US States Balance 2003 Budget Without Big Tax Hikes Says NCSL

by Mike Godfrey, Tax-News.com, Washington

25 July 2003

Despite the current fiscal crisis, the worst the country has seen for many years, state governments have managed to balance their budgets without resorting to large tax hikes, the National Conference of State Legislatures has claimed in its State Budget and Tax Actions report 2003.

According to the NCSL, 43 out of 49 states have managed to complete the budget balancing process this year without turning to drastic tax measures. Instead, states have relied on reserves, fee increases and expenditure cuts. The report shows the net increase in taxes in 2003 is 1.3% of the tax collected in 2002. This is only the second time in nine years that state taxes have risen, the Conference report states, with taxes actually falling up to 2% every year from 1995 to 2001.

“After three daunting years of financial crisis, state legislators should be lauded for resolving some of the most formidable budget problems seen in decades,” NCSL President Angela Monson, a Oklahoma state Senator, announced. “State lawmakers have done what they had to do. They made the wrenching decisions necessary and they balanced their budgets.”

However, the recent fiscal crisis has taken a large toll on states' combined reserves, which have halved during the last fiscal year from a total of $22.4 billion to $11.6 billion.

Nevertheless, most states appear more optimistic for the fiscal year 2004 with higher levels of revenue anticipated, and the NCSL reports that no state is expecting a deficit by the end of fiscal 2003.

The last three years has seen state legislatures attempting to close off a combined deficit of $200 billion. Here are some of the measures that the NCSL reports have been used to close this gap.

• Thirty-one states cut spending. Fourteen of these imposed across-the-board cuts ranging from 1.5% to 15%. In addition to broad cuts, many also imposed target cuts to programs including corrections, Medicaid and higher education.
• Twenty-nine states tapped a variety of state funds.
• Twenty-three states reduced their state workforces or took other actions affecting state employees.
• Thirteen states tapped rainy-day funds.
• Eleven states delayed capital projects or shifted them from pay-as-you-go projects to debt.
• Six states expanded gaming.

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