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For budget year ahead, states expecting only moderate growth

by Tim Anderson ~ January 2016 ~ Stateline Midwest »
Two recent national studies on budget conditions show that state revenue and spending growth will slow a bit during the current fiscal year. In its “Fiscal Survey of States,” the National Association of State Budget Officers reports that spending will increase by 4.1 percent in fiscal year 2016. This figure is lower than historic year-over-year increases as well as the 4.6 percent rise in spending between FY 2014 and 2015. These moderate increases, though, do outpace changes in inflation.
“Most states continue on a path of steady, modest budget increases,” the NASBO study concludes.
In the Midwest, one positive sign for several states is the amount of money in their rainy-day funds. According to the NASBO survey, Indiana, Iowa, Nebraska, North Dakota and South Dakota expect to have year-end balances in FY 2016 that equal 10 percent or more of total expenditures.
The second study, done by the Rockefeller Institute of Government, examines trends in state sales- and income-tax collections. In FY 2016 and 2017, states expect to collect more from these two key revenue sources. However, because of a weakening stock market, the increases will not be as great as they have been in recent budget cycles.
“The overall picture is of continued but sluggish growth in fiscal years 2016 and 2017 and continued fiscal challenges and uncertainties,” the Rockefeller Institute study concludes.
Over the long term, too, an aging population will likely have an adverse effect on state revenue collections — for example, less money being spent and fewer people working with a smaller share of their income subject to taxes.