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U.S. state budgets will tick up in 2022, report finds

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The coronavirus shock wasn’t nearly as bad as feared for U.S. state fiscal health, but there have been wide disparities among state experiences, with 2022 looking like a transition year back to normalcy, according to a report out Thursday.

State general fund revenues of $928.9 billion for the 2022 fiscal year represent a 2.3% increase compared with FY21, but 2020 and 2021 revenues combined will likely total 2.8% less than states had expected before the pandemic. That’s according to the National Association of State Budget Officers’ Fiscal Survey of States report, which is issued twice a year.

Most states have a July 1 – June 30 fiscal year, so NASBO’s survey is based on budget figures that likely come close to what is eventually enacted, though there may be some changes after they collected the data this spring.

Of note: fiscal 2020 marked the first year when state general fund revenues declined year-over-year since the Great Recession, even if only a 0.6% slip.

Governors’ requested general fund budgets total $963.6 billion for FY22, representing a 5% increased versus estimated 2021 levels. For FY21, NASBO estimates spending will total $917.8 billion, a 3% increase over the prior year, but 2% lower than states had anticipated spending before the pandemic struck.

Fiscal 2022 will mark a shift from reliance on federal funds to one in which states are mostly relying on their own revenues, NASBO notes, since most budgets were developed before the American Rescue Plan, which will direct $350 billion to state and local governments, was passed in March.

Read: Cities and towns are about to get $65 billion in stimulus from Washington. Here’s what to know about the American Rescue Plan

States managed through 2021, the year in which the pandemic had the longest-running impact, in various ways. None reported layoffs, but 16 states implemented hiring freezes or allowed open positions to remain vacant, and three states cut employee salaries. Only three – Colorado, Hawaii, and Nebraska – reported changes to expected pension payments.

The budget impact across the three years spanned by the pandemic has been all over the map, as shown in the chart above. While Alaska suffered a 39% decline in revenue in 2020, it expects a healthy 5.7% gain in 2022. Nebraska came through the first two years relatively unscathed, but projects a 6.9% decline in Fiscal 2022.

See next: State of the States: Are rainy days here again? In four charts, the pandemic’s pain

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