Since Election Day, there has been a lot of media coverage about the so-called "fiscal cliff," and state budget officers, like many others, are closely watching Congress and the Administration to see what will happen and how it will affect states. The "fiscal cliff" includes a number of tax and spending policies set to take effect under current law, including:
State fiscal conditions are continuing to improve into fiscal 2013, although many state budgets are not fully back to prerecession levels. This report finds that governors’ recommended budgets show an overall increase in both general fund expenditures and revenues in fiscal 2013. Fiscal trends indicate that while
Last summer out west I saw a state park on the map and decided to drive out and hike there, only to arrive and find it was closed. While state parks make up less than one percent of most state budgets, their treatment in budgets is symbolic of the very tough decisions state officials will have to make as they continue to develop their state budgets this year. As state monies increasingly go to large parts of the state budget like K-12 education and health care, state officials have to decide how to deal with the smaller discretionary parts of their budgets.
Congressional Research Service
State legislatures are now in session and most Governors have released their proposed budgets. There will be the usual "back and forth" as legislators negotiate with the Governor on parts of the budget -- with the goal of passing a budget before the session ends.
Over the past year, Congress and the administration have taken up the issue, on numerous occasions, of federal budget deficit reduction. Many state and local officials understand the need for, and are supportive of, efforts to reduce the long term federal deficit. However, many state and local officials also have concerns about the way in which such actions will be implemented and believe it is important to understand the consequences of certain decisions.
The state and local government bond markets have held up well throughout the year despite a few high profile municipal defaults or bankruptcies by local governments. The forecasts from some commentators in 2010 and earlier this year predicting a municipal bond crisis have not come to fruition, and a collapse of the municipal debt markets is not likely to arise anytime soon. Certainly states and localities will continue to encounter fiscal strain, but potential defaults or bankruptcies are so few and far between that they are the “exceptions” that prove the “rule”.
Facts You Should Know: State and Local Bankruptcy, Municipal Bonds, and State and Local Pensions was produced by the following organizations in early 2011:
Center for Budget and Policy Priorities
This report finds that the recent improvement in the national economy has not translated to strong growth in total state spending. This is largely due to the fact that state revenues have not increased as fast as Recovery Act funds have declined, leading to a unique situation in which total state expenditure growth has slowed during the same time that the national economy has been improving.
The National Association of State Budget Officers