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Highlights from NASBO Fall 2017 Fiscal Survey of States

This week, our In Focus section highlights some of the key findings of the Fiscal Survey of the States Fall 2017, released this month by the National Association of State Budget Officers (NASBO). The association conducted surveys of state budget officers in all 50 states from August through November 2017. The findings in the report focus on the key determinants of state fiscal health, highlighting data and state-by-state budget actions by area of spending. Below we summarize the major takeaway points from the report, as well as highlight key findings on Medicaid-specific and other health care budget items.

 Overall Budget Environment Takeaways

Based on NASBO’s survey and evaluation of state governors’ recommended budgets, states are approaching FY 2018 with significant caution, following two consecutive years of slow revenue growth. Medicaid spending continues to be a major driver of state budget actions, with Medicaid being the second largest general fund spending category on average at 20.3 percent.

Over one-half of states (27) reported general fund (GF) revenues below budget projections for FY 2017, with nearly half of states (22) making mid-year budget cuts. Governors’ budget proposals for FY 2018 amount to overall general fund spending growth of 2.8 percent. In all:

  • 15 states are projecting negative budget growth;
  • 28 states are projecting budget growth between 0 and 5 percent;
  • Seven states are projecting budget growth between 5 and 10 percent; and
  • No states anticipate budget growth above 10 percent.

Figure 1 – State Nominal Annual Budget Increases, FY 1979 to FY 2018

On the revenue side, FY 2018 is projecting slightly better than FY 2017, with five states projecting negative revenue growth (compared with eight in FY 2017). Proposed FY 2018 budgets assume overall growth in sales tax revenues of 4.2 percent, along with 4.4 percent growth in personal income tax revenue, and 1.0 percent growth in corporate income tax revenues.

Figure 2 – State Nominal Annual Revenue Increases, FY 1979 to FY 2018

Medicaid-Specific Budget Environment

Of the 30 states making FY 2017 mid-year budget adjustments, 19 reduced Medicaid funding by more than $846 million in the aggregate. Only eight states increased Medicaid funding. In FY 2018, 30 states enacted Medicaid funding increases, while 17 states enacted decreases, with a net increase of $2.6 billion.

Figure 3 – Selected State Data from NASBO Report – FY 2017 to FY 2018

Link to NASBO Fiscal Survey of States, Fall 2017