States rolling in surpluses

NY Times:

State lawmakers across the country, their coffers unexpectedly full of cash, have been handing out tax cuts, spending money on fixing roads, schools and public buildings, and socking something away for less fruitful years.

Budget surpluses have largely stemmed from higher than expected tax collections — corporate tax revenues alone were 11 percent higher than budget estimates — and booming local economies. There has also been some relief in Medicaid spending, which fell from an 11 percent annual growth rate to something closer to 7 percent in the past few years.

More than 40 states have found themselves with more money than they planned as they wound down their regular sessions. Governors in 23 of those states proposed tax cuts, and a majority of states with surpluses chose to shore up their roads, schools and rainy day funds. For example, lawmakers in Utah agreed to a $1 billion bond act to fix state roads and add lane miles, while in Idaho state spending on education outpaced that on Medicaid for the first time in 20 years.

The extra cash over the last two budget sessions (many states work on a two-year cycle) is at the highest level since 2000, state budget experts say. States, burned by several years of shortfalls, kept their estimates of total revenues on the conservative side and are now reaping plenty.

“Because states cut back so in the early part of the decade,” said Ray Scheppach, the executive director of the National Governors Association, “they put off maintenance, they put off building, things like that, so they are beginning to do some one-time spending.”

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Only a handful of states have had to cut budgets, led by Michigan, which has suffered six straight years of job losses. Texas issued the largest property tax cut in its history — $14.2 billion for the biennium, representing roughly a one-third decrease for average home owners.

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Texas still had the largest surplus of any state. It should have reduced property taxes even more. The schools are the main culprit. They have been spending significant amounts of money from a windfall in property tax receipts caused by higher evaluations. The law required that they adjust the tax rate to reflect the higher evaluation but most do not. The taxes on my property have more than doubled in the last ten years and most of it has gone to the schools.