Most States Expect to Have Budget Surpluses This Year

Revenues are pouring into most state government coffers at an unexpectedly high rate, making surpluses likely--but not necessarily tax cuts, a survey found.

As legislative sessions open around the nation this month, 30 states say they’ve taken in more tax collections so far this budget year than they had predicted. Eighteen others say revenues are coming in on target, according to an annual fiscal report of the states done by the National Conference of State Legislatures.

Only Alaska expects a slight decline in revenues, and Hawaii did not respond to the survey.

While revenues are up--thanks to a strong stock market, experts say--only 13 states said unexpected costs had arisen. Each of those states said they could cover the cost with revenues.

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Surpluses that states have seen over the past three to four years mean serious politicking, legislators said. In austere times, they said, it’s easier to tell constituents no without losing political face.

“Now we’ll find out exactly how committed to your philosophy you are,” said Arizona Senate Finance Chairman Scott Bundgaard.

The Phoenix Republican wants Arizona to turn back an unexpected $300 million in collections and $200-million surplus from the end of the last budget year in the form of tax cuts. Arizona, which has been cutting taxes since 1991, “has found a wallet with $500 million in it. I’d like to return that wallet,” he said.

The debate over what to do with potential surpluses has an added factor: 1998 is an election year.

“You can’t underestimate the role that will play on people’s thinking,” said Arturo Perez, author of the report by the Denver-based National Conference.

While surpluses are likely, tax cuts may not be. Budget officials in only 16 states predicted tax relief would be on their agenda this session.

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Among the proposals floating around are ones to cut Arizona’s personal income tax and Oklahoma’s sales tax on food, to eliminate Virginia’s motor vehicle property tax and to give a property tax credit in Missouri.

But Perez noted that 24 states cut at least 1% of their tax collections from 1995 to 1997 and said that “they can’t keep coming back to that.” Expenditures also have been up: 5.3% in fiscal 1998 from the previous year.

Legislators and state officials are also cagey this time of year, Perez said, not wanting to reveal proposals in the works for tax cuts or increases.

Education will be the big spending issue of this legislative session, according to most states. Others mentioned were juvenile justice programs, adult corrections and state employee compensation.