WASHINGTON -- State lawmakers anticipate more budget cuts next year, including aid to local governments, as revenue shortfalls and weak economic growth persist, according to a survey by the National Conference of State Legislatures.
"With revenue shortfalls probable and tax increases largely foreclosed, many lawmakers may find budget-cutting to be their first task," says a report describing the annual survey that was released yesterday by the group. "The first candidate for targeted cutbacks is aid to local government, at it has been in previous years," the report says.
In at least half the states, revenue in fiscal 1993 is expected to fall short of previous projections that were based on assumptions of a moderate recovery, the group said.
"In some cases, the estimated shortfalls constitute a substantial fraction of the budget," the report adds. For example, California's shortfall is expected to be 13% to 25%, Texas' 15% to 20%, Maryland's 7% to 8%, and Minnesota's 5% to 6%.
In the last two years, states have raised taxes considerably. The report says voters generally oppose more tax hikes. "Voters [in several states] in fact are endorsing constitutional amendments that make any state tax increase very difficult," the report says.
In general, survey respondents predicted their states will face the same set of problems in 1993 that have plagued their jurisdictions for the last few years. That includes ballooning costs for Medicaid, prisons, and other programs, in the wake of lackluster revenue growth, the report says.
In writing their fiscal 1993 budgets, states on average projected 4.8% more revenue than in fiscal 1992, the report says. This would yield an additional $14 billion for states in fiscal 1993.
However, as fiscal 1993 has gotten under way, "The expected growth clearly was not materializing in all states," the report says. This has resulted in the expectations of significant budget shortfalls in several states, including Hawaii, Maine, Ohio, and Georgia.
Total state spending in fiscal 1993 is projected to be 3% or $9 billion more than in fiscal 1992, according to the report. Inflation is expected to remain at about 3% this year, so the report concludes that real growth in state spending, adjusted for inflation, will essentially be nonexistent in fiscal 1993.
In managing their fiscal 1993 budgets, most of the survey respondents said they planned to deal with shortfalls with spending cuts rather than tax increases, according to the report.
In addition, many of the respondents said they expected their state's spending requirements would outpace revenues over the next five years without tax increases, the report says.
"Further, legislators generally report that if a tax increase were to become necessary, the most acceptable increase would be in excise tax, a poor provider or revenue," the report notes, adding that "the least acceptable would be income and sales tax rate changes, the most productive kinds of tax increases."