With a sharp decrease in revenue growth expected in fiscal 2025, New Mexico Gov. Michelle Lujan Grisham proposed a $10.5 billion spending plan that she said maintains hefty reserves that help cushion state coffers from volatility in the fossil fuel industry, which generates tax and other revenue.
"Here's my promise to New Mexicans in future years and future generations: We will continue to spend within our means, responsibly and with an eye toward accountability, always, while capitalizing on the fiscal opportunities available," the Democratic governor said in a statement earlier this month.
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"As legislative changes to the tax code take effect, inflation returns to pre-pandemic norms, employment markets weaken, consumer savings are depleted, oil prices soften, and oil production slows, revenue growth is expected to shrink to 2.2 percent in FY 25 before returning to more typical growth of over 3 percent in FY27 and beyond," Legislative Finance Committee economists reported.
States are confronting broadly shared budget challenges for the first time since 2020 as atypical revenue growth driven by federal fiscal aid abates and spending increases and tax cuts adopted in recent years weigh on budgets,
"Based on budget analyses states published in late 2023, roughly half of Americans live in states that report short-term budget gaps, potential long-term deficits, or both — and this inventory almost certainly understates the scope of the problem because many states do not publish sufficient forward-looking data to meaningfully assess their fiscal outlook," the report said.
Pew added shortfalls are occurring at a time states have increased their rainy day fund balances to record levels.
"However, for states with structural budget deficits—where ongoing spending chronically exceeds ongoing revenue — policymakers need to either decrease spending or increase revenue to bring the budget back into balance, or else they will eventually exhaust even the largest reserves," the report said.
Arizona's Joint Legislative Budget Committee
The rising deficits come amid
In her State of the State address last week, Democratic Gov. Katie Hobbs reiterated her call to rein in spending
"It is our responsibility as stewards of this state to put in place guardrails to ensure taxpayer dollars dedicated to education are used properly," she said, adding that requiring voucher recipients to have attended a public school for at least 100 days would save $250 million.
Republicans who control the legislature contend vouchers are not fueling the shortfall and will fight efforts to undermine the program.
Kansas Gov. Laura Kelly on Thursday unveiled an $11.18 billion
The state's Consensus Estimating Group in November
"I'm a fiscal conservative, which is why, once again, I'm proposing a budget that's balanced, pays off debt, and includes tax cuts for working families and retirees," the Democratic governor said in a statement.
Kelly, who must work with GOP supermajorities in the state legislature,
Another $540 million in surplus dollars would be used to cash fund capital projects, including a new jail.
Kansas has built up its budget balances and reserves, which S&P Global Ratings noted when it
Fitch Ratings, which recently announced its first-ever issuer default rating for Kansas of AA, cited the state's "sustained trend of structurally balanced budgets" and the rebuilding of fiscal reserves to levels well above historical norms.
The governor's budget would also expand Medicaid to 150,000 residents and cut more than $1 billion in property and other taxes over three years.
Tax cuts are
Republican House Speaker Charles McCall
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In Utah, general fund revenue "continues to squeak past expectations," according to a December
"Through five months of (fiscal 2024) the state's general, income and transportation fund revenues totaled just over $4.5 billion, up 2.1% over the same time last fiscal year," the report said. "The most recently updated year end projection for all state sources expects to have a slight contraction from last year's astronomical revenue."
Utah Gov. Spencer Cox's $29.5 billion fiscal 2025