Budget Blog

Overview of FY 2017 Enacted Budgets

By Brian Sigritz posted 09-19-2016 02:42 PM


Unlike last year when a number of states had late budgets, the vast majority of states this year were able to finalize their budget by the start of the fiscal year, which began on July 1 for 46 states. Thirty-two states enacted their fiscal 2017 budget during the 2016 legislative session, while 17 states enacted budgets last year covering both fiscal 2016 and fiscal 2017 (one state, Illinois, approved a six month budget through December). In addition, of the 17 states that enacted biennial budgets last year, 6 states this year enacted supplemental budgets or mid-biennium adjustments. For the most part, enacted budgets were similar to governors’ budget proposals. Most budgets contained limited spending growth, and few substantial tax changes. In addition, in a number of states, governors and legislatures agreed to increase the size of the state’s rainy day fund or other reserve accounts. When signing the budget, many governors thanked the legislature for making the necessary tough choices, and for once again passing a balanced budget. While in most instances the level of spending in enacted budgets closely mirrored governors’ budget proposals, in some cases spending levels had to be reduced following downward revisions of revenue projections, most notably in several of the energy states. Governors also issued line-item vetoes for a number of reasons, including reducing the level of spending that was viewed as excessive in certain areas, addressing revenue shortfalls, and reversing policy changes.

As has been the case most years following the Great Recession, states once again directed the largest portion of new funds in fiscal 2017 towards education, especially in the areas of K-12 and early education. Several states this year approved programs aimed at improving teacher recruitment and retention, and increasing teacher pay. An area that received additional emphasis this year was in targeting the increase in drug abuse, most notably involving opioids, through such measures as increasing treatment options, and providing additional funds for social services and public safety. Another area of emphasis was funding programs to help foster economic growth, through programs aimed at workforce training and job creation. Other areas that states prioritized included tuition freezes or keeping tuition increases low, increased infrastructure investments, expanded services for people with mental illnesses, controlling the cost of healthcare, and fulfilling pension obligations. Similar to fiscal 2016, states made mostly minor changes to their tax structures in fiscal 2017. Tax reductions were largely aimed at various measures to cut personal income taxes, provide property tax relief, and reduce business taxes, while revenue increases were seen in such areas as increasing cigarette taxes and reducing certain tax breaks.

Many states saw revenues come in below projections for the final few months of fiscal 2016. There were a number of reasons for this including the impact of low oil and natural gas prices on energy-producing states, the weaker stock market performance in calendar year 2015, and modest national economic growth. Since the enactment of their fiscal 2017 budget, some states have lowered revenue projections for the current year. States are currently closely monitoring revenue collections for fiscal 2017, and examining their potential impact on both the current budget and fiscal 2018 budget proposals.

For state-by-state fiscal 2017 enacted budget summaries, and links to enacted budgets and other information, please click here.