WASHINGTON -- Increased health care spending and uncertainty from the federal government over spending has complicated the fiscal picture for states at the same time there has been revenue growth.
The fall 2012 version of the Fiscal Survey of the States, released Friday by the National Governors Association and the National Association of State Budget Officers, shows that states are "modestly recovering" but the outlook remains uneven across state lines. In a conference call with reporters Friday morning, Scott Pattison, the executive director of NASBO, and Dan Crippen, NGA executive director, indicated that all states have not reached pre-recession levels in terms of economic activity. Pattison and Crippen said that the current debate over federal spending cuts has led to an uncertain outlook for state governments.
Pattison said a series of federal cuts triggered by the sequestration process would have an impact on states trying to resume spending on programs cut in previous years. "We're not back to where we need to be," Pattison said. "The data shows money tight for the foreseeable future. With uncertainty at the federal level there is not enough money to make up for those cuts."
Crippen said that governors have been reminding President Barack Obama and congressional leaders of the need to consult with state leaders in the ongoing fiscal cliff talks. He said that with health care spending for Medicaid and government retirees continuing to rise and be a larger portion of state budgets, there is a need for states to be included in talks about the future of federal Medicaid spending.
The Survey showed that the two growth areas for state spending center on health care and K-12 education spending. The full report can be viewed here.
Crippen noted that state leaders are also grappling with a hole in the federal highway trust fund, which has caused issues with state transportation spending. He said with a federal gas tax hike unlikely, governors and state legislatures will have to find ways to increase transportation spending dollars at the state level.
Pattison said smaller, particularly those with energy and agricultural resources have been seeing a more unbeat economic outlook. Among those are North Dakota, which has seen a rise in state revenue collection and economic growth due to a rising oil and gas sector in the western part of the state.
Crippen used the call to renew a push by state governments for federal legislation allowing states to collect sales tax on online puchases. Currently, consumers have to report that sales tax to states individually, which states note is an uncommon practice and has lead to budget holes. The National Conference of State Legislatures organized a lobby day on Capitol Hill for state legislators during their fall forum last week.
Figures provided by NCSL show that states could collect $23.2 billion in revenue from online sales. Former Kansas Revenue Secretary Joan Wagnon told HuffPost last week that the legislation has its best shot of passing this year after a push that started in the late 1990s. Wagnon, now the chairwoman of the Kansas Democratic Party, said the legislation would also benefit rural states, since many rural consumers prefer to shop online rather than use up a tank of gas to drive to stores.
Crippen said that with a growing trend in online shopping, states will continue to suffer until Congress passes a bill.
"In the meantime you can expect sales tax to continue to decline," he said.
CORRECTION: An earlier version of this article misspelled the last name of Dan Crippen, executive director of the National Governors Association.
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Posted: 12/14/2012 12:16 pm EST | Updated: 12/18/2012 11:45 pm EST