–Fiscal Survey Says States Still Face ‘Considerable Fiscal Stress’
–State Revenues Have Been ‘Drastically Reduced’ By Recession
–States Still Face ‘Numerous Difficult Spending Decisions’
–Dwindling Stimulus Funds Will Cause Some State Program Cuts

By John Shaw

WASHINGTON (MNI) – A fiscal survey of state governments released
Wednesday shows that after being hammered by the national recession that
began in December in 2007, they are slowly recovering.

But the report says that state governments are still struggling to
emerge from difficult fiscal circumstances.

“After two of the most challenging years for state budgets, fiscal
2011 will present a slight improvement over fiscal 2010,” the report
says.

“However, even an improvement over one of the worst time periods in
state fiscal conditions since the Great Depression states still forecast
considerable fiscal stress,” it adds.

The Fiscal Survey of States is published twice annually by the
National Governors Association and the National Association of State
Budget Officers. The field survey on which the report is based was
conducted from August through October 2010.

Forty-six states begin their fiscal years in July and end them in
June. The major exceptions are New York (with an April to March fiscal
year), Texas (with a September to August fiscal year) and Michigan (with
an October to September fiscal year.) Additionally, 21 states have a
biennial budget cycle.

The report says that the severe national recession which ended in
the second half of calendar 2009 has “drastically reduced state tax
revenues from every revenue source.”

The report notes that state general fund expenditures have been so
negatively affected by the recession that both fiscal 2009 and fiscal
2010 saw nominal declines in state government spending.

One indication of the improving fiscal environment in fiscal 2011
is that 35 states enacted budgets with higher general funding spending
compared to fiscal 2010. However, 36 states still forecast lower general
fund spending in fiscal 2011 compared to fiscal 2008.

The report says that fiscal 2010 general fund expenditures were
$613 billion compared to $661 billion in fiscal 2009, a 7.3% decline.
Fiscal 2011 enacted budgets call for $645 billion in general fund
spending, a 5.3% increase from fiscal 2010.

The report says that the reduction in general fund spending is the
result of “significant declines in sales, personal income and corporate
income tax collections” which make up about 80% of general fund revenue.

According to the survey, state revenues in fiscal 2011 are forecast
to be $636 billion, a 4.4% increase from fiscal 2010 levels.

The report says that state governments will use about $43 billion
in funds in fiscal 2011 from the $787 billion federal fiscal stimulus
law that was passed in early 2009. But after fiscal 2011, stimulus funds
will largely be gone.

“The significant wind down of this support will result in a
continuation of extremely tight fiscal conditions for states and could
lead to further state spending cuts,” it says.

“The removal of these funds, when combined with an extremely slow
recovery in state revenue collections, could result in severe cuts to
state programs and services,” the report adds.

** Market News International Washington Bureau: 202-371-2121 **

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