Keating Report: 2014 forecast on government budgets and spending-Part 1

State finances are improving a little as we head into 2014, reports the fall 2013 “Fiscal Survey of States” from the Washington-based National Association of State Budget Officers (NASBO). Fiscal 2014 general fund revenues from all sources, including sales, personal and corporate income taxes and all other taxes and fees are exceeding original forecasts in 14 states and on target in 23 states, says the report.

In 2013, the U.S. economy performed admirably in the face of a variety of challenges, including federal sequestration, the federal government shutdown and the debt ceiling debacle, says Sujit CanagaRetna, senior fiscal analyst at the Council of State Governments’ Atlanta-based Southern Legislative Conference (photo at right).

The high levels of uncertainty in Washington, says CanagaRetna, adversely impacted consumer and business confidence levels in the past year. In spite of that, he says, GDP growth scored impressive gains in the third quarter of 2013. The good news should continue this year, CanagaRetna told GPN. “In 2014, experts call for the U.S. economy to expand by 2.6 percent, an expansion that will trickle down to the states. States will continue to grapple with the usual list of fiscal challenges — pensions, healthcare, education, transportation, infrastructure, unemployment insurance — during their 2014 legislative sessions. Importantly, states will be able to leverage the improving housing, energy, manufacturing and export sectors in their jurisdictions to advance economic prospects for their citizens.”

States should budget carefully in 2014, says Liz McNichol, who is senior fellow at the Washington-based Center on Budget and Policy Priorities. “States should proceed with caution as they consider tax cuts or new programs, as revenue growth is very likely to slow again. In addition, states are still far from fully recovered after the biggest revenue decline in history. As states finalize their budgets for 2014, available revenue will fall short of needs in many states.” McNichol’s photo is at the left.

States are still playing catch-up, McNichol told GPN. “Shortfalls in recent years were so large, and so deep were the resulting cuts in critical services like education, health care, and human services, that the problem for states is not just meeting growing needs but also the difficulty of restoring those cuts.”

Don’t look for assistance from the federal government, McNichol cautions state governments. “In fact, as federal policymakers focus on deficit reduction, they are far more likely to cut ongoing federal funding for states and localities than to increase assistance — making state budget challenges even greater.”

States continue to search for additional revenue sources. The Marketplace Fairness Act of 2013 legislation before Congress would force businesses to collect and remit sales taxes to at least 46 different state tax jurisdictions. Proponents argue that the legislation would “level the playing field” between remote retailers and brick and mortar retailers, solve budgetary woes, and collect tax that is already due. The legislation passed the Senate in May. The U.S. House Committee on the Judiciary has been considering the House version.

At the November ballot, New York voters expanded gaming to allow seven new casinos after seven years, including three in New York City. Until now, legal betting has been restricted to “racinos” (horse racing tracks with slot machines and video gaming), charitable gambling such as bingo and state approved lotteries. One goal of the New York gaming expansion is to keep some of state gaming monies at home.

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 [email protected]

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