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State Budgets Report Finds 'Slow And Steady' Revenue Growth

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A new state budget report from the National Conference of State Legislatures paints a different picture than a recent study co-authored by former Federal Reserve Chairman Paul Volcker.
A new state budget report from the National Conference of State Legislatures paints a different picture than a recent study co-authored by former Federal Reserve Chairman Paul Volcker.

CHICAGO -- Contrary to the dire fiscal report released by the State Budget Crisis Task Force in July, the National Conference of State Legislatures is reporting "slow and steady" growth in state finances in the summer of 2012.

The NCSL released a report Tuesday morning at its conference in Chicago laying out what the organization said is a rise in states' revenues and economies, based on data collected from budget officials around the country. The latest study -- one of three fiscal reports the group releases annually -- concludes that states are likely to see their rainy-day funds increase and to avoid the budget gaps that have plagued them in recent years.

"State fiscal conditions continue to improve," NCSL fiscal director Arturo Perez said. "This is a continuation from the last series of releases. There has been a slow and steady progress in improvement."

Perez said the NCSL found that the average state rainy-day fund equals 8 percent of the budget, with Texas and Alaska leading the pack, because of oil revenues, and California and Illinois at the bottom. When those four states are eliminated, the average rainy-day fund drops to 5.1 percent. Eleven states reported "concern" about their economic outlook, but most states had a positive view on fiscal year 2013.

According to Perez, this year's legislative sessions produced little change in overall state tax rates, with most states that made adjustments enacting both cuts and increases. Only three states -- Idaho, Kansas and New York -- passed tax cuts alone this year.

The NCSL also found that Medicaid remains a concern for state leaders, echoing both the State Budget Crisis Task Force and the most recent Fiscal Survey of the States released by the National Governors Association and the National Association of State Budget Officers in June.

"There has been no overall robust growth," Perez said, tempering the optimism. "There are still issues facing states."

The July report from the State Budget Crisis Task Force, which is led by former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch, offered a different take on state finances. The report projected a $4 trillion shortfall in unfunded state pension and benefits obligations, along with dramatic revenue gaps and skyrocketing Medicaid costs. The report said that states need to majorly overhaul their fiscal practices in order to address what it said could be a disaster in the making.

"The thing that worries me is the threats to the social order," Ravitch said last month. "You can't cut human services and cut the ability of government to take care of the people."

Ravitch noted that the State Budget Crisis Task Force differed from the NCSL and National Governors Association in that the Volcker-Ravitch group was not run by current state officials. He also urged immediate action.

"It is getting worse every day," Ravitch said. "We have to stop bullsh***ing."

Although Perez said he did not want to compare the NCSL report to the Volcker-Ravitch report, he pointed out that Volcker and Ravitch looked at just six states -- California, Illinois, New Jersey, New York, Texas and Virginia -- to conduct their research, while the NCSL talked to all 50 states and the District of Columbia. Perez also noted that the NCSL report is part of a 20-year series of reports and is designed to capture a moment in time for state finances.

"Ours is a series of reports that go back 20 years that keep periodic tabs on the current state of state finances," Perez said, adding that it can take "a couple of reports" to show a change in trends.

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