NCSL report finds states raised $10.6 billion in taxes, fees to balance budgets this year

AP -

By ROBERT TANNER, AP National Writer

SAN FRANCISCO (AP, July 23) - States overall raised $10.6 billion in new taxes and fees this year to keep government programs running, relying on cuts, borrowing and other tactics to cover tens of billions more in gaps between income and spending, according to a new report released Wednesday.

The report from the National Conference of State Legislatures, released at their annual meeting here, predicted stronger revenue growth than the last three years, and an overall increase in state spending of 1.0 percent.

"Guarded optimism is a perfect way to describe this," said Corina Eckl, senior fiscal
analyst with the nonpartisan association of state lawmakers. "They're still being
cautious ... These are folks who have been burned before."

In budget actions, states:
* Raised $6.9 billion in new or higher taxes for the fiscal year beginning, for most
states, July 1.
* Raised fees and other revenues by $3.7 billion.
* Expect revenue to be 4.3 percent higher than in fiscal year 2003.

More than half the states -- 31 -- cut spending to balance the budget, but the report
did not document the total value of cuts made to state spending plans. The report relied on data from 42 states; some states, like California and New Hampshire, are working on budgets.
The NCSL estimated that budget shortfalls nationwide for the current year reached $78.4 billion. Since nearly all states had balance those budgets by July 1, those gaps were overcome by cuts, borrowing or improved revenue income. But the report didn't break down how much states relied on each.

In signs of expected economic improvement, the report found that only two states --
Alaska and Louisiana -- expect revenues to fall from 2003. Last year, 11 states saw
their revenues fall from 2002. And the year before, 40 states saw their revenue fall.
Eckl noted that the 1.0 percent growth in state spending plans was smaller than the rate of inflation. Two dozen states agreed to larger budgets than last year; nine to smaller spending plans. But some legislators said they were still doubtful about a recovery this year, and said the report's revenue projections seemed too optimistic.
"I don't think states will be seeing dramatically improved revenues for the foreseeable
future," said Kansas Senate President Dave Kerr, a Republican. "States will have to
continue to try and get through this difficult period without spending significantly
more money."

During the boom year in the 1990s, states cut $35.7 billion in taxes. In the past two
years, states have raised $16 billion in new or higher taxes.

The report also analyzed state spending from 1991 to 2001, concluding that state and
local government spending grew in proportion with the national economy, with Medicaid, education and corrections driving much of the increase in state budgets.