States’ Budget Pains Ease

Recovering economy boosts revenue; states’ Q1 saw 5.6% rise in taxes.

For the past four years, U.S. states struggled to close more than $500 billion of budget shortfalls caused by the recession, ushering in tax increases, spending cuts and clashes with public-employee unions.

With the economy recovering, officials gathering in Washington today for the National Governors Association winter meeting are beginning to face a welcome choice: how to spend extra money.

“State policy makers have good reason to feel optimistic about the recent and positive economic news,” said Kil Huh, who follows budgets for the Pew Center on the States. “But when it comes to budget matters, there may be reasons to hedge. There’s stress still lurking in state budgets.”

Ohio Governor John Kasich, a Republican, said that with the exception of $2 million he promised to children’s hospitals for research, he doesn’t plan to increase spending this year. Tax receipts for fiscal 2012 are running $147.1 million ahead of projections, according to the state Office of Budget and Management.

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