The Deltek Straight Dope on the State Budgets: Untangling Business Fact from Media Sensationalism

Deltek Sr. Analyst Chris Cotner reports.

The National Association of State Budget Officers (NASBO) and the National Governor’s Association (NGA) released a report this week outlining the fiscal condition of the states. Some media coverage has sensationalized the report and the states’ fiscal conditions. This analysis examines NASBO numbers and related business implications, in black and white. Deltek believes in presenting the straight dope

As highlighted by NASBO, state general funds (GF) budgetary conditions are actually improving in FY 2012, albeit slowly. The economic recovery is still tepid. NASBO projects growth to continue, with slowly improving economic conditions in FY 2012 and 2013. Deltek projects similar improvement in state all funds (AF) budgets, with slow growth in 2013 and improved growth looking forward to 2014 and 2015. So, while some media outlets would lead the business community to believe that doom and gloom lie ahead for the states, the data shows otherwise. Simply, expenditures, revenues, balances, and rainy day funds are all up and improving. This is good news for the GovCon community.

Digging deeper into expenditures, the states’ financial improvement becomes more apparent. 38 states had higher GF spending in FY 2011, compared to 2010, and 43 states had higher GF spending in FY 2012, compared to 2011. However, 29 states are still struggling to return to 2008 GF spending levels, indicating the lasting impact of the recession in some areas. Overall GF expenditures increased by 6.03 percent from FY 2010 to 2011 and by 1.62 percent from FY 2011 to 2012. While rates of expenditure increase have slowed a little for FY 2012, they are not outpacing revenues, which indicates overall state fiscal health.

In terms of revenue, state GF revenues experienced an overall increase of 6.42 percent from FY 2010 to 2011 and an increase of 1.60 percent from FY 2011 to 2012. As discussed previously, GF expenditures are roughly tracking revenues, as states continue to practice financial restraint in light of the recent budget crisis. More specifically, 45 states experienced GF revenue gains from FY 2010 to 2011, while only 40 had revenue gains from FY 2011 to 2012. While revenue gains slowed a bit in 2012, two consecutive years of revenue gains headed out of the recession bode well for continued recovery and future business prospects.

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