The Return Of State Surpluses Could Point To More Growth To Come - The Daily Beast

The Return Of State Surpluses Could Point To More Growth To Come - The Daily Beast

This spring, budget surpluses are blossoming across America. We’ve noted that the combination of employment growth and tax increases is boosting federal revenues significantly—13 percent in the first five months of the current fiscal year. Combined with a bit of fiscal discipline, the higher revenues are helping to reduce the (still massive) federal budget deficit.

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But America’s 50 states aren't permitted to run deficits. So each year, state legislatures pass, and governors sign, budgets for the next fiscal year in which expenditure are supposed to align with expected revenues. Then, they wait and hope that the revenues actually materialize.

That’s happening—and more. In the current fiscal year (fiscal 2013, which started last spring or summer in most states), the level of spending rose just 2.2 percent from fiscal 2012, according to the National Association of State Budget Officers (NASBO). That’s far below the historical average of 5.6 percent growth per year. But state revenues are growing more rapidly than spending. In the fourth quarter of 2012, according to the Nelson A. Rockefeller Institute of Government, state tax receipts were up 5.7 percent from the fourth quarter of 2011. For the full year, revenues probably rose about 4 percent. Now, late 2012 tax receipts were boosted in part because so many companies rushed dividend payments out the door to avoid the prospect of higher taxes.

Still, with revenues rising more rapidly than spending, deficits are evaporating in state capitals. “It’s likely most states will end the year with a slight surplus,” said Brian Sigritz, director of state fiscal studies at NASBO.

Surpluses are showing up in places you’d expect. North Dakota, currently enjoying an energy and agricultural boom, is projecting a $1.6 billion surplus over its two-year budgeting cycle. Texas, another resource-rich state, foresees an $8.8 billion surplus over its current two-year budget cycle.

But the Rust Belt is also regaining some of its fiscal shine. Ohio is expecting a $1 billion surplus for the current fiscal year. Wisconsin is looking at $484 million in black ink. Other states with surpluses include Iowa ($800 million) and Tennessee ($580 million). West Virginia completed its 2011–12 fiscal year with a surplus of about $88 million.