Finance

Spending Levels Rebounding for Most States, Report Finds

After declining last year, it's estimated that 41 states recorded spending increases in fiscal 2013. View up-to-date spending data for each state.
by | November 26, 2013
Hundred dollar bills to represent tax revenue

Aided by healthier revenue growth and federal funding, spending levels rebounded for many states in fiscal year 2013.

A report published last week by the National Association of State Budget Officers (NASBO) estimates 41 states saw total expenditures rise in fiscal 2013. Twenty-two states recorded an annual increase of at least 3 percent, led by Wyoming (42.9 percent), Nevada (16.7 percent) and Idaho (15.6 percent). (See table below)

In all, total state spending climbed 4.7 percent for the fiscal year. That represents a stark contrast from fiscal year 2012, when aggregate expenditures dipped 1.7 percent – the first decline recorded in the 26-year history of the NASBO report.

Shifts in federal funding account for part of the reversal, as states' federally-funded spending ticked up 2.3 percent after falling 9.1 percent in fiscal 2012 as Recovery Act grant money dried up.

Meanwhile, total state general fund spending also increased an estimated 4.4 percent as state tax revenues saw notable gains, according to the report.

NASBO expressed caution, though, regarding states' ability to sustain spending growth for the long term. “Although in many ways state fiscal conditions have stabilized in fiscal 2013, states remain concerned about both the short and long term outlook due to the slow pace of economic growth, the uncertainty of federal fund levels, questions regarding the future performance of state revenue, and increased spending demands," the report stated.

The following summary provides an overview of reported changes in state expenditures for a few of the major spending categories:

Elementary/Secondary Education: State spending for this category is estimated to have increased 4.2 percent in fiscal 2013 after incurring cuts during the recession. General funds account for the bulk of elementary-secondary education spending -- about 71 percent in 2012. For fiscal 2013, states reporting the largest year-over-year percentage increase in elementary/secondary education spending included California, Maine, Minnesota and Wyoming. Thirteen states reported a drop in state spending.

Higher Education: After declining nearly 4 percent in fiscal 2012, NASBO estimates state higher education spending increased 2.6 percent. States registering large spending hikes in this area include Florida (18 percent), Virginia (23 percent) and South Dakota (45 percent).

Medicaid: It’s no surprise that state Medicaid spending continued to increase in fiscal 2013. State-funded spending climbed an estimated 8 percent, while federally-funded spending increased 7.2 percent from fiscal 2012 levels. NASBO data estimates all states will record annual increases in total Medicaid spending, with the exceptions of Georgia, Iowa, Kentucky, Minnesota, New Jersey, New York and Tennessee.

Public Assistance: Federal funds account for the bulk of state public assistance spending, so less money from Washington meant states needed to either increase their contribution or cut spending. For the Temporary Assistance for Needy Families (TANF) program, total expenditures tied to state funds jumped an estimated 10.1 percent in fiscal 2013. However, federal fund spending plummeted 11.3 percent, enough to push total state TANF spending down 5.7 percent for the year.

Transportation: Spending from both state and federal sources were expected to increase for fiscal 2013, pushing total state transportation expenditures up 6.1 percent. Costs states count as transportation spending vary greatly by state. Spending data for each state is listed beginning on page 64 of the NASBO report.

Change in Total State Spending: FY 2012 - FY 2013

The following table shows annual changes in state spending. Most figures represent estimates reported by states in the NASBO report, not actual amounts.

Source: NASBO, State Expenditure Report.

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