States have less money to withstand economic swings or changes in federal aid than at any time in the past 12 years, the nation's state governors and budget officers said Tuesday.
In their 1988 Fiscal Survey of the States, the National Governors' Association and National Association of State Budget Officers said the projected 1989 states' general-fund balances had shrunk to the lowest point in the 12-year history of the survey."The gap between revenues and expenditures narrowed considerably in fiscal 1989, with growth in expenditures exceeding the growth in revenues," said Raymond Scheppach, executive director of the governors' association.
States have increased spending for the 1989 spending year by 6.8 percent, close to the growth rate of the previous two fiscal years, said Gerald Miller, executive director of the NASBO.
"In terms of real spending increases, states are at the lowest rate since the 1982-83 recession, which means states have been unable to afford significant program expansion," Miller said.
The survey, released twice a year by the two associations, shows that 27 states passed tax initiatives during the 1988 legislative sessions, focused primarily on conforming to national tax law changes.
The measures will add less than $1 billion to state revenues, with most of that coming from increased taxes on gasoline, the survey said.
Eighteen states cut spending or adopted other measures to deal with projected budget shortfalls in fiscal 1988.
The already low balances could be reduced further if economic conditions deteriorate or if the federal government reduces aid to states, the survey warned.
Cuts in federal aid "loom on the federal agenda as potential means of dealing with the federal deficit and the nation's economy," the survey noted.
The survey concludes the country is in generally good economic health.