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Highlights from NASBO Spring 2017 Fiscal Survey of States

This In Focus article was originally published in the June 21, 2017 HMA Weekly Roundup.

This week, our In Focus section highlights some of the key findings of the Fiscal Survey of the States Spring 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 in February through April 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 spending growing faster than revenues.

Two-thirds of states (33) reported general fund (GF) revenues below budget projections for FY 2017, with nearly half of states (23) making mid-year budget cuts. Governors’ budget proposals for FY 2018 amount to overall general fund spending growth of 1.0 percent. In all:

  • 15 states are projecting negative budget growth;
  • 29 states are projecting budget growth between 0 and 5 percent;
  • Six 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 only three states projecting negative revenue growth (compared with nine in FY 2017). Proposed FY 2018 budgets assume overall growth in sales tax revenues of 2.7 percent, along with 4.1 percent growth in personal income tax revenue, and 3.9 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 23 states making FY 2017 mid-year budget adjustments, 18 reduced Medicaid funding by more than $888 million in aggregate. Meanwhile, seven states made positive mid-year adjustments to Medicaid funding of nearly $305 million. States project overall Medicaid expenditures to grow at 4.2 percent in FY 2018, down from 8.8 percent in FY 2017.

Figure 3 – FY 2017 & Proposed FY 2018 Budgetary Actions Related to Medicaid

Proposed FY 2018 budgets show a significant uptick in states looking to restrict provider payments (20 in FY 2018; 12 in FY 2017), as well as restrict benefits to enrollees (12 in FY 2018; five in FY 2017). However, there are still a greater number of states increasing provider payments (26 in FY 2018) and expanding or restoring benefits (21 in FY 2018).

A total of 13 states responded that they intend to expand Medicaid managed care in FY 2018, down from 17 states in FY 2017.

Table 4 – Selected State Data from NASBO Report – FY 2017 to FY 2018

Link to NASBO Fiscal Survey of States, Spring 2017