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A4 up front
Wednesday 28 december 2022

States banking big bucks as Fed attempts to fight inflation

Continued from Front the entire previous year.
But Fitzpatrick, the treasur-
Missouri is hardly alone. er, advises caution for poli-
States ranging from Dem- cymakers.
ocratic-led Massachusetts “Even though we’re mak-
to Republican-led Texas as ing a lot of money, inflation
well as politically divided is outpacing what we’re
Minnesota all are sitting able to make on our mon-
on large surpluses that are ey,” said Fitzpatrick, who
swelling even further thanks will take office as the elect-
to favorable interest rates ed state auditor on Jan. 9.
on investments. He added: “We need to be
As legislatures prepare for careful not to commit the
their 2023 sessions, gover- state to a lot of ongoing
nors and lawmakers are new expenditures.”
proposing to tap into those Pennsylvania’s treasury is
surpluses to cover tax cuts projected to rake in $275
and greater spending million of interest this fiscal
on priorities such as infra- year — 13 times the aver-
structure and education. age amount over the past
Though most states can af- five years. Though compris-
ford it, financial experts are ing just a fraction of the
nonetheless urging caution state’s overall budget, the
because of concerns the interest earnings would be
U.S. could slip into a reces- large enough to run any of
sion. the state’s Cabinet agen-
“Some of this is what I call a Missouri Treasurer Scott Fitzpatrick displays a $1 bill signed by the former treasurer of the United cies for a full year, except
sugar high,” said Phil Dean, States on Thursday, Dec. 15, 2022, at his Capitol office in Jefferson City, Mo. Associated Press for education, human ser-
chief economist and public vices and corrections.
finance researcher at the Republican Treasurer Stacy
University of Utah’s Gardner Garrity recommended that
Policy Institute. “The growth tional Association of State be returned to taxpayers. for electric vehicles. budget writers put the extra
rates are definitely not sus- Budget Officers. Large cash balances al- “We can do all of these cash into reserve, pointing
tainable.” “Budgets are really strong lowed the state to collect things. This isn’t a choice of out that an independent
California could be a har- — historically strong,” Tim nearly $57 million of inter- either-or,” Walz said. fiscal agency projects a
binger of economic trends. Storey, CEO of the National est in October alone — six Virginia finance officials ex- billion-dollar-plus deficit for
After projecting an unprec- Conference of State Leg- times the amount earned pect the nation to fall into a the 2023-24 budget year.
edented $97 billion surplus islatures, said as he pre- during the entire 2021 fiscal recession in 2023, depress- “We know that a fiscal cliff
just seven months ago, viewed the upcoming leg- year. Minnesota is project- ing the state’s tax revenues. is looming, and it’s crucial
state officials are now fore- islative sessions. ing a record $17.6 billion Yet the state has so much that the Commonwealth
casting a roughly $25 billion Large surpluses put states surplus for the next budget. extra money that Republi- prepare as much as pos-
deficit in the next budget. in a position to benefit as A strong economy, with can Gov. Glenn Youngkin sible,” Garrity’s office said.
California imposes higher the Federal Reserve raised one of the lowest unem- recently proposed an ad- Some other states also are
taxes on the wealthy than its benchmark interest rate ployment rates in the na- ditional $1 billion in tax cuts forecasting leaner times.
most states, leading to seven times this past year, tion, pushed individual in- and $2.6 billion in spending Under a recently revised
pendulum-type swings in making many loans more come, sales and corporate on education, economic revenue forecast, Oregon
tax revenues as the stock expensive in an attempt to tax revenues higher than development, public safe- expects to reap $190 mil-
market rises and falls. slow spending and fight in- originally projected. Po- ty, behavioral health and lion of interest during the
State budgeters have la- flation. litical gridlock contributed the environment. current budget cycle — al-
bored through abnormally Texas had projected a $27 to the swollen coffers, as “Our state government’s fi- most double the amount
uncertain times since the billion surplus for its current the Republican-controlled nancial condition has nev- that had been projected
coronavirus pandemic be- budget, boosted by strong Senate and Democratic- er been stronger,” Young- just three months earlier.
gan in early 2020. As gover- sales taxes and energy rev- led House couldn’t agree kin said. Citing a large The state expects a $4 bil-
nors ordered shutdowns to enues. That’s likely to rise to on how to use all the extra surplus, Missouri Gov. Mike lion surplus this year. But
try to slow the spread of the more than $30 billion when money. Parson called lawmakers state fiscal analysts also
virus, layoffs skyrocketed a revised revenue estimate Thanks to higher interest into a special fall session to expect a mild recession in
and states braced for huge is released in January, said rates on the huge surplus, pass what he described as 2023 that could help flip
revenue losses. But federal Tom Currah, associate Minnesota expects invest- “the largest tax cut in the the surplus into a $560 mil-
relief payments put spend- deputy comptroller for fis- ment earnings of $428 mil- state’s history.” The first rung lion budget deficit during
ing money in people’s cal matters. That’s a larger lion this fiscal year — a of the eventual $760 million the next two years.
pockets, labor markets re- surplus than the annual whopping 1,427% increase income tax cut takes ef- “The sharp rise in interest
bounded and the deep general fund expenditures over a prior estimate. fect in January. Yet Missouri rates this year is akin to
downturn was short-lived. of 40 other states. Democrats who were victo- still expects to finish its 2023 taking one’s foot off the
State tax revenues surged Republican Gov. Greg Ab- rious in the fall elections will fiscal year with a surplus, gas and slamming on the
well beyond expectations. bott promised during his hold full control of Minne- leaving money to poten- brakes. The car will shake,
After back-to-back years reelection campaign that sota government in 2023. tially spend on things such skid and even fishtail,” said
of double-digit percentage half the surplus would go Gov. Tim Walz said the sur- as teacher pay raises. a report by Oregon’s Office
growth in revenues, states toward property tax relief. plus could be used to pro- In the first five months of its of Economic Analysis. “The
ended their 2022 fiscal Surging tax revenue in Mas- vide tax rebates, increase fiscal year, Missouri already ultimate question is does
years with a record cash sachusetts this year trig- investments in education, has earned $116 million on it end up in the ditch or is
balance of nearly $343 bil- gered a seldom-used state modernize infrastructure its investments — nearly the driver able to pull out of
lion, according to the Na- law requiring $2.9 billion to and add charging stations doubling the earnings of it?”q