Sunday, November 27, 2005

20051125 New York Times: States' Coffers Swelling Again After Struggles

New York Times: States' Coffers Swelling Again After Struggles

November 25, 2005

http://www.nytimes.com/2005/11/25/national/25states.html?th&emc=th

States' Coffers Swelling Again After Struggles

LOS ANGELES, Nov. 24 - After four years of tight budgets and deepening debt, most states from California to Maine are experiencing a marked turnaround in their fiscal fortunes, with billions of dollars more in tax receipts than had been projected pouring into coffers around the country.

The windfall is a result of both a general upturn in the economy and conservative budgeting by state officials in recent years, and it is leading to the restoration of school funding, investments in long-neglected roads and bridges, debt reduction, and the return of money borrowed from cities and counties.

In Sacramento, officials are setting aside part of a multibillion-dollar revenue windfall to build up California's depleted cash reserves. Delaware has appropriated money for a pilot program for full-day kindergarten, and Florida will spend nearly $400 million on a new universal preschool program for 4-year-olds. Some states, including New York, New Jersey, Hawaii and Oklahoma, are pouring significant new sums into public colleges and universities after several years of sharp cutbacks.

One sign of the improved fiscal health, according to the National Association of State Budget Officers, is that only five states were forced to make midyear budget cuts, totaling $634 million, in the fiscal year that ended, for most states, on June 30. In 2003, by contrast, 37 states cut spending in the middle of the budget year, by a total of $12.6 billion, the association said.

But the good news is not universal and may prove short-lived. The Great Lakes States continue to be hammered by the loss of manufacturing jobs, and full recovery from the hurricanes in the Gulf Coast States will take years.

And experts warn that even though tax revenues are rising in most of the country, demands on state budgets - particularly for education, health care and pensions - are growing even faster.

"The general picture is that revenue is coming in better than expected for quite a few states," said Scott Pattison, executive director of the National Association of State Budget Officers.

"The problem," Mr. Pattison said, "is that the states are like the guy who had been laid off and his income went way down, and now he's got a job again. But in the meantime, he put a lot of expenses on his credit card, his kids' tuition went up and he tapped into his retirement fund. That's exactly what a lot of states did."

During the lean years, states resorted to a lot of one-time fixes to balance their budgets while maintaining services. They cut spending, raised taxes, drew down their rainy-day funds, relied on federal programs, delayed payments to employee pension funds and borrowed heavily. Now they are coping with the hangover from those stopgap solutions.

Read the entire article here: New York Times: States' Coffers Swelling Again After Struggles