Six Principles of Better Budgeting

Source: William Glasgall, Council of State Governments, The Current State, Issue 104, May 15, 2017

The beginning of fiscal year 2018 is barely four months away in all but four states—Alabama, Michigan, New York and Texas—and governors from coast to coast have started proposing budgets for the coming year. But while the U.S. economy is nearing its third-longest recovery since records began in 1857, the outlook for state revenue is less robust than almost eight years of steady gross domestic product growth might imply. Following the National Association of State Budget Officers’ observation that “weak revenue performance” in 2016 helped keep inflation-adjusted general fund spending under where it was even in the recession in 2008, The Nelson A. Rockefeller Institute of Government recently described the 2016–17 outlook for state tax collections in one word: gloomy.

The contrast between tepid revenue growth and growing spending needs, especially for Medicaid and pension payments, suggests that states will resort—as they often do—to balancing their budgets by using one-time solutions and other techniques that shift the cost of current expenditures to the next generation of taxpayers or beyond….