Spending by states, at $1.7 trillion, is about 10 percent of the national GDP. State spending supports education, medical care for low income citizens, assistance to local governments and many other services. State governments are hives of economic activity. Like corporate entities, they must balance their books at the end of every year.
Tax revenues are erratic, so state budget processes must be flexible enough to make mid-year adjustments. Municipal Finance Today reported on good budget news in the recently released National Association of State Budget Officers (NASBO) report:
NASBO in its report said that after several years of recovery, they are seeing noticeable improvements in the state budget environment. Both budget cuts and gaps have decreased, states have enacted net tax cuts in two of the last three fiscal years and revenue collections have outpaced projections.
The Rockefeller Institute reported on Thursday that state revenues are growing at an increasingly slow pace:
State tax revenue growth slowed sharply in the third quarter of 2013. Year-over-year growth was 6.1 percent, based on preliminary data from the Rockefeller Institute, compared with second quarter growth of 9.0 percent and first-quarter growth of 8.6 percent. This is consistent with our prior analysis, which explained that atypical factors had driven growth up in those earlier quarters.