A new study out of think tank the Center on Budget and Policy Priorities says that, despite recent revenue growth and budget surpluses in some states, most states continue to feel the after-effects of a recession that hit in 2000.According to the center, the economic growth that the states are now experiencing follows several years of falling or steady revenues. During those years, the paper's authors say that states cut back on services, withdrew from reserve funds and enacted temporary revenues, among other one-time accounting methods used to narrow the budget gaps. The paper contends that, as a result, state fiscal conditions today are weaker than they were before the last recession.
Co-authored by Elizabeth McNichol, a senior fellow specializing in state fiscal issues at the center, and Iris Lav, deputy director of the center, the paper's analysis shows that state revenues would have to grow by more than 9 percent per year between now and 2008 in order to generate enough funds to restore the level of services that prevailed in fiscal year 2000.
McNichol and Lav said that state taxes have been growing at an annual rate of about 7 to 11 percent since early 2004. Normally, state revenues can be expected to grow at an average annual rate of 5 to 6 percent. Looking at state expenditures, at the end of the 2005 fiscal year, state spending as a share of the economy was at its lowest level in 15 years. Expenditures stood at 4.61 percent of GDP, below the average in the 1990s of 4.85 percent of GDP.
The full report, "State Revenues and Services Remain Below Pre-Recession Levels," is available on the center's Web site, www.cbpp.org. The center is a nonpartisan organization that conducts research and analysis on proposed budget and tax policies.
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