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As revenue

Table 9

21 States with 1998 Reserves of 10%

poured in faster

or More

than expected,

Balance as

spending

Percentage

increased right

State

of Expenditures

along with it.

Alaska

142.3%

Nebraska

29.2%

Delaware

28.4%

Indiana

23.0%

Minnesota

21.5%

Iowa

20.4%

Kansas

19.7%

Colorado

17.4%

Nevada

15.7%

Arizona

15.5%

Oregon

15.2%

Maryland

13.3%

North Dakota

13.3%

Mississippi

13.1%

Michigan

12.9%

Wyoming

12.6%

Texas

11.5%

Oklahoma

11.2%

South Carolina

10.5%

Maine

10.0%

Rhode Island

10.0%

While financial analysts do take state

budgets came to $54.4 billion. Those rising

reserves into account when assigning state

revenues have coincided with rising spending

bond ratings, most recommend a reserve in

increases (Figure 10). That is, as revenue

the range of 3 percent to 5 percent.18 Forty

poured in faster than expected, spending

states had reserves larger than 5 percent in

increased right along with it. The aggregate

FY98, and 21 of those had reserves that were

excess spending over levels recommended by

10 percent or larger (Table 9).19 Greater-than-

the governors was $63.7 billion from 1994 to

expected revenues are the cause of the large

1998.

accumulating surpluses. Over the past four

Take FY98, for example. In early 1997 when

years, state tax collections--from sales, person-

governors put forth their recommended bud-

al income, and corporate income taxes, the

gets for FY98, they projected that tax collec-

three main sources of state revenue--have

tions would come in at $306 billion, and they

exceeded expectations by a total of $30 bil-

proposed increasing spending by 3.6 percent.

lion.20 Figure 9 illustrates that, in each of the

Later in 1997, when FY98 budgets were enact-

ed by the state legislatures, tax collection esti-

last five fiscal years, projected state tax collec-

mates had risen to $317 billion. Those enacted

tions have steadily risen over the course of the

budgets called for an increase in spending of

budget cycle. The aggregate revenue surplus

5.5 percent. The final numbers for FY98

over revenues recommended in the governors'

17