State Government Fiscal Stress and Federal Assistance

State Government Fiscal Stress and Federal Assistance

State Government Fiscal Stress and
Federal Assistance
Robert Jay Dilger
Senior Specialist in American National Government
February 4, 2014
Congressional Research Service
7-5700
www.crs.gov
R41773

State Government Fiscal Stress and Federal Assistance

Summary
No two state budgets are alike. States have different budget cycles, different ways of preparing
revenue estimates and forecasts, different requirements concerning their operating and capital
budgets, different roles for their governors in the budget process, and different policies
concerning the carrying over of operating budget deficits into the next fiscal year.
Although no two state budgets are alike, all 50 states experienced heightened levels of fiscal
stress during and immediately following the national economic recession, which officially lasted
from December 2007 to June 2009. For example, state tax revenues from all sources, including
sales, personal, and corporate income taxes, fell 10.3% (from $680.2 billion to $609.8 billion)
from FY2008 to FY2010. The decline in state tax revenue, coupled with increased demand for
social services and state-balanced operating budget requirements, created what the National
Association of State Budget Officers (NASBO) characterized as “one of the worst time periods in
state fiscal conditions since the Great Depression.”
States closed nearly $230 billion in state budget shortfalls in FY2009 and FY2010; and $146.3
billion in state shortfalls in FY2011 and FY2012. Since then, state fiscal conditions have
generally improved. In FY2013, state general fund spending surpassed pre-recession levels for
the first time, reaching $693.7 billion, and 45 states increased their general fund spending in
FY2013 compared with FY2012. Although state fiscal conditions have improved, state budgetary
officials predict continuing budgetary challenges in virtually all states in FY2014, in part due to
relatively slow state revenue growth, the need to replenish reserves, and increased costs for health
care and other social services.
Congressional interest in state budgetary finances has increased in recent years, primarily because
state action to address budget shortfalls, such as increasing taxes, laying off or furloughing state
employees, and postponing or eliminating state infrastructure projects, could have an adverse
effect on the national economic recovery. Also, if states reduce their service levels there could be
additional pressure for the federal government to either provide those services or to provide
additional federal assistance to states.
This report examines the current status of state fiscal conditions and the role of federal assistance
in state budgets. It begins with an overview of state budgeting procedures and then provides
budgetary data comparing state fiscal conditions in FY2008 to FY2013. The data indicate that (1)
recent improvements in the national economy have enabled many states to increase their general
fund spending, but states still face several fiscal challenges in part due to relatively slow state
revenue growth, the need to replenish reserves, and increased costs for health care and other
social services; (2) states are more reliant on federal assistance today than in FY2008; and (3)
state officials anticipate an increase in federal assistance for Medicaid over the next several years,
but they are concerned that federal budget constraints could lead to declines in federal assistance
in other program areas.
This report concludes with an assessment of the consequences current levels of state fiscal stress
may have for the 113th Congress.

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State Government Fiscal Stress and Federal Assistance

Contents
State Budgets ................................................................................................................................... 1
State Budgetary Procedures ............................................................................................................. 3
Current State Operating Expenditures ....................................................................................... 4
The State Capital Budget ........................................................................................................... 5
Trends in State Expenditures ........................................................................................................... 5
Total State Expenditures ............................................................................................................ 6
State General Fund Expenditures ............................................................................................ 10
State Federal Funds Expenditures ........................................................................................... 12
Other State Funds Expenditures .............................................................................................. 15
State Bonds Expenditures ........................................................................................................ 18
State Capital Expenditures ....................................................................................................... 21
Federal Assistance and State Fiscal Stress ..................................................................................... 23
Consequences for State Policy Makers.................................................................................... 23
Variations in State Fiscal Stress ..................................................................................................... 24
Consequences for Congress ..................................................................................................... 25
Benchmarks for Measuring Variation in State Fiscal Stress .................................................... 26
Issues with Using State General Fund Expenditures as a Benchmark .............................. 26
Measuring the Relative Size of State Governments .......................................................... 26
Concluding Observations ............................................................................................................... 29

Figures
Figure 1. Total State Expenditures for FY2000-FY2013, by Funding Source ................................ 9

Tables
Table 1. Total State Expenditures (Capital Inclusive), FY2000-FY2013 ........................................ 6
Table 2. Change in Total State Expenditures, FY2008-FY2013 ...................................................... 7
Table 3. State General Fund Expenditures, FY2000-FY2013 ....................................................... 10
Table 4. Change in State General Fund Expenditures, FY2008-FY2013 ...................................... 11
Table 5. State Federal Funds Expenditures, FY2000-FY2013 ...................................................... 13
Table 6. Change in State Federal Funds Expenditures, FY2008-FY2013 ..................................... 13
Table 7. State Other Funds Expenditures, FY2000-FY2013 ......................................................... 15
Table 8. Change in Other State Funds Expenditures, FY2008-FY2013 ........................................ 16
Table 9. State Bonds Expenditures, FY2000-FY2013 ................................................................... 18
Table 10. Change in State Bonds Fund Expenditures, FY2008-FY2013 ...................................... 19
Table 11. Change in State Capital Fund Expenditures, FY2008-FY2013 ..................................... 21
Table 12. State Federal Funds Expenditures: Total Amount and as a Share of Total State
Expenditures (Capital Inclusive), FY2000-FY2013 ................................................................... 23
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Table 13. Total State Expenditures, Per Capita FY2013 and as a Percentage of State GDP
FY2012 ....................................................................................................................................... 27

Contacts
Author Contact Information........................................................................................................... 30

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State Budgets
No two state budgets are alike.1 For example, 29 states have an annual budget cycle, 19 states
have a biennial budget cycle, and 2 states have an annual budget cycle for some agencies or
purposes and a biennial budget cycle for others.2 Most states (46) begin their fiscal year on July 1,
2 states begin their fiscal year on October 1 (Alabama and Michigan), 1 state begins its fiscal year
on September 1 (Texas), and 1 state begins its fiscal year on April 1 (New York).3
States also have different ways of preparing their revenue estimates and forecasts that project the
amount of revenue that will be available based on current law to support operating costs and
capital outlays in the current and future fiscal years. These revenue estimates are important
because they establish the general parameters for the state’s budget at the outset of the budget
process.4 The state budget office is solely responsible for revenue forecasting in 13 states, a board
or commission is solely responsible in 11 states, and the state revenue office is solely responsible
in 3 states. The remaining states use a combination of agencies or boards to develop their revenue
forecasts.5
All but one state (Vermont) has some form of a balanced operating budget requirement, either in
statute or in their state constitution, but the stringency of these requirements varies, ranging from
having only a requirement that the governor submit a balanced operating budget for the
legislature’s consideration (2 states) to having a prohibition against carrying a deficit forward and
requirements that the governor propose, the legislature pass, and the governor sign a balanced
operating budget (26 states).6 Overall, governors in 44 states must submit a balanced operating

1 The state expenditure data presented in this report are drawn from the National Association of State Budget Officers’
(NASBO) annual State Expenditure Reports. The data are self-reported by the states. In 2010, the Government
Accountability Office (GAO) assessed the reliability of NASBO expenditure data for a report on state and local
government use of funding provided by P.L. 111-5, the American Recovery and Reinvestment Act of 2009. GAO
reviewed existing documentation related to the NASBO data sources and interviewed knowledgeable agency officials
about the data. GAO determined that “the data are sufficiently reliable for the purposes of this report.” See U.S.
Government Accountability Office, Recovery Act: Opportunities to Improve Management and Strengthen
Accountability over States’ and Localities’ Use of Funds, GAO-10-999, September 20, 2010, p. 205, at
http://www.gao.gov/new.items/d10999.pdf. GAO has also examined the reliability of NASBO’s semi-annual Fiscal
Survey of States reports and found them to be reliable. See U.S. Government Accountability Office, State and Local
Governments: Knowledge of Past Recessions Can Inform Future Federal Assistance, GAO-11-401, March 31, 2011,
pp. 2, 52, at http://www.gao.gov/new.items/d11401.pdf. The Bureau of the Census also surveys state and local
governments concerning their revenues and expenditures. NASBO data was used in this report because it includes more
recent estimates.
2 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, p. 5,
at http://www.nasbo.org/sites/default/files/BP_2008.pdf; and Ron Snell, “State Experiences With Annual and Biennial
Budgeting,” National Conference of State Legislatures, April 2011, p. 1-3, at http://www.ncsl.org/research/fiscal-
policy/state-experiences-with-annual-and-biennial-budgeti.aspx.
3 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, p. 5,
at http://www.nasbo.org/sites/default/files/BP_2008.pdf.
4 Ibid., pp. 3, 20. For further information and analysis of state revenue estimates see Susan K. Urahn and Thomas Gais,
“States’ Revenue Estimating: Cracks in the Crystal Ball,” The Nelson Rockefeller Institute of Government and the Pew
Center on the States, Washington, DC, at http://www.pewstates.org/uploadedFiles/PCS_Assets/2011/
States_Revenue_Estimating_final.pdf.
5 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, pp. 3,
20, at http://www.nasbo.org/sites/default/files/BP_2008.pdf.
6 Ibid., p. 40; and National Conference of State Legislatures, “NCSL Fiscal Brief: State Balanced Budget Provisions,”
Washington, DC, October 2010, pp. 4, 5, at http://www.ncsl.org/documents/fiscal/
(continued...)
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budget for legislative consideration, state legislatures in 41 states must pass a balanced operating
budget, the governor must sign a balanced operating budget in 37 states, and 43 states have a
prohibition against carrying an operating budget deficit forward.7 Also, the extent of the
governor’s authority in the budget process varies among the states. The governor can spend
unanticipated federal funds in 30 states, reduce enacted budgets in 38 states, veto an item within
the appropriations bill in 41 states, veto selected words in 15 states, and use the veto to change the
meaning of words in 4 states.8
Although 43 states have a prohibition against carrying an operating budget deficit forward, all
states incur debt to finance capital projects, typically subject to limits on debt service (31 states),
levels of authorized debt (44 states), or both (29 states).9 State government debt was $1.148
trillion at the end of FY2012 (39.2% of total state and local government debt).10
Although no two state budgets are alike, all 50 states experienced heightened levels of fiscal
stress during FY2009 and FY2010.11 The national economic recession, which officially lasted
from December 2007 to June 2009, led to lower levels of economic activity throughout the nation
and reduced state tax revenues.
State tax revenues from all sources, including sales, personal, and corporate income taxes, fell
from $680.2 billion in FY2008 to $609.8 billion in FY2010, a decline of 10.3%.12 The decline in
state tax revenue, coupled with state balanced operating budget requirements, created what the
National Association of State Budget Officers (NASBO) characterized as “one of the worst time
periods in state fiscal conditions since the Great Depression.”13 For example, even with an
additional $120.3 billion in temporary federal assistance provided through P.L. 111-5, the
American Recovery and Reinvestment Act of 2009 (ARRA) in FY2010, states reduced their
general fund expenditures by 5.7% from FY2009 ($660.9 billion) to FY2010 ($623.4 billion),
enacted $23.9 billion in increased taxes and fees, and raised an additional $7.5 billion through
other revenue measures.14

(...continued)
statebalancedbudgetprovisions2010.pdf.
7 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, pp.
29, 40, at http://www.nasbo.org/sites/default/files/BP_2008.pdf.
8 Ibid., pp. 29, 38.
9 Ibid., p. 43.
10 U.S. Census Bureau, State Government Finances Summary: 2012, Government Division Briefs, January 2014, p. 2,
at http://www2.census.gov/govs/state/12statesummaryreport.pdf. For further analysis of state debt issues see CRS
Report R41735, State and Local Government Debt: An Analysis, by Steven Maguire.
11 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall 2010, pp. vii, viii,
at http://www.nasbo.org/sites/default/files/Fall%202010%20Fiscal%20Survey%20of%20States%20-%20Final.pdf.
12 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall 2011, pp. 4-6, at
http://www.nasbo.org/sites/default/files/Fall%202010%20Fiscal%20Survey%20of%20States%20-%20Final.pdf.
13 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall 2010, p. vii, at
http://www.nasbo.org/sites/default/files/Fall%202010%20Fiscal%20Survey%20of%20States%20-%20Final.pdf.
14 Ibid., pp. vii, viii; National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall
2011, p. 4, at http://www.nasbo.org/sites/default/files/Fall%202010%20Fiscal%20Survey%20of%20States%20-
%20Final.pdf; and National Association of State Budget Officers, State Expenditure Report: Fiscal Year 2010,
Washington, DC, December 2011, p. 2, at http://www.nasbo.org/sites/default/files/
2010%20State%20Expenditure%20Report_0.pdf.
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States closed nearly $230 billion in state budget shortfalls in FY2009 and FY2010; and $146.3
billion in FY2011 and FY2012.15 Since then, state fiscal conditions have generally improved. In
FY2013, state general fund spending surpassed pre-recession levels for the first time, reaching
$693.7 billion, and 45 states increased their general fund spending in FY2013 compared with
FY2012. Although state fiscal conditions have improved, state budgetary officials predict
continuing budgetary challenges in virtually all states in FY2014, in part due to relatively slow
state revenue growth, the need to replenish reserves, and increased costs for health care and other
social services.16
Congressional interest in state budgetary finances has increased in recent years, primarily because
state action to address budget shortfalls, such as increasing taxes, laying off or furloughing state
employees, and postponing or eliminating state infrastructure projects, could have an adverse
effect on the national economic recovery.
This report examines the current status of state fiscal conditions and the role of federal assistance
in state budgets. It begins with an overview of state budgeting procedures and then provides
budgetary data comparing state fiscal conditions in FY2008 to FY2013. The data indicate that (1)
recent improvements in the national economy have enabled many states to increase their general
fund spending, but states still face several fiscal challenges in part due to relatively slow state
revenue growth, the need to replenish reserves, and increased costs for health care and other
social services; (2) states are more reliant on federal assistance today than in FY2008; and (3)
state officials anticipate an increase in federal assistance for Medicaid over the next several years,
but they are concerned that federal budget constraints could lead to declines in federal assistance
in other program areas.
This report concludes with an assessment of the consequences current levels of state fiscal stress
may have for the 113th Congress.
State Budgetary Procedures
Unlike the federal government, states budget separately for current operating expenditures and for
capital expenditures. As mentioned previously, virtually all states (except Vermont) have some
form of a balanced operating budget requirement, and most states have restrictions on the amount
of debt that they issue to finance capital projects.17

15 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Spring 2011, p. i,
http://www.nasbo.org/sites/default/files/Fall%202010%20Fiscal%20Survey%20of%20States%20-%20Final.pdf; and
National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Spring 2012, p. vii, at
http://www.nasbo.org/sites/default/files/Spring%202012%20Fiscal%20Survey_1.pdf.
16 National Association of State Budget Officers, “Facts You Should Know: State and Local Bankruptcy, Municipal
Bonds, State and Local Pensions,” Washington, DC, 2010, at http://www.nasact.org/downloads/downloads/02_11-
state_local_fact_sheet.pdf; Dean Baker, “The Origins and Severity of the Public Pension Crisis,” Center for Economic
and Policy Research, Washington, DC, February 2011, at http://www.cepr.net/documents/publications/pensions-2011-
02.pdf; The Pew Center on the States, “The Trillion Dollar Gap: Underfunded State Retirement Systems and the Road
Ahead,” Washington, DC, February 2010, at http://www.pewstates.org/uploadedFiles/PCS_Assets/2010/
Trillion_Dollar_Gap_Underfunded_State_Retirement_Systems_and_the_Roads_to_Reform.pdf; The Pew Center on
the States, “The Widening Gap Update,” Washington, DC, June 18, 2012, at http://www.pewstates.org/uploadedFiles/
PCS_Assets/2012/Pew_Pensions_Update.pdf; and CRS Report R41736, State and Local Pension Plans and Fiscal
Distress: A Legal Overview, by Jennifer A. Staman.
17 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, pp.
(continued...)
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Current State Operating Expenditures
Most states account for their current operating expenditures through four budgets:
• the state general fund budget refers to expenditures from revenues accruing to
the state from taxes, fees, interest earnings, and other sources which can be used
for the general operation of state government.
• the state federal funds budget refers to expenditures from funds received directly
from the federal government.
• the other state funds budget refers to expenditures from revenue sources that are
restricted by law for particular governmental functions or activities; for example,
a gasoline tax dedicated to a state highway trust fund would appear in other state
funds.
• the state bonds budget refers to expenditures from the sale of bonds, generally for
capital projects.18
In addition, 48 states (Kansas and Montana are the exceptions) have a state budget stabilization
fund, budget reserve account, or “rainy day” fund to cover unanticipated revenue shortfalls.19 The
amount of revenue set aside in these funds varies from state-to-state, generally ranging from 2%
to 8% of state general fund expenditures.20
State end-of-year balances, which include ending balances and budget stabilization, budget
reserve account, and “rainy day” funds, declined from 8.6% of total state general fund
expenditures in FY2008 ($59.1 billion) to 5.2% in FY2010 ($32.5 billion). Since then, states have
increased their budget reserves, with state end-of-year balances projected to be 8.2% of total state
general fund expenditures in FY2014 ($56.7 billion).21 However, state budget officials note that
the combined balances for Texas and Alaska ($8.3 billion and $16.5 billion, respectively) account
for 43.8% of total state end-of-year balances. The remaining 48 states have average projected
end-of-year balances of 4.9% of total state general fund expenditures. Most budget analysts
suggest as an informal rule-of-thumb that states set aside at least 5% of state general fund
expenditures for unanticipated budget shortfalls.22 In FY2014, 4 states are projecting end-of-year
balances below 1% of total state general fund expenditures and 18 states are projecting end-of-

(...continued)
40, 43, at http://www.nasbo.org/sites/default/files/BP_2008.pdf.
18 Ibid., p. 107; and National Association of State Budget Officers, State Expenditure Report: Fiscal Year 2009,
Washington, DC, December 2010, p. 4, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf.
19 National Association of State Budget Officers, Budget Processes in the States, Washington, DC, Summer 2008, pp.
67-69, at http://www.nasbo.org/sites/default/files/BP_2008.pdf .
20 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall 2013, p. 57, at
http://www.nasbo.org/publications-data/fiscal-survey-of-the-states. The procedures used to expend these funds vary
from state-to-state, with some states requiring a majority vote of the state legislature and others requiring a super
majority vote to access the funds. See National Association of State Budget Officers, Budget Processes in the States,
Washington, DC, Summer 2008, p. 50, at http://www.nasbo.org/sites/default/files/BP_2008.pdf .
21 National Association of State Budget Officers, The Fiscal Survey of States, Washington, DC, Fall 2013, pp. 51, 57, at
http://www.nasbo.org/publications-data/fiscal-survey-of-the-states.
22 Ibid., p. 51.
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year balances greater than 1% of total state general fund expenditures, but less than the
recommended 5% level.23
The State Capital Budget
The state capital budget is associated with the acquisition or construction of major capital
projects, including land, buildings, structures, and major equipment. Minor repairs and routine
maintenance are typically reported as operating expenses. Funds for capital projects traditionally
have come primarily from non-general fund sources. In FY2012, funds for capital projects came
from bonds (33.7%), dedicated fees and surpluses (30.5%), federal funds (30.4%), and state
general funds (5.3%).24
State capital spending totaled $80.3 billion in FY2008, $84.2 billion in FY2009, $86.1 billion in
FY2010, $86.4 billion in FY2011, $88.5 billion in FY2012, and an estimated $93.4 billion in
FY2013.25 According to NASBO, the increase in state capital spending in FY2009 and FY2010
was at least partly due to increased federal funding provided by P.L. 111-5 (ARRA) and several
ARRA bond provisions, such as Build America Bonds, Recovery Zone Economic Development
Bonds, and School Construction Bonds.26 In FY2012, transportation projects accounted for 59.0%
of all state capital expenditures, followed by higher education projects at 12.5%, environmental
projects at 5.7%, housing projects at 1.9%, corrections projects at 1.3%, and other capital
projects, such as public school facilities, zoo improvements, health care infrastructure, and sports
facilities, at 19.6%.27
Trends in State Expenditures
This section examines state expenditures, in nominal dollars, from FY2000 through FY2013,
starting with total state expenditures (including the states’ capital budgets) and followed by the
states’ four operating expenditures budgets (state general fund, federal funds, other state funds,
and bonds). Changes in overall spending by all states combined and changes in spending by each
state are examined. A comparison of state expenditures in FY2008 to FY2013 is also provided.
FY2008 is used as a baseline for comparative purposes because FY2008 is used by many in
Congress as the baseline for comparisons in federal budget debates.28

23 Ibid., p. 56.
24 National Association of State Budget Officers, State Expenditure Report: Examining Fiscal Year 2011-2013 State
Spending, Washington, DC, November 2013, p. 78, at http://www.nasbo.org/publications-data/state-expenditure-report.
25 National Association of State Budget Officers, State Expenditure Report: Fiscal Year 2009, Washington, DC,
December 2010, p. 80, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and National
Association of State Budget Officers, State Expenditure Report: Examining Fiscal Year 2011-2013 State Spending,
Washington, DC, November 2013, p. 78, at http://www.nasbo.org/publications-data/state-expenditure-report.
26 For further analysis of Build America Bonds, Recovery Zone Economic Development Bonds, and School
Construction Bonds, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis, by Steven Maguire.
27 National Association of State Budget Officers, State Expenditure Report: Examining Fiscal Year 2011-2013 State
Spending, Washington, DC, November 2013, pp. 81-86, at http://www.nasbo.org/publications-data/state-expenditure-
report.
28 For example, H.Res. 38, Reducing non-security spending to fiscal year 2008 levels or less (112th Congress), was
passed by the House of Representatives, by a vote of 256-165, on January 25, 2011.
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Total State Expenditures
As shown in Table 1, total state expenditures (capital inclusive) increased every fiscal year from
FY2000 through FY2011, declined slightly in FY2012, and increased in FY2013. The decline in
FY2012 was primarily due to a combination of relatively slow state revenue growth, state
balanced operating budget requirements, and the expiration of ARRA-funded state federal
assistance.
Table 1. Total State Expenditures (Capital Inclusive), FY2000-FY2013
($ in millions)
Change in Total
% Change in Total
Amount of State
Amount of State
Total Amount of
Expenditures from
Expenditures from
FY
State Expenditures
Previous FY
Previous FY
2000 $946,086
$65,834 7.48%
2001 $1,015,813 $69,727 7.37%
2002 $1,088,207 $72,394 7.13%
2003 $1,127,261 $39,054 3.59%
2004 $1,181,330 $54,069 4.80%
2005 $1,266,396 $85,066 7.20%
2006 $1,343,118 $76,722 6.06%
2007 $1,425,028 $81,910 6.10%
2008 $1,478,782 $53,754 3.77%
2009 $1,558,416 $79,634 5.38%
2010 $1,617,118 $58,702 3.77%
2011 $1,663,097 $45,979 2.84%
2012 $1,634,192 ($28,905) (1.74%)
2013 est.
$1,719,780
$85,588
5.24 %
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal 2010-2012 State Spending, Washington, DC,
December 2012, p. 7, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
As shown in Table 2, in FY2013, total estimated state expenditures (capital inclusive) are
projected to be about $241.0 billion higher than in FY2008 ($1,719,780 million compared with
$1,478,782 million). In FY2013, 2 states (Nevada, and Vermont) had a lower level of total state
expenditures than in FY2008, and 48 states had a higher level of total state expenditures.
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Table 2. Change in Total State Expenditures, FY2008-FY2013
($ in millions)
Change in Total
State
Total State
Total State
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
with FY2013
Alabama
$19,840
$24,117
$4,277
Alaska
$11,656
$12,142
$486
Arizona
$25,247
$29,293
$4,046
Arkansas
$16,899
$21,585
$4,686
California
$194,276
$227,881
$33,605
Colorado
$25,129
$28,479
$3,350
Connecticut
$24,270
$28,138
$3,868
Delaware
$8,621
$9,162
$541
Florida
$64,379
$69,975
$5,596
Georgia $38,494

$41,074
$2,580
Hawaii
$11,160
$11,584
$424
Idaho
$5,932
$7,242
$1,310
Illinois
$44,566
$66,447
$21,881
Indiana
$24,239
$27,766
$3,527
Iowa
$16,129
$19,609
$3,480
Kansas
$12,689
$14,405
$1,716
Kentucky
$22,995
$25,673
$2,678
Louisiana
$28,888
$29,662
$774
Maine
$7,427
$7,798
$371
Maryland
$30,408
$36,974
$6,566
Massachusetts
$43,807
$60,298
$16,491
Michigan
$43,982
$48,748
$4,766
Minnesota
$28,446
$35,766
$7,320
Mississippi
$15,539
$19,417
$3,878
Missouri
$21,432
$22,943
$1,511
Montana
$5,357
$6,040
$683
Nebraska
$8,711
$10,163
$1,452
Nevada $9,240

$8,893
($347)
New Hampshire
$4,807
$5,024
$217
New Jersey
$48,704
$52,085
$3,381
New Mexico
$14,207
$14,543
$336
New York
$116,056
$133,097
$17,041
North Carolina
$41,588
$51,389
$9,801
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Change in Total
State
Total State
Total State
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
with FY2013
North Dakota
$3,597
$5,939
$2,342
Ohio
$56,763
$58,268
$1,505
Oklahoma
$20,730
$21,430
$700
Oregon
$22,174
$25,806
$3,632
Pennsylvania
$58,696
$67,880
$9,184
Rhode Island
$7,118
$8,133
$1,015
South Carolina
$20,787
$22,300
$1,513
South Dakota
$3,217
$4,131
$914
Tennessee
$26,033
$31,453
$5,420
Texas
$81,097
$96,925
$15,828
Utah
$11,323
$12,603
$1,280
Vermont $5,308

$4,960
($348)
Virginia
$35,330
$44,595
$9,265
Washington
$31,732
$33,202
$1,470
West Virginia
$18,710
$23,363
$4,653
Wisconsin
$36,089
$42,769
$6,680
Wyoming
$4,958
$8,611
$3,653
Total
$1,478,782
$1,719,780
$240,998
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 6, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: Total state expenditures include expenditures from the state’s general fund account, federal funds
account, other state funds, and bonds. FY2013 total state expenditures are estimated from state budget
documents.
As shown in Figure 1, the share of total state expenditures held by the states’ four operating
expenditures budgets were relatively stable from FY2000 to FY2008, and then shifted from
FY2008 to FY2013, with an increased reliance on federal funds, especially in FY2010 and
FY2011. For example, in FY2008, the states’ general fund expenditures accounted for 45.9% of
total state expenditures, federal funds expenditures accounted for 26.3%, other state funds
expenditures accounted for 25.5%, and state bonds expenditures accounted for 2.3%. State budget
officials anticipate that in FY2013 the states’ general fund expenditures will account for 40.3% of
total state expenditures, followed by federal funds expenditures (30.7%), other state funds
expenditures (26.5%), and state bonds expenditures (2.5%).29

29 National Association of State Budget Officers, State Expenditure Report: Examining Fiscal Year 2011-2013 State
Spending, Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
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The states’ increased reliance on federal funds in FY2009, FY2010, and FY2011 was primarily
attributed to temporary increases in federal funding to states under ARRA. More recently, the
state’s increased reliance on federal funds has been primarily attributed to increases in federal
funding to states for health care (primarily Medicaid). In FY2008, Medicaid accounted for 20.5%
of total state expenditures. In FY2013, Medicaid is anticipated to account for 24.5% of total state
expenditures.30
Figure 1. Total State Expenditures for FY2000-FY2013, by Funding Source
(% of total state expenditures)
50%
State general fund
45%
40%
35%
Federal funds
30%
25%
Other state funds
20%
15%
10%
5%
State bonds
0%

Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, FY2010 State Expenditure Report, Washington, DC, December 2011, p. 7, at
http://www.nasbo.org/sites/default/files/2010%20State%20Expenditure%20Report_0.pdf; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal 2010-2012 State Spending, Washington, DC,
December 2012, p. 2, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 total state expenditures and share from the state general fund, federal funds, other state funds,
and state bonds are estimated from state budget documents.

30 Ibid., p. 2.
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State General Fund Expenditures
As shown in Table 3, state general fund expenditures declined in FY2003 (following the
recession of March 2001 through November 2001), and in FY2009 and FY2010 (following the
recession of December 2007 through June 2009). Since then, state general fund expenditures have
increased, and are expected to exceed pre-recession levels in FY2013.
Table 3. State General Fund Expenditures, FY2000-FY2013
($ in millions)
Change in State
% Change in State
General Fund
General Fund
State General Fund
Expenditures from
Expenditures from
FY
Expenditures
Previous FY
Previous FY
2000 $454,198 $32,728
7.77%
2001 $488,458 $34,260
7.54%
2002 $499,051 $10,593
2.17%
2003 $492,994 ($6,057)
-1.21%
2004 $509,696 $16,702
3.39%
2005 $553,186 $43,490
8.53%
2006 $600,072 $46,886
8.48%
2007 $651,280 $51,208
8.53%
2008 $678,911 $27,631
4.24%
2009 $659,449
($19,462)
-2.87%
2010 $616,527
($42,922)
-6.51%
2011 $640,761 $24,234 3.93%
2012 $664,729 $23,968 3.74%
2013 est.
$693,688
$28,959
4.35%
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal 2010-2012 State Spending, Washington, DC,
December 2012, p. 7, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 total state general fund expenditures are estimated from state budget documents.
As shown in Table 4, in FY2013, 20 states had a lower level of state general fund expenditures
than in FY2008, and 30 states had a higher level of state general fund expenditures.
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Table 4. Change in State General Fund Expenditures, FY2008-FY2013
($ in millions)
Change in State
State General
State General
General Fund
Fund
Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Alabama $8,460
$6,897
($1,563)
Alaska $5,090
$7,301
$2,211

Arizona $10,368
$8,567
($1,801)
Arkansas $4,274
$4,746
$472

California $102,986
$95,665
($7,321)
Colorado $7,908
$7,942
$34

Connecticut $16,627 $19,030 $2,403

Delaware $3,422
$3,659
$237

Florida $27,513
$24,717
($2,796)
Georgia $17,934
$18,303
$369

Hawaii $5,407
$5,666
$259

Idaho $2,799
$2,699
($100)
Illinois $22,140
$29,260
$7,120

Indiana $12,880
$14,189
$1,309

Iowa $5,867
$6,231
$364

Kansas $6,102
$6,198
$96

Kentucky $9,334
$9,426
$92

Louisiana $10,372
$8,156
($2,216)
Maine $3,084
$3,042
($42)
Maryland $14,488
$15,119
$631

Massachusetts $28,934 $25,509 ($3,425)
Michigan $9,822
$9,164
($658)
Minnesota $17,600
$20,056
$2,456

Mississippi $4,842
$4,699
($143)
Missouri $8,084
$8,022
($62)
Montana $1,901
$1,947
$46

Nebraska $3,247
$3,590
$343

Nevada $4,031
$3,179
($852)
New Hampshire
$1,515
$1,262
($253)
New Jersey
$33,112
$31,618
($1,494)
New Mexico
$6,027
$5,656
($371)
New York
$53,385
$58,960
$5,575
North Carolina
$20,376
$20,602
$226
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State Government Fiscal Stress and Federal Assistance

Change in State
State General
State General
General Fund
Fund
Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
North Dakota
$1,204
$2,220
$1,016
Ohio $25,722
$31,514
$5,792

Oklahoma $6,793
$6,892
$99

Oregon $6,601
$5,960
($641)
Pennsylvania $26,969 $27,761 $792

Rhode Island
$3,405
$3,268
($137)
South Carolina
$7,149
$6,350
($799)
South Dakota
$1,176
$1,302
$126
Tennessee $11,570
$12,622
$1,052

Texas $41,184
$43,521
$2,337

Utah $5,784
$4,990
($794)
Vermont $1,225
$977
($248)
Virginia $15,099
$17,691
$2,592

Washington $14,616 $15,633
$1,017

West Virginia
$3,824
$4,159
$335
Wisconsin $13,527
$14,042
$515

Wyoming $3,132
$3,709
$577

Total $678,911
$693,688
$14,777

Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 6, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 state general fund expenditures are estimated from state budget documents.
State Federal Funds Expenditures
As shown in Table 5, state federal funds expenditures increased in every fiscal year from FY2000
through FY2011, with relatively large increases in FY2009 and FY2010. State federal funds
expenditures declined in FY2012, primarily due to the expiration of temporary ARRA-related
federal funding to states. State federal funds expenditures are expected to increase somewhat in
FY2013, primarily due to anticipated increased federal funding for Medicaid.
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Table 5. State Federal Funds Expenditures, FY2000-FY2013
($ in millions)
Change in State
% Change in State
Federal Funds
Federal Funds
State Federal
Expenditures from
Expenditures from
FY
Funds Expenditures
Previous FY
Previous FY
2000 $241,317 $15,359 6.80%
2001 $260,567 $19,250 7.98%
2002 $295,752 $35,185 13.50%
2003 $325,102 $29,350 9.92%
2004 $343,561 $18,459 5.68%
2005 $365,787 $22,226 6.47%
2006 $368,668 $2,881 0.79%
2007 $379,271 $10,603 2.88%
2008 $388,184 $8,913 2.35%
2009 $462,980 $74,796 19.27%
2010 $562,255 $99,275 21.44%
2011 $567,694 $5,439 0.97%
2012 $516,211
($51,483)
-9.07%
2013 est.
$528,071
$11,860
2.25%
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal 2010-2012 State Spending, Washington, DC,
December 2012, p. 7, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 total state federal funds expenditures are estimated from state budget documents.
As shown in Table 6, state federal funds expenditures are anticipated to be nearly $139.9 billion
higher in FY2013 than in FY2008. In FY2013, 2 states (Louisiana and Oklahoma) had a lower
level of federal funds expenditures than in FY2008, and 48 states had a higher level of federal
funds expenditures.
Table 6. Change in State Federal Funds Expenditures, FY2008-FY2013
($ in millions)
Change in State
State Federal
State Federal
Federal Fund
Funds
Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Alabama $6,291
$9,541
$3,250

Alaska $2,314
$2,902
$588

Arizona $7,820
$12,332
$4,512

Arkansas $4,806
$6,189
$1,383

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State Government Fiscal Stress and Federal Assistance

Change in State
State Federal
State Federal
Federal Fund
Funds
Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
California $56,211
$81,299
$25,088

Colorado $4,739
$7,334
$2,595

Connecticut $2,117 $2,555 $438

Delaware $1,113
$1,783
$670

Florida $18,754
$24,737
$5,983

Georgia $10,268
$11,752
$1,484

Hawaii $1,760
$1,912
$152

Idaho $2,005
$2,792
$787

Illinois $11,073
$15,407
$4,334

Indiana $7,818
$10,357
$2,539

Iowa $4,565
$5,682
$1,117

Kansas $3,522
$3,599
$77

Kentucky $6,720
$8,001
$1,281

Louisiana $12,883
$12,311
($572)
Maine $2,182
$2,564
$382

Maryland $6,561
$11,811
$5,250

Massachusetts $2,525 $15,548 $13,023

Michigan $12,660
$19,295
$6,635

Minnesota $6,264
$8,637
$2,373

Mississippi $6,434
$8,274
$1,840

Missouri $5,632
$7,209
$1,577

Montana $1,646
$2,115
$469

Nebraska $2,411
$3,014
$603

Nevada $1,780
$2,918
$1,138

New Hampshire
$1,498
$1,601
$103
New Jersey
$8,851
$12,485
$3,634
New Mexico
$4,506
$5,660
$1,154
New York
$34,680
$38,574
$3,894
North Carolina
$10,914
$17,459
$6,545
North Dakota
$1,241
$1,621
$380
Ohio $9,655
$12,630
$2,975

Oklahoma $9,030
$6,516
($2,514)
Oregon $4,625
$7,452
$2,827

Pennsylvania $18,037 $24,144 $6,107

Rhode Island
$1,939
$2,659
$720
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State Government Fiscal Stress and Federal Assistance

Change in State
State Federal
State Federal
Federal Fund
Funds
Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
South Carolina
$6,654
$7,792
$1,138
South Dakota
$1,182
$1,487
$305
Tennessee $9,343
$13,055
$3,712

Texas $25,023
$33,147
$8,124

Utah $2,503
$3,405
$902

Vermont $1,312
$1,662
$350

Virginia $6,342
$9,546
$3,204

Washington $6,678 $7,744
$1,066

West Virginia
$3,287
$4,394
$1,107
Wisconsin $7,534
$10,815
$3,281

Wyoming $476
$2,353
$1,877

Total
$388,184
$528,071
$139,887
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 6, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 state federal fund expenditures are estimated from state budget documents.
Other State Funds Expenditures
As shown in Table 7, total state other funds expenditures increased in each fiscal year from
FY2000 to FY2011, declined somewhat in FY2012, and increased in FY2013.
Table 7. State Other Funds Expenditures, FY2000-FY2013
($ in millions)
Change in State
% Change in State
Other Funds
Other Funds
State Other Funds
Expenditures from
Expenditures from
FY
Expenditures
Previous FY
Previous FY
2000 $230,684 $17,067
7.99%
2001 $243,918 $13,234
5.74%
2002 $265,918 $22,000
9.02%
2003 $275,361 $9,443
3.55%
2004 $297,685 $22,324
8.11%
2005 $319,517 $21,832
7.33%
2006 $344,550 $25,033
7.83%
2007 $358,688 $14,138
4.10%
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State Government Fiscal Stress and Federal Assistance

Change in State
% Change in State
Other Funds
Other Funds
State Other Funds
Expenditures from
Expenditures from
FY
Expenditures
Previous FY
Previous FY
2008 $376,894 $18,206
5.08%
2009 $400,059 $23,165
6.15%
2010 $402,527 $2,468
0.62%
2011 $416,443 $13,916
3.46%
2012 $416,226 ($217)

(0.05%)
2013 est.
$455,137
$38,911
9.35%
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal 2010-2012 State Spending, Washington, DC,
December 2012, p. 7, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 total state other funds expenditures are estimated from state budget documents.
As shown in Table 8, other state funds expenditures increased about $78.2 billion from FY2008
to FY2013, with 9 states having a lower level of other state funds expenditures in FY2013 than in
FY2008, and 41 states having a higher level of other state funds expenditures.
Table 8. Change in Other State Funds Expenditures, FY2008-FY2013
($ in millions)
Change in Other
State Funds
Other State Funds Other State Funds
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Alabama $4,537
$7,490
$2,953

Alaska $4,226
$1,389
($2,837)
Arizona $6,405
$7,624
$1,219

Arkansas $7,756
$10,447
$2,691

California $26,674
$38,656
$11,982

Colorado $12,482
$13,203 $721

Connecticut $3,494
$3,618 $124

Delaware $3,811
$3,281
($530)
Florida $14,916
$18,437
$3,521

Georgia $8,773
$10,211
$1,438
Hawaii $3,376
$3,271
($105)
Idaho $1,097
$1,718
$621

Illinois $11,047
$19,825
$8,778

Indiana $3,380
$3,220
($160)
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State Government Fiscal Stress and Federal Assistance

Change in Other
State Funds
Other State Funds Other State Funds
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Iowa $5,668
$7,539
$1,871

Kansas $2,787
$4,193
$1,406

Kentucky $6,941
$8,246
$1,305

Louisiana $5,342
$8,791
$3,449

Maine $2,053
$2,176
$123

Maryland $8,520
$8,909
$389

Massachusetts $10,928 $17,135 $6,207

Michigan $21,081
$20,107
($974)
Minnesota $3,891
$6,263
$2,372

Mississippi $4,029
$5,660
$1,631

Missouri $7,165
$7,712
$547

Montana $1,810
$1,978
$168

Nebraska $3,053
$3,559
$506

Nevada 3,028
$2,769
($259)
New Hampshire
$1,680
$2,080
$400
New Jersey
$5,233
$6,735
$1,502
New Mexico
$3,091
$3,227
$136
New York
$26,122
$32,305
$6,183
North Carolina
$10,098
$12,543
$2,445
North Dakota
$1,125
$2,072
$947
Ohio $20,633
$12,950
($7,683)
Oklahoma $4,803
$7,878
$3,075

Oregon $10,763
$12,262
$1,499

Pennsylvania $12,952
$15,175 $2,223

Rhode Island
$1,589
$2,122
$533
South Carolina
$6,866
$8,158
$1,292
South Dakota
$842
$1,307
$465
Tennessee $4,969
$5,394 $425

Texas $12,634
$18,318
$5,684

Utah $3,033
$3,739
$706

Vermont $2,734
$2,248
($486)
Virginia $13,040
$16,191
$3,151

Washington $8,617
$7,809 ($808)
West Virginia
$11,422
$14,736
$3,314
Wisconsin $15,028
$17,912
$2,884

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Change in Other
State Funds
Other State Funds Other State Funds
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Wyoming $1,350
$2,549
$1,199

Total
$376,894
$455,137
$78,243
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 6, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 state other state fund expenditures are estimated from state budget documents.
State Bonds Expenditures
As shown in Table 9, state bonds expenditures have been relatively volatile from FY2000
through FY2013. Over this time period, state bond expenditures increased nine times from the
previous fiscal year and decreased five times. Overall, state bond expenditures have more than
doubled since FY2000, increasing from nearly $19.9 billion in FY2000 to a projected $42.9
billion in FY2013.
Table 9. State Bonds Expenditures, FY2000-FY2013
($ in millions)
Change in State
% Change in State
State Bonds
Bonds Expenditures
Bonds Expenditures
FY
Expenditures
from Previous FY
from Previous FY
2000 $19,887 $680 3.54%
2001 $22,870 $2,983
15.00%
2002 $27,486 $4,616
20.18%
2003 $33,804 $6,318
22.99%
2004 $30,388
($3,416)
-10.11%
2005 $27,906
($2,482)
-8.17%
2006 $29,828 $1,922 6.89%
2007 $35,789 $5,961
19.98%
2008 $34,793 ($996)
-2.78%
2009 $35,928 $1,135 3.26%
2010 $35,809 ($119)
-0.33%
2011 $38,199 $2,310 6.45%
2012 $37,026
($-1,173)
-3.07%
2013 est.
$42,884
$5,858
15.82%
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all p. 2, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; National Association of
State Budget Officers, State Expenditure Report: Examining Fiscal Year 2010-2012 State Spending, Washington, DC,
December 2012, p. 7, at http://www.nasbo.org/sites/default/files/State%20Expenditure%20Report_1.pdf; and
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National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 total state bonds expenditures are estimated from state budget documents.
As shown in Table 10, state bonds expenditures increased about $8.1 billion from FY2008 to
FY2013, with 10 states (Colorado, Indiana, Kentucky, Missouri, Montana, Nebraska, New
Mexico, South Carolina, Wisconsin, and Wyoming) having no state bonds fund expenditures in
FY2013. Overall, 17 states anticipate having a lower level of state bonds fund expenditures in
FY2013 than in FY2008, 6 states anticipate having the same amount, and 27 states anticipate
having a higher level of state bonds fund expenditures.
Table 10. Change in State Bonds Fund Expenditures, FY2008-FY2013
($ in millions)
Change in State
Bonds Fund
State Bonds Fund
State Bonds Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Alabama $552

$189
($363)
Alaska
$26
$550
$524
Arizona
$654
$770
$116
Arkansas
$63
$203
$140
California
$8,405
$12,261
$3,856
Colorado
$0
$0
$0
Connecticut
$2,032
$2,935
$903
Delaware
$275
$439
$164
Florida $3,196

$2,084
($1,112)
Georgia $1,519

$808
($711)
Hawaii
$617
$735
$118
Idaho
$31
$33
$2
Illinois
$306
$1,955
$1,649
Indiana $161

$0
($161)
Iowa
$29
$157
$128
Kansas
$278
$415
$137
Kentucky
$0
$0
$0
Louisiana
$291
$404
$113
Maine $108

$16
($92)
Maryland
$839
$1,135
$296
Massachusetts
$1,420
$2,106
$686
Michigan $419

$182
($237)
Minnesota
$691
$810
$119
Mississippi
$234
$784
$550
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Change in State
Bonds Fund
State Bonds Fund
State Bonds Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Missouri $551
$0
($551)
Montana
$0
$0
$0
Nebraska
$0
$0
$0
Nevada 401
$27
($374)
New Hampshire
$114
$81
($33)
New Jersey
$1,508
$1,247
($261)
New Mexico
$583
$0
($583)
New York
$1,869
$3,258
$1,389
North Carolina
$200
$785
$585
North Dakota
$27
$26
($1)
Ohio
$753
$1,174
$421
Oklahoma $104
$144 $40

Oregon $185

$132
($53)
Pennsylvania
$738
$800
$62
Rhode Island
$185
$84
($101)
South Carolina
$118
$0
($118)
South Dakota
$17
$35
$18
Tennessee
$151
$382
$231
Texas $2,256

$1,939
($317)
Utah
$3
$469
$466
Vermont
$37
$73
$36
Virginia
$849
$1,167
$318
Washington
$1,821
$2,016
$195
West Virginia
$177
$74
($103)
Wisconsin
$0
$0
$0
Wyoming
$0
$0
$0
Total
$34,793
$42,884
$8,091
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 6, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 state bonds fund expenditures are estimated from state budget documents.
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State Capital Expenditures
The total state expenditures amounts presented in Table 2 included state capital expenditures.
State capital spending totaled $80.3 billion in FY2008, $84.2 billion in FY2009, $85.9 billion in
FY2010, $86.4 billion in FY2011, $88.5 billion in FY2012, and an estimated $93.4 billion in
FY2013.31 As shown in Table 11, three states (Montana, South Carolina, and Wisconsin) reported
that they did not anticipate making any state capital expenditures in FY2013. Overall, 18 states
anticipate having a lower level of state capital expenditures in FY2013 than in FY2008, 3 states
anticipate having the same amount, and 29 states anticipate having a higher level of state capital
expenditures.
Table 11. Change in State Capital Fund Expenditures, FY2008-FY2013
($ in millions)
Change in State
Capital Fund
State Capital Fund
State Capital Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Alabama $1,256
$860 ($396)
Alaska
$2,606
$3,683
$1,077
Arizona
$1,234
$1,474
$240
Arkansas $107
$101 ($6)
California
$5,210
$9,754
$4,544
Colorado $1,798
$282
($1,516)
Connecticut
$2,032
$3,063
$1,031
Delaware
$652
$652
$0
Florida $12,671

$10,264
($2,407)
Georgia $3,229

$2,158
($1,071)
Hawaii
$1,047
$1,175
$128
Idaho
$479
$558
$79
Illinois
$2,378
$4,482
$2,104
Indiana $477

$201
($276)
Iowa
$598
$1,036
$438
Kansas
$782
$1,040
$258
Kentucky $875
$697
($178)
Louisiana
$1,710
$1,884
$174
Maine
$235
$315
$80
Maryland
$2,980
$3,685
$705

31 National Association of State Budget Officers, State Expenditure Report: Fiscal Year 2009, Washington, DC,
December 2010, p. 80, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and National
Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 80, at http://www.nasbo.org/publications-data/state-expenditure-report.
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Change in State
Capital Fund
State Capital Fund
State Capital Fund
Expenditures,
Expenditures,
Expenditures,
FY2008 Compared
State
FY2008
FY2013 est.
to FY2013
Massachusetts
$1,985
$2,754
$769
Michigan
$1,832
$2,492
$660
Minnesota
$1,503
$1,843
$340
Mississippi
$1,384
$1,468
$84
Missouri $223
$108
($115)
Montana
$0
$0
$0
Nebraska
$851
$1,010
$159
Nevada 1,240 $526
($714)
New Hampshire
$300
$244
($56)
New Jersey
$4,896
$4,250
($646)
New Mexico
$866
$220
($646)
New York
$6,131
$7,540
$1,409
North Carolina
$0
$3,491
$3,491
North Dakota
$403
$838
$435
Ohio
$3,004
$3,007
$3
Oklahoma
$1,572
$1,626
$54
Oregon $310

$147
($163)
Pennsylvania
$738
$800
$62
Rhode Island
$429
$363
($66)
South Carolina
$436
$0
($436)
South Dakota
$74
$86
$12
Tennessee
$1,609
$1,758
$149
Texas
$148
$3,213
$3,065
Utah $1,735

$1,551
($184)
Vermont
$225
$332
$107
Virginia $1,192

$1,034
($158)
Washington $3,576
$3,434 ($142)
West Virginia
$1,091
$1,633
$542
Wisconsin
$0
$0
$0
Wyoming
$239
$245
$6
Total
$80,348
$93,377
$13,029
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report: FY2009,
Washington, DC, p. 82, at http://www.nasbo.org/sites/default/files/2009-State-Expenditure-Report.pdf; and
National Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 80, at http://www.nasbo.org/publications-data/state-expenditure-report.
Notes: FY2013 state capital fund expenditures are estimated from state budget documents.
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Federal Assistance and State Fiscal Stress
As the data in the preceding tables indicate, states were more reliant on federal assistance in
FY2013 than they were in FY2008. Over this time period, state federal funds expenditures
increased $139.9 billion, compared to an increase of $14.8 billion in state general funds
expenditures, an increase of $78.2 billion in state other state funds expenditures, and an increase
of $8.1 billion in state bonds expenditures.
As shown in Table 12, state federal funds expenditures, as a share of total state expenditures,
peaked at 34.8% in FY2010, and is anticipated to be about 30.7% in FY2013.
Table 12. State Federal Funds Expenditures: Total Amount and as a Share of Total
State Expenditures (Capital Inclusive), FY2000-FY2013
($ in millions)
Total Amount of State
% Share of Total State
FY
Federal Assistance
Expenditures
2000 $241,317 26.0%
2001 $260,567 25.8%
2002 $295,752 26.9%
2003 $325,102 28.7%
2004 $343,561 29.5%
2005 $365,787 28.9%
2006 $368,668 27.8%
2007 $379,271 26.5%
2008 $388,184 26.3%
2009 $462,980 29.7%
2010
$562,255
34.8%
2011 $567,694 34.1%
2012 $516,211 31.6%
2013 est.
$528,071
30.7%
Source: National Association of State Budget Officers, State Expenditure Report [FYs 2000-2009], Washington,
DC, all pp. 4, 8, at http://www.nasbo.org/publications-data/state-expenditure-report/archives; and National
Association of State Budget Officers, State Expenditure Report: Examining Fiscal 2011-2013 State Spending,
Washington, DC, November 2013, p. 7, at http://www.nasbo.org/publications-data/state-expenditure-report.
Consequences for State Policy Makers
The states’ increased reliance on federal assistance during and immediately following the
December 2007-June 2009 recession raised concerns that states were approaching a level of
dependence on federal assistance that threatened their ability to design programs in a way that
they believe best meets their needs. For example, some worried that federal conditions attached to
the increased level of federal funds was increasing the federal government’s ability to substitute
its policy preferences for the state’s policy preferences. There was also a concern that the states’
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increased reliance on federal assistance was also limiting the states’ ability to finance non-federal
programs because many federal grants, including Medicaid, have mandatory state matching
requirements.32
These concerns have been lessened somewhat in recent years as most of the ARRA-funded state
federal assistance has expired and improvement in economic conditions in many states has led to
somewhat higher levels of optimism concerning state revenue growth.
State budget officials now worry that, with the exception of Medicaid funding which is projected
to increase as a result of the passage of P.L. 111-148, the Patient Protection and Affordable Care
Act, federal budget concerns could lead to quick and deep reductions in other state federal
assistance programs. If that were to occur, given the relatively slow rate of state revenue growth,
state budget officials worry that they may have to take actions, such as laying off public
employees, cutting back on state service levels, or increasing state taxes and fees, that could have
an adverse effect on the national economic recovery, and, as a consequence, on the higher rates of
revenue growth which they are currently experiencing. For example, Daniel Crippen, Executive
Director of the National Governors Association (NGA), indicated on December 14, 2012, that
The uncertainty surrounding federal efforts to cut its debt and the implications this has on
states leaves governors with their hands tied. Another recession would be devastating for
states, especially when many states have barely recovered from the last recession. Governors
recognize that there will be reductions in federal funding for state programs, but they should
be done equitably and in consultation with governors.33
The counter-argument is that reducing state federal assistance may force some state governments
to make difficult policy choices, but, given the federal government’s budget deficit and debt,
federal policy makers face similar difficult choices. In addition, it could be argued that the states’
increased reliance on federal assistance has created conditions in which state service and benefits
levels have become artificially “elevated” to levels that, in the absence of additional federal
assistance, would not have been enacted in the first place. As will be discussed in the next section,
this last argument involves value judgments concerning the appropriate size and scope of state
government.
Variations in State Fiscal Stress
Although state economic downturns generally occur around the same time as national recessions,
the states’ responses to national recessions “vary in magnitude, duration, and timing and do not
necessarily coincide with dates identified for national recessions.”34 The variation in the states’

32 Others argued that the states’ increased reliance on federal assistance could induce a moral hazard issue by
encouraging states to expect similar increases in federal assistance during future economic slowdowns. The concern
was that by providing states additional federal assistance the states’ “incentives to properly manage risks,” by taking
such actions as fully funding their “rainy day” reserve funds or making other policy choices to restrain state budget
growth during good economic times, could be weakened. See U.S. Government Accountability Office, State and Local
Governments: Knowledge of Past Recessions Can Inform Future Federal Fiscal Assistance, GAO-11-401, March 31,
2011, p. 30, at http://www.gao.gov/assets/320/317223.pdf.
33 National Governors Association, “NGA, NASBO Say States Concerned About Uncertainty As They Slowly Emerge
From Recession,” December 14, 2012, Washington, DC, at http://www.nga.org/cms/home/news-room/news-releases/
page_2012/col2-content/nga-nasbo-say-states-concerned-a.html.
34 U.S. Government Accountability Office, State and Local Governments: Knowledge of Past Recessions Can Inform
(continued...)
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economic responses to the most recent recession helps to explain the variation found in the states’
change in state general fund expenditures from FY2008 to FY2013, with some states increasing
their state general fund expenditures and others reducing them.
Consequences for Congress
GAO has recommended that Congress take variations in state fiscal stress into consideration
when deciding whether, when, and how to provide federal assistance to state and local
governments during and immediately after national economic downturns.35 Specifically, GAO
found that the federal government has provided fiscal assistance to state and local governments in
response to three of the six national recessions since 1974, and, after examining the efficacy of
those efforts in ameliorating state fiscal stress and enhancing national economic growth,
recommended that Congress consider the following when developing a policy strategy to address
state and local government fiscal stress during and following national recessions:
• Timing/triggering mechanisms—federal policy strategies specifically intended to
stabilize state and local governments’ budgets may have to be timed differently
than those designed to stimulate the national economy, because state budget
difficulties often persist beyond the end of a recession.
• Targeting—if federal fiscal assistance to state and local governments is targeted
based on the magnitude of the recession’s effect on each state’s economy, this
approach can facilitate economic recovery and moderate fiscal distress at the
state and local level.
• Temporary—while a federal fiscal stimulus strategy can increase economic
growth in the short run, such efforts can contribute to the federal budget deficit if
allowed to run too long after entering a period of strong recovery.
• Consistency—the design of federal fiscal assistance occurs in tandem with
consideration of the impact these strategies can have on other federal policy
objectives. For example, a standby federal fiscal assistance policy could induce
moral hazard by encouraging state or local governments to expect similar federal
action in future crises, thereby weakening their incentives to properly manage
risks. Another consideration is the policy objective of maintaining accountability
while promoting flexibility in state spending. Past studies have shown that
unrestricted federal funds are fungible and can be substituted for state funds, and
the uses of such funds can be difficult or impossible to track.36
GAO provided Congress a list of recommended economic indicators that could be used to serve
as triggering mechanisms to either time or target state federal assistance to respond to the effects
of a particular recession, including, among others, employment and unemployment data, hourly
earnings, personal income, wages and salaries, and weekly hours worked.37 GAO excluded
indicators of state fiscal stress, such as declines in state tax receipts or state budget gaps, “because

(...continued)
Future Federal Fiscal Assistance, GAO-11-401, March 31, 2011, p. 3, at http://www.gao.gov/assets/320/317223.pdf.
35 Ibid., p. 28.
36 Ibid., p. 30.
37 Ibid., p. 32.
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they are dependent on state government’s policy choices and because state definitions and
measurement techniques vary for calculations such as budget gaps.”38
Benchmarks for Measuring Variation in State Fiscal Stress
Although GAO chose not to measure variations in state fiscal assistance, one measure of state
fiscal stress that is often used is the difference between the state’s current and previous year’s
general fund budget expenditures. It could be argued that if the state is facing a need to reduce its
general fund expenditures from the previous year’s level, either in real (inflation adjusted) dollars
or in current (nominal) dollars, it is experiencing fiscal stress. Generally speaking, after taking
into account factors such as state population differences or differences in the size of the states’
general fund budgets, as the amount needed to reduce the state’s general fund expenditures
increases (typically referred to as the state’s budget gap), the state’s fiscal stress also increases.
Issues with Using State General Fund Expenditures as a Benchmark
The difference between each state’s current and previous year general fund budget expenditures is
relatively easy to compute and is often used as an indication of state fiscal stress by various
organizations. However, as GAO has noted, there is little guidance available to determine if the
state’s general fund expenditures for the current, or for the previous year, are “appropriate”
baselines to use for measuring state fiscal stress. For example, depending on one’s personal
values concerning the appropriate size and scope of state government, it could be argued that state
expenditures are too high or too low. Also, as mentioned previously, in the absence of an
agreement concerning which baselines to use in measuring state fiscal stress, it could be argued
that the states’ current fiscal stress has as much to do with their previous budgetary decisions (or
non-decisions) as with the national economic slowdown’s adverse effect on state revenue growth.
This is an important issue for federal policy makers because if state fiscal stress is viewed as
being largely a result of state policy decisions, it is likely that there will be less support for federal
action to ease that fiscal stress than would be the case otherwise.
Measuring the Relative Size of State Governments
The data presented in Table 13 are provided to help inform congressional debate concerning the
extent to which the states’ varying levels of fiscal stress are due to changing economic conditions
or to state policy choices. The data provide a framework for measuring differences in the size of
state governments relative to each other, rather than to a preconceived “ideal” state budget that
would, by necessity, be based largely on personal value judgments concerning the appropriate
size and scope of state government. This information may prove useful as a reference when
debating the role of state policy choice in state fiscal stress.
As shown in the table, total state expenditures, both on a per capita basis and as a percentage of
state gross domestic product (GDP), vary.39

38 Ibid.
39 Another factor that could be used to compare total state expenditures is the extent to which the state relies on local
governments to provide services. It could be argued that some states look “bigger” than others because they carry
greater responsibility for providing services than their local governments when compared to other states. Unfortunately,
data on local government finance are typically delayed for at least two years. For example, at the time of this writing,
(continued...)
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Table 13. Total State Expenditures, Per Capita FY2013 and as a Percentage of State
GDP FY2012
Total State
Total State
Total State
Expenditures
Expenditures
Expenditures
State GDP
FY2013 as a
FY2013
FY2013,
FY2012
% of State GDP
State
($ in millions)
Per Capita
($ in millions)
FY2012
Alabama
$24,117 $4,989
$183,547 13.14%
Alaska $12,142
$16,517

$51,859
23.41%
Arizona
$29,293 $4,421
$266,891 10.98%
Arkansas
$21,585 $7,294
$109,557 19.70%
California $227,881
$5,945

$2,003,479
11.37%
Colorado
$28,479 $5,406
$274,048 10.39%
Connecticut $28,138 $7,825
$229,317 12.27%
Delaware $9,162
$9,897

$65,984
13.89%
Florida $69,975
$3,579

$777,164
9.00%
Georgia $41,074
$4,111
$433,569
9.47%
Hawaii $11,584
$8,250

$72,424
15.99%
Idaho $7,242
$4,492

$58,243
12.43%
Illinois $66,447
$5,158

$695,238
9.56%
Indiana $27,766
$4,226

$298,625
9.30%
Iowa
$19,609 $6,345
$152,436 12.86%
Kansas
$14,405 $4,978
$138,953 10.37%
Kentucky
$25,673 $5,841
$173,466 14.80%
Louisiana
$29,662 $6,413
$243,264 12.19%
Maine $7,798
$5,871

$53,656
14.53%
Maryland
$36,974 $6,236
$317,678 11.64%
Massachusetts $60,298 $9,009
$403,823 14.93%
Michigan
$48,748 $4,926
$400,504 12.17%
Minnesota
$35,766 $6,598
$294,729 12.14%
Mississippi
$19,417 $6,491
$101,490 19.13%
Missouri $22,943
$3,796

$258,832
8.86%

(...continued)
the latest available data at the Bureau of the Census for both state and local government expenditures are for FY2011.
Those data indicate that in FY2011 the state share of total state and local government expenditures varied among the
states, ranging from 49.1% in Nebraska to 85.2% in Vermont. The states’ average share of state and local government
expenditures was 63.4%, with 15 states below the national average and 35 states above the national average. States
more than 10 percentage points below the average were: Florida and Nebraska; states more than 10 percentage points
above the average were: Alaska, Arkansas, Delaware, Hawaii, Kentucky, Mississippi, Montana, New Mexico, North
Dakota, Vermont, and West Virginia. CRS calculations from U.S. Bureau of the Census, “State and Local Government
Finances: 2011 State and Local Government,” at http://www.census.gov/govs/local/.
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Total State
Total State
Total State
Expenditures
Expenditures
Expenditures
State GDP
FY2013 as a
FY2013
FY2013,
FY2012
% of State GDP
State
($ in millions)
Per Capita
($ in millions)
FY2012
Montana $6,040
$5,950

$40,422
14.94%
Nebraska $10,163
$5,439

$99,557
10.21%
Nevada $8,893
$3,187

$133,584
6.66%
New Hampshire
$5,024
$3,796
$64,697
7.77%
New
Jersey $52,085 $5,853
$508,003 10.25%
New Mexico
$14,543
$6,974
$80,600
18.04%
New York
$133,097
$6,773
$1,205,930
11.04%
North
Carolina $51,389 $5,218
$455,973 11.27%
North Dakota
$5,939
$8,210
$46,016
12.91%
Ohio
$58,268 $5,036
$509,393 11.44%
Oklahoma
$21,430 $5,565
$160,953 13.31%
Oregon
$25,806 $6,566
$198,702 12.99%
Pennsylvania $67,880 $5,314
$600,897 11.30%
Rhode Island
$8,133
$7,735
$50,956
15.96%
South
Carolina $22,300 $4,670
$176,217 12.65%
South
Dakota $4,131 $4,889
$42,464 9.73%
Tennessee
$31,453 $4,842
$277,036 11.35%
Texas $96,925
$3,665

$1,397,369
6.94%
Utah $12,603
$4,345

$130,486
9.66%
Vermont $4,960
$7,915

$27,296
18.17%
Virginia
$44,595 $5,399
$445,876 10.00%
Washington $33,202 $4,763

$375,730 8.84%
West Virginia
$23,363
$12,599
$69,380
33.67%
Wisconsin
$42,769 $7,448
$261,548 16.35%
Wyoming $8,611
$14,779

$38,422
22.41%
Total
$1,719,780
NA
$15,456,284
NA
National Average
$34,396
$5,451
$309,126
11.13%
Source: CRS computations from National Association of State Budget Officers, State Expenditure Report:
Examining Fiscal 2011-2013 State Spending, Washington, DC, November 2013, p. 7, at http://www.nasbo.org/
publications-data/state-expenditure-report; U.S. Bureau of the Census, “Population Estimates, July 1, 2013,” at
http://www.census.gov/popest/data/state/totals/2013/index.html; and U.S. Department of Commerce, Bureau of
Economic Analysis, ”Gross Domestic Product By State,” at http://www.bea.gov/newsreleases/regional/gdp_state/
gsp_newsrelease.htm.
Notes: FY2013 total state expenditures are estimated from state budget documents. The national median for
total state expenditures in FY2013, per capita, was $5,703. The national median for total state expenditures in
FY2013 as a percentage of state GDP in FY2012 was 12.15%. Because state GDP for FY2013 was not available,
the figures presented for total state expenditures as a percentage of state GDP should be viewed as an estimate.
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As shown in Table 13, in FY2013, total state expenditures ranged from $4,131 million in South
Dakota to $227,881 million in California. The national average for total state expenditures was
$34,396 million, with 34 states below the national average and 16 states above the national
average.
In FY2013, total state expenditures on a per capita basis varied from $3,187 in Nevada to $16,517
in Alaska. The national average for total state expenditures on a per capita basis was $5,451, with
24 states below the national average and 26 states above the national average.
State GDP in 2012 (the latest available data) ranged from $27,296 million in Vermont to
$2,003,479 million in California. The national average for state GDP was $309,126 million, with
35 states below the national average and 15 states above the national average.
Total state expenditures in FY2013 as a percentage of state GDP in FY2012 ranged from 6.66%
in Nevada to 33.67% in West Virginia. The national average for total state expenditures in
FY2013 as a percentage of state GDP in FY2012 was 11.13%, with 18 states below the national
average and 32 states above the national average.
Concluding Observations
State fiscal conditions have improved in recent years. As the NGA has noted, “signs of [state]
budget volatility have subsided compared to the years immediately following the recession when
states had to make substantial cuts and take other actions to balance their budgets.”40 However,
although state revenues are expected to grow over the next several years, many states continue to
face fiscal challenges as they replenish their reserves, address infrastructure projects that were
postponed due to the recession, and face rising health care and education costs.41 Also, state
federal assistance is included in federal domestic discretionary spending, an area of the federal
budget expected to receive much attention over the next several years by federal policy makers as
they seek ways to address the federal deficit and debt.
Given these fiscal challenges, it is likely that states will continue to look to the federal
government for financial assistance. Federal assistance could be provided in several ways, for
example (1) granting of waivers of federal grant program requirements, (2) temporary or
permanent relief from federal grant matching requirements, (3) relaxation or elimination of state
program-related maintenance of effort requirements that are often attached to federal grant
programs, and (4) providing additional direct federal assistance.
GAO has recommended that Congress consider variations in state fiscal stress when deciding
whether, when, and how to provide federal assistance to state and local governments during and
immediately after national economic downturns. As mentioned previously, GAO also provided a
list of economic indicators, such as employment and unemployment data, hourly earnings,

40 National Governors Association, “NGA, NASBO Say States Concerned About Uncertainty As They Slowly Emerge
From Recession,” December 14, 2012, Washington, DC, at http://www.nga.org/cms/home/news-room/news-releases/
page_2012/col2-content/nga-nasbo-say-states-concerned-a.html.
41 Ibid. For further information and analysis of state revenue estimates see Susan K. Urahn and Thomas Gais, “States’
Revenue Estimating: Cracks in the Crystal Ball,” The Nelson Rockefeller Institute of Government and the Pew Center
on the States, Washington, DC, at http://www.pewcenteronthestates.org/uploadedFiles/
States_Revenue_Estimating_final.pdf.
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State Government Fiscal Stress and Federal Assistance

personal income, wages and salaries, and weekly hours worked, that could be used as triggers for
providing states federal assistance.42 GAO excluded indicators of state fiscal stress, such as
declines in state tax receipts or state budget gaps, “because they are dependent on state
government’s policy choices and because state definitions and measurement techniques vary for
calculations such as budget gaps.”43
Disagreement over the appropriate size of state government has always been an issue in
discussions of the role of federal assistance in state budgeting. The data presented in Table 13
suggest that state governments, both in terms of total state expenditures on a per capita basis and
as a percentage of state GDP, vary in size. Some argue against providing additional federal
assistance to states because, in their view, the states’ current level of fiscal stress, especially in
states with a relatively high level of state expenditures, could have been ameliorated if the states
had been more prudent with their fiscal choices prior to the recent recession. Others suggest that
the federal government’s fiscal challenges have reached a point at which providing additional
federal assistance to states is out of the question. Still others assert that if the federal government
does not continue to provide the states additional assistance, then the states will take actions that
will have an adverse effect on the national economic recovery. Some also contend that the states’
increased reliance on federal assistance to provide services could displace state priorities with
federal priorities. The data and analysis in this report provide a framework for assisting Congress
as it considers these various viewpoints concerning whether, when, and how to provide federal
assistance to state and local governments during times of state fiscal stress.

Author Contact Information

Robert Jay Dilger

Senior Specialist in American National Government
rdilger@crs.loc.gov, 7-3110

42 U.S. Government Accountability Office, State and Local Governments: Knowledge of Past Recessions Can Inform
Future Federal Fiscal Assistance, GAO-11-401, March 31, 2011, p. 32, at http://www.gao.gov/assets/320/317223.pdf.
43 Ibid.
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