December 20, 2014

States Fret Over Washington’s Fiscal Problems

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

Although recession-related pressures on state budgets may be easing, governors and other state officials around the country are worried about the potential impact of Washington’s fiscal difficulties.

State finances are “modestly recovering in step with the slowly improving national economy,” according to the latest semi-annual Fiscal Survey of States, recently released by the National Governors Association and the National Association of State Budget Officers. While growth is uneven among states and often has not returned to pre-recession levels, states are showing improvements in tax revenues in comparison to previous years.

But the report says states are deeply concerned about “the significant uncertainty surrounding federal tax and spending decisions, which could negatively impact the economy and federal funding for states.”

Congress last week delayed for two months the “automatic” spending cuts that had been scheduled to start this month under the U.S. Budget Control Act of 2011. Even if  those cuts are eventually avoided, the Fiscal Survey of States said, “the likely policies required to address the nation’s long-term fiscal debt problems may also reduce the level of federal funds for states.”