The National Association of State Budget Officers Fiscal Survey of the States is out, and as usual it’s full of interesting news for people who want to see where the states appear to be headed in the near future.

For example, despite recent state tax cuts, slowing inflation, and other economic factors, state revenues continue to hold up pretty well, with FY 2024 tax collections beating original revenue projections in most states. After the two fastest growing years for general fund revenue in FY 2021 and FY 2022, general fund revenue growth has been relatively flat the last two years and is expected to see a modest increase in proposed budgets for FY 2025.

What’s more, despite relatively flat growth in recent years, general fund revenue forecasted for FY 2025 is roughly 36 percent above levels recorded in FY 2019 (before the pandemic).

In fact, even with flat revenue growth trends in the aggregate, most states are on track to end FY 2024 with higher rainy day fund balances than the year before, and this trend is expected to continue in FY 2025 governor budgets.

For people who may not dig a little deeper into the data in the report, there’s one number that could easily be misunderstood. We’re talking about the overall 6.2% general fund spending decline projected for FY 2025 in governor’s budgets. That’s certainly a steeper drop than might be anticipated, but it requires some context according to Shelby Kerns, executive director of NASBO. “This is really driven by a temporary bump in the baseline year (FY2024) for several large states that recorded substantial one-time expenditures that year,” she explained to us. “The median spending change (a 1.1% increase) is more indicative of overall trends in governors’ budgets for FY 2025.

“Along similar lines, aggregate general fund spending grew at a faster clip in FY 2024 than previously anticipated, once again driven by significant increases fueled by one-time expenditures in several large states.”

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