Earn more; spend less: a formula for financial improvement that is much simpler in concept than in reality, particularly for states against the backdrop of today’s economy. While states were able to cut back on expenditures in 2012, revenues also declined. In fact, as in three of the past four years, revenues fell short of expenditures, according to the recently released 2012 Census of Governments: Finance – Survey of State Government Finances.
Because many federal stimulus programs ended in 2011, federal aid (through grants) fell for the first time in several years, leaving states with the challenge of trying to balance their budgets on their own merits in 2012.
The report, published by the U.S. Census Bureau Governments Division, says that state governments saw general revenues fall to $1,627.8 billion in 2012, a 1.8 percent decrease from 2011. Total revenue – the sum of general revenues plus social insurance trust revenue (unemployment compensation funds) – fell 15.6 percent over the year.
State governments primarily derive general revenue from three sources: taxes, federal grants, and service charges. Because many federal stimulus programs ended in 2011, federal aid (through grants) fell for the first time in several years, leaving states with the challenge of trying to balance their budgets on their own merits in 2012.
Highlights of the report include:
- In 2012, taxes contributed the largest percentage (49.0 percent) of state revenues, totaling $798.2, up 4.7 percent from the prior year. This broad category includes sales and gross receipt taxes, selective sales taxes, personal and corporate income taxes, and license taxes.
- Federal grants, the next highest contributor to state revenues, fell by 10.7 percent from 2011, due largely to the temporary nature of the funding provided by the American Recovery and Reinvestment Act.
- On the other side of the ledger, state government general expenditures were $1,645.8 billion in 2012, reflecting a 0.5 percent decline from 2011.
- In 13 states, expenditures for education comprised more than 40 percent of general expenditures in 2012. Indiana led the pack, spending 46.3 percent of its general expenditures on education.
- Public welfare, health and hospitals, and highways, and unemployment comprised other significant expenditure areas in 2012.
- Overall state capital outlays – which doesn’t always entail taking on debt – were actually up by 4.7 percent for highway spending.
- State debt for general purposes edged up slightly, while state debt for private activity purposed declined in 2012 compared to the prior year.