Archive for Sunday, August 20, 2006

Many states welcome unexpected revenue

Kansas one of five states without surplus

August 20, 2006


It's tantamount to finding an unexpected wad of cash buried in the pocket of an old jacket - utter euphoria at the windfall, mad money to splurge on a one-time extravagance.

Only this find is breathtakingly huge.

For first time since Sept. 11, 2001, the vast majority of states reported saving an average of 10 percent of their budgets, one of the highest percentages of unspent money in decades. The $57 billion in unexpected revenue has afforded states an opportunity to find all sorts of creative ways to spend and save their cash, according to a report released last week by the National Conference of State Legislators.

New Mexico has undoubtedly targeted the most unconventional project to lavish money upon - a space launchpad for future commuter orbital excursions. (No, the spaceport is not in Roswell, home of the rumored 1947 flying saucer.) Nationally, the states' surplus money is a 25 percent increase from the previous fiscal year and a welcomed boost after a five-year slump. The report notes that year-end balances are "widely considered one of best indicators of state fiscal health."

"It's sort of breather ... like the eye of the storm, before a lot of serious needs kick in," said Corina Eckl, co-author of the report for NCSL. "Overall revenues are not keeping up with spending and these states are still in need of a lot of resources for items such as funding No Child Left Behind and aging prison facilities."

Some states have earmarked the money for one-time expenditures, or they are using it bolster reserves and rainy-day funds. Across the board, education is the largest recipient, with 24 states sending money to kindergarten-through-12th-grade education and 20 spending on higher education, the report said.

Alaska invested $300 million into its Public Education Fund and had another $300 million to place in a new reserve fund. Wyoming used its surplus for natural resources, putting $200 million toward its Permanent Mineral Trust Fund, while New Mexico placed $40 million of its $800 million windfall into its Water Trust Fund. Oklahoma invested some money into cancer and diabetes centers, and North Carolina found veterans nursing homes that needed money.

Arizona ended up with an extraordinary $1.5 billion more in revenue than expected, money that was generated largely from the real estate boom. The state used about a third of the money to reduce taxes, some to promote the state and some for highway construction, and it still had a solid chunk for the rainy-day fund. "It's given us the opportunity spend money on things that we would normally let slide, such as ongoing repairs" for state property, said Richard Stavneak, director of the Joint Legislative Budget Committee.

A number of states chose to sock away the money in rainy-day funds. Maryland sent $593 million. Connecticut added $440 million - and used an additional $250 million to catch up on contributions to the teachers pension fund. Georgia's rainy-day fund will receive $430 million.

Nationwide, state lawmakers have been struggling with budgets since the 2001 attacks triggered an economic downturn. After several years of fast-declining revenues, states were conservatively planning based on scaled-back expenditures. Even as revenues started to climb, states were reluctant to count on the money and based budgets on lesser income. As a result, all but five states - Illinois, Kansas, Louisiana, Michigan and Wisconsin - reported surpluses.

The study noted that revenues had been projected to grow by only 2.7 percent for last budget year, but they ended up growing by nearly 7.7 percent. Because state budget drafts forecast 18 months in advance, it is often difficult to accurately predict actual revenue.

In New Mexico, the state was bestowed with unexpected revenues from oil and gas leases, and in Connecticut capital gains taxes proved more generous than expected.


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