U.S. states have budgeted for the largest increase in general fund spending since 2007 for fiscal 2022, according to a new report, as economic growth and federal stimulus help boost the local fiscal outlook.
The report, the fall Fiscal Survey of States from the National Association of State Budget Officers, tracks annual budgets for states, most of which are finalized in the spring for a July 1 fiscal year start. States project general fund spending of $1.02 trillion, a 9.3% increase compared to 2021. The median state budget increase is 6.1%.
Some of the outsize increase is due to one-time factors arising from the pandemic. In many cases, states are shifting their spending back to their own budgets and away from the use of federal funds. State spending was lower in some cases in fiscal 2021, and funding restored for 2022.
But the outlook for spending is also due to an economic picture that’s brighter than expected at the outset of the pandemic. Some 47 states reported general fund revenues that came in above their original projections in 2021. In the aggregate, combined fiscal ’20 and ’21 revenues were 2.2% above pre-pandemic projections.
That’s carried through to 2022: Of 42 states able to report in the first part of the fiscal year, 32 said revenue collections were ahead of budget projections and the remaining 10 said they were running in line with forecasts.
In 2022, just about every category of spending is projected to increase, as shown in the graphic above. The sharp jump in the “all other” category reflects pandemic-related expenses. K-12 and higher education are also projected to see big increases.