Most states expect a temporary breather in 2004 from the budget problems of the last three years, but many anticipate shortages again for fiscal year 2005.
According to the National Conference of State Legislatures, states have a $2.5 billion budget shortfall for the current fiscal year, compared to the $25.7 billion gap they had to overcome at this time last year. The information, collected from the legislative fiscal directors of all 50 states, was reported in the NCSL’s “State Budget Update: February 2004” report.
North Carolina reported that it didn’t project a budget shortfall for the remainder of 2004, but Gov. Mike Easley is holding back “2 percent of agency allotments as an uncertainty reserve against April income tax collections,” NCSL reported. The fiscal year ends June 30.
Thirty states expect to end fiscal year 2004 with a budget surplus, with 23 states reporting that revenues were surpassing their estimates. Thirteen states said their financial projections were on target.
Last week the Associated Press reported that North Carolina’s tax revenues, through February, were running $24 million ahead of projections for this year.
Predictions for 2005 aren’t so rosy. NCSL reported that 31 states expect budget gaps, albeit of a lesser magnitude than in recent years. “Sixteen predict shortfalls above 5 percent,” NCSL said, “compared to 33 last year.” A collective deficit of $35.6 billion is expected by states for 2005, but the widely-reported $15 billion shortfall in California makes up 42 percent of the overall number.
NCSL says 15 states will consider tax increases – mostly cigarette taxes “or other narrow taxes.” The organization also reported that 19 states will consider gaming proposals.
“A dozen states are considering other revenue-raising measures such as higher education tuition increases, changing tax due dates, imposing surcharges or raising fees,” NCSL reported. Despite Easley’s longstanding desire for a state-run lottery, North Carolina was not expected to be among the states to consider tax increases or games of chance to increase revenues.
NCSL reported that North Carolina anticipated a $500 million budget gap for fiscal year 2005, which would represent 3.5 percent of the General Fund budget. Some estimates go as high as $800 million.
“Continuation budget needs are fully funded,” the NCSL report said of North Carolina, “but there are no resources for key gubernatorial and legislative priorities including pay raises, education improvement, higher education improvement costs, repairs and renovation account, and partial restoration of the rainy day fund.”
Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected].