Keating Report: mid-year 2014 forecast on government budgets and spending-Part 3

State and local government purchases, according to IHS Global, will rise from $1.92 trillion in 2014 to $1.98 trillion in 2015, a 3.1 percent increase. State and local government purchases totaled $1.88 trillion in 2013.

A majority of states will meet their budgetary goals for FY2014, according to the “State Budget Update: Spring 2014” report from the Denver-based National Conference of State Legislatures (NCSL). A total of 34 states, Puerto Rico and D.C. are expected to meet their FY2014 revenue estimates, according to NCSL findings. Indeed, a total of nine states are expected to have surpluses, while seven may come up short on their revenue goals.

States have make significant progress on their budget situations compared to the dismal years of the Great Recession, says Sujit CanagaRetna, fiscal policy manager at the Atlanta-based Council of State Governments’ Southern Office, the Southern Legislative Conference. State budgets still have a ways to go, says CanagaRetna. “Even though a vast majority of states have seen steady revenue growth in the past few years, revenues in over two dozen states still rank below the peak reached just before the Great Recession’s onset.”

For the second half of 2014, CanagaRetna sees a more accelerated rate of growth compared to 2013, a continuing decline in the national unemployment rate and a gradual rise in inflation toward 2 percent. He predicts that the improving U.S. economy will generate gains for state economies. “But,” he cautions, “States will continue to grapple with a number of structural drawbacks in their tax and revenue systems that will impede a more healthy, broad-based economic recovery.”

“The fiscal climate for states has greatly improved since the past recession,” says a recent report from the Washington-based National Association of State Budget Officers (NASBO).  The “Summaries of Fiscal Year 2015
Proposed Executive Budgets” report notes that the majority of governors have recommended budgets with general fund spending growth ranging from one to five percent. While positive, the fiscal 2015 general fund spending growth rate among the states lags the historical year-over-year growth rate of 5.6 percent.

One area of emphasis in FY 2015 state budgets will be infrastructure projects, says the NASBO report. “Governors are calling for greater investments in capital projects such as roads, bridges, water treatment and school construction.”

Governors in some states, the report says, have proposed increased spending for pre-kindergarten and full-day kindergarten programs. Other governors have proposed initiatives linking education to economic development through job training and workforce development programs. Lastly, says the NASBO report, governors in a number of states have proposed maintaining or increasing the size of their states’ rainy day funds and reserves.

In the next Keating Report mid-year 2014 installment, read about the government and public works construction outlook for the remainder of 2014.

Michael Keating (photo at right) is senior editor for Government Product News and the GPN web site. He can be reached via e-mail at michael.keating@penton.com

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