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U.S. States’ Fiscal 2024 Budgets Expected To Weather Economic Uncertainty


As the dust settles on the pandemic and expectations for another recession amplify, states are dealing with significant uncertainty as they navigate the 2024 budget session. However, S&P Global Ratings believes most are well-positioned in this legislative cycle to address the economic uncertainty ahead and are focused on strategies for long-term growth.

Baseline Forecast Of Shallow Revenues Aligns With Projected State Revenues

As federal support tapers off, interest rates remain higher for longer and inflation perseveres, while proposed fiscal 2024 budgets generally project slower revenue growth as the economy cools. The Core Consumer Price Index (CPI) is expected to increase by 4.7% in 2023 from 2022's already high levels, which will pressure wage expectations, construction costs, and program costs upward for states.

S&P Global Economics' most recent baseline believes that the U.S. economy will fall into a shallow recession in 2023, although increased credit tightening stemming from recent events in the banking sector elevates the likelihood of a hard landing and heightens uncertainty. Although inflation likely peaked in third-quarter 2022 as prices for goods moderated, prices for services (excluding housing) remain elevated. S&P Global Economics' U.S. GDP growth forecast is 0.7% for 2023 and 1.2% for 2024. We also expect U.S. GDP will decline by 0.3% from its peak in first-quarter 2023 to its third-quarter trough. Our lower GDP and inflation forecasts for 2023 and 2024 relate to the Federal Reserve's continued policy stance of keeping interest rates high until inflation exhibits declines toward its 2% target. (For more information, see "Economic Outlook U.S. Q2 2023: Still Resilient, Downside Risks Rise," published March 27, 2023, on RatingsDirect.)

We believe some state budgets are better positioned for slower growth than others; however, we expect historically high reserves accumulated over the past decade will support stability over the upcoming budget cycle as economic and revenue conditions evolve.

Balanced Budgets Despite Revenue Softening

Despite our expectations of slower revenue growth, at least 40 states' budget proposals are structurally balanced, in our view. We recognize that the slower projected revenue growth comes on the heels of extremely strong growth in fiscal years 2021 and 2022, and states have taken actions to prepare for a potential slowdown. Much of the increased spending in the past two years focused on nonrecurring investments, paying down long-term obligations (including debt and pension liabilities), or building reserves, thereby affording states an ability to pare down expenses in fiscal 2024. New revenue streams also help stabilize budgets in some states, although they generally do not represent a significant share of total revenue.

According to the Urban Institute, fiscal year-to-date revenues are up 1.8% in nominal terms for the median state, but down if inflation-adjusted; there are signs of weakness as corporate income tax collections are slowing in many states. Although revenues are continuing to meet or slightly outpace budgetary expectations, they are not necessarily keeping up with inflation. Should inflation remain elevated beyond expectations, this could add pressure on budgets midyear, even where revenues remain on target. (See "Outlook For U.S. States: Rainy Day Funds Will Support Credit In A Shallow Recession," published Jan. 5, 2023, on RatingsDirect.)

Reserves Fall Slightly But Remain Strong

After two consecutive years of widespread budget surpluses and commitments to build reserves, state reserves were at historical highs in 2023. Despite softening revenue trends, state budget proposals appear committed to maintaining reserve levels: more than half of states project holding stable reserves in fiscal 2024, and at least 13 expect to make deposits into budget stabilization funds to boost reserves, including Illinois, South Carolina, and Texas. Overall, we expect average reserves across states to decline by only 1.5% in 2024 and they remain very strong, in our view, at a median across states of 16% of budgetary expenditures.


Chart 1


In some instances, states are choosing to build up alternative reserve funds--rather than formal, more legally protected, reserve funds--to provide for more flexibility. In our view, this additional flexibility could be beneficial for state budgets, provided spending plans remain limited and formal reserve accounts are kept for use in severe economic conditions.

Budget Initiatives Indicate Competition For Future Growth Prospects

At the confluence of historically high reserves, demographic shifts, and a potential recession, 2024 budget initiatives for most states are focused on creating a competitive edge for the next economic cycle.

Population replacement is shaping up to be a challenge in many states. While the U.S. population increased by 0.4% in 2022, the growth across states was largely uneven, with over one-third of states recording population declines. This, in addition to low workforce participation that just recently recovered to pre-pandemic levels, could contribute to faltering economic growth. In our view, although the current worker shortage may continue to ease as the economic cycle moves into a recession, broader long-term issues remain. On the flip side, in the states with high population growth, affordability pressures and limited resources could threaten to stall future growth.

To combat limits on future economic growth, state budget proposals include strategic goals to become more competitive. Major proposed initiatives generally address workforce development, taxpayer relief, affordable housing, natural resource management, and education accessibility.

For Some States, Tax Reform Is A Top Priority

Despite the economic uncertainty that lies ahead, more states, spurred by strong revenues, are proposing tax-related changes than in the previous year. At least 23 states are exploring such changes that could affect general fund revenues during this legislative session. Although a number of states are cutting tax rates, the cuts appear incremental. We still expect overall reserves will remain high, short of an economic downturn, and states will generally preserve structural balance. However, states depending on economic growth to offset proposed tax relief could face structural pressures, depending on the accuracy of their revenue forecasting.

Tax changes approached during this budget cycle are largely focused on reducing the tax burden of residents and businesses toward dulling the effects of inflation. Examples include reductions to tax rates (personal income, corporate, sales), adjusting to a flat income tax rate, provision of one-time tax rebates, introduction of new tax credits, and eliminating taxes for certain purposes.

Chart 2


Tax relief measures are expected to further dampen revenue growth for states, at least in the near term. For example, Virginia's proposed tax policy adjustments would lower individual and corporate income tax rates, at an estimated cost of 4.8% of 2025-2026 estimated general fund biennium revenue. Arkansas approved a tax cut reducing the top individual income tax rate to 4.7% from 4.9%, and the top corporate income tax rate to 5.1% from 5.3%. The state estimates these reductions will reduce revenues by approximately $186 million, or approximately 3% of the approved $6.2 billion budget.

Most states reducing income tax rates tend to approach the change gradually over several years to temper the budgetary effect. However, most do not include revenue triggers or offsetting changes to ensure budgetary balance but assume economic growth will make up for the resulting revenue losses. In addition, we still expect that long-term cost pressures could continue to stress future budgets where triggers are not adopted. We believe that, absent established protections aimed at preserving structural balance, it's extremely important for these states to hold ample budgetary reserves, especially until the tax reduction is fully implemented and structural budgetary balance is proven.

Some tax reforms discussed during this legislative session include property tax rebates and reductions that are nonrecurring. Colorado, Georgia, and Idaho are temporarily expanding or offering property tax rebate programs, in part to combat the effects of high inflation on households.

Budget Overviews By State


In early March, Alabama's governor called the legislature into a special session to allocate the state's remaining $1.06 billion in American Rescue Plan Act (ARPA) funds and to return previously borrowed amounts to the Alabama Trust Fund (ATF) The special session concluded quickly and successfully. ARPA funds were primarily allocated to water and sewer projects, health care, and broadband expansion, and a $60 million transfer to the ATF from the state general fund (SGF) was authorized. Following the special session, the governor released her budget request for the SGF and education trust fund (ETF), and the regular legislative session (which must conclude no later than June 19) resumed. The budget recommendation increases SGF spending by $230 million (8.4%), to $2.97 billion, and ETF spending by $537 million (6.5%), to $8.8 billion. Both include 2.0% salary increases for state employees and teachers. The bill's (ETF supplemental budget) most significant allocations include $400 tax rebates to individual taxpayers, costing approximately $967 million, and $604 million for the Department of Education to fund one-time expenses, including $360 million to cover inflation increases in capital projects. Alabama ended fiscal 2022 with approximately $1.5 billion in combined SGF and ETF reserves, which we consider very strong at 14% of enacted fiscal 2023 expenditures.


The state would have had structural budget balance in fiscal 2023 if not for increased permanent fund dividend payments to state residents that could have otherwise been used for budgeting purposes, assuming dividend payments are an ongoing expense. State budgeting is complicated by in the volatility of oil price and production levels, as oil-derived tax revenue is a key contributor to state revenues in a state without an income or sales tax. Structural balance depends in large part on whether oil prices stay at higher levels, although more stable permanent fund dividend income also constitutes an increasing share of state operating revenue. Currently, the governor has proposed increased dividend payments to citizens in fiscal 2024. Final dividend payments and appropriations are still under negotiation in the legislature. However, very large reserve balances provide substantial cushion in the event of budget deficits and revenue swings. Recent oil price declines from earlier projections may complicate enactment of a fiscal 2024 budget, expected by the end of May.


Arizona's fiscal 2024 executive budget proposal is proposing a small structural operating surplus, excluding one-time items, and includes a $250 million transfer to the state's budget stabilization fund (BSF). The transfer would raise it to $1.6 billion, or a very strong 9.3% of proposed budgeted expenditures, which would be a slight increase from its projection for fiscal year-end at $1.4 billion, or 8.9% of enacted fiscal 2023 expenditures, which we consider very strong. The executive budget proposes increasing state per-pupil funding for kindergarten through grade 12 (K-12) education from $7,999 to $8,250. The governor's proposed budget also increases funding for Arizona's Medicaid agency, given the system's caseload growth and reduction in Federal Medical Assistance Percentage (FMAP) matching dollars. Overall, the state is projecting ongoing revenues to decrease by 5.9% compared with the forecast for fiscal 2023, while ongoing spending is expected to increase by 5.9%.


The Arkansas legislature approved a $6.2 billion fiscal 2024 budget that increases spending by approximately $178 million above the approved fiscal 2023 budget. The governor vetoed three bills in their entirety and exercised her line-item authority to veto a portion of a fourth bill. When the legislature returns to session on May 1, it can attempt to override the vetoes with a majority vote before the budget is finalized. A tax cut was approved, reducing the top individual income tax rate to 4.7% from 4.9% and the top corporate income tax (CIT) rate to 5.1% from 5.3%. The state estimates the reductions will reduce revenues by approximately $186 million, approximately 3% of the approved $6.2 billion budget. It also estimates ending fiscal 2023 with $3.8 billion in its primary reserve accounts, 60% of the 2024 budget, significantly above what we view as very strong.


California budgeted for $32.4 billion of one-time spending in fiscal 2023, larger than the $22.5 billion budget gap it recently projected for fiscal 2024. As a result, despite a large spenddown in available fund balances in fiscal 2023 and the projected budget gap in fiscal 2024, the governor's January 2023 executive budget proposal for fiscal 2024 would still have structural balance if the one-time spending were eliminated in fiscal 2024. Based on recent monthly revenue trends and analysis from the state Legislative Analyst's office, however, the upcoming May 2023 revision to projected fiscal 2024 revenues is likely to show a larger fiscal 2024 budget gap than projected in the executive budget, which would have to be addressed in the upcoming budget session, potentially by reserve drawdowns, which are not in the current executive budget proposal.


The governor's balanced fiscal 2024 budget proposal assumes $16.7 billion in general fund (GF) revenues, down by 1.6% compared with fiscal 2023 estimates. Nevertheless, the state's March 2023 forecast shows significant revenue growth still outpacing the constitutional Taxpayer's Bill of Rights (TABOR) revenue limit, resulting in historical TABOR refunds. The forecast projects that the combined GF and state education fund reserves will decline modestly to $3.45 billion in fiscal 2024 (a still very strong 19.2% of expenditures). Colorado anticipates the possibility of a structural budget deficit beyond 2024, given that service costs are likely to outpace revenues, which are expected to remain constrained due to its constitutional revenue growth cap. The state anticipates such shortfalls would need to be resolved by future legislative action if they arise. The fiscal 2024 budget was adopted by the house and senate, and is awaiting approval by the governor.


The governor's fiscal 2024-2025 biennium GF budget proposal totals $44.4 billion, or a 5.0% increase from the 2022-2023 legislatively approved budget. Several tax relief measures, including a reduction in personal income tax (PIT) rates, increasing the earned income tax credit, and restoring the pass-through entity tax credit to 93.01%, are estimated to reduce revenue by $265.2 million in fiscal 2024 and $540.4 million in fiscal 2025. Proposed spending adjustments include a $223.8 million net reduction in expenditures for fiscal 2024 and a $357.7 million net increase in appropriations for fiscal 2025, reflecting increases to the state share of Medicaid costs, state employee wages, workforce housing and other initiatives, and education cost-sharing funds for municipalities. While current-year budget performance remains on a favorable trajectory, we will continue to monitor medium- to long-term revenue effects of proposed tax reductions on structural balance and whether they contribute to more cyclical revenue.


The governor presented a structurally balanced $5.5 billion fiscal 2024 GF budget, up 7.4% from the adopted fiscal 2023 budget. It would bring reserve balances from expected surplus, the budget reserve account (BRA), and the BSF to all-time nominal highs of $719 million combined, or 13.5% of the proposed budget. The fiscal 2024 proposal continues Delaware's strong budgeting practices and appropriates less than 98% of Delaware Economic and Financial Advisory Council (DEFAC)-determined available revenues, continues to fully fund the RDF, and keeps the BSF at 6.3% of gross revenues. Since this budget was introduced, the March DEFAC projections show a $79 million decrease in revenues for fiscal 2023 and a $42 million increase in revenues for fiscal 2024. Other postemployment benefits (OPEB) costs remain a credit focus, and the state is in part addressing the $8.4 billion liability by allocating 1% of fiscal 2023's budget into the OPEB trust fund, and the governor has proposed the same in the fiscal 2024 budget; this would result in about $48 million and $51 million, respectively, thereby increasing the trust to 6.5% of the unfunded liability.


The governor's executive budget for 2024 budget totals $114.8 billion ($42.4 billion GF), reflecting a 3.5% increase from fiscal 2022. The state's Consensus Revenue Estimating Conference forecasts recurring general revenue will decline by 2.1% in fiscal 2024 relative to fiscal 2023, reflecting in part the comparatively strong revenue collections in the current fiscal year. The legislature is currently in session, and developing the budget is not final until the governor provides review and approval. The state's combined general revenue and BSF reserves are forecast to end the current fiscal year at slightly above 50% of expenditures.


Georgia's executive GF budget proposal for fiscal 2024 totals $30.8 billion, reflecting growth in appropriations of nearly $2.1 billion (or 7.5%) above the previous year's enacted budget. The moderate year-over-year increase includes $846.1 million in appropriations to fund the state share of employer increases on certified educators who participate in Georgia's State Health Benefit Program. It also includes approximately $567 million to fund a $2,000 cost-of-living adjustment for state, pre-kindergarten to secondary education, and University System of Georgia employees, while proposing additional funds to raise the base salary for certified education personnel, increase public college grant and scholarship programs, and fully fund the state's Quality Basic Education formula. While the Georgia General Assembly (GA)'s negotiation of the fiscal 2024 budget is ongoing, it passed, and the governor signed the amended fiscal 2023 budget in March 2023, appropriating some of the state's projected operating surplus for $1.0 billion in one-time income tax rebates and $950 million in one-time property tax relief. It also funded $116 million for school security grants, $92 million to the state reinsurance program, and $35.7 million for the state's Rural Workforce Housing Fund.


The state's proposed budget for the 2024-2025 biennium GF budget includes approximately $9.9 billion in GF spending for fiscal 2024, an increase of 7% compared with fiscal 2022. Some of the budget priorities focus on nonrecurring investments in health care and permanent housing. Budget priorities address reducing state tax burden on necessities, addressing the workforce shortage in education, mitigating climate impacts on the economy, and creating a sustainable tourism industry. After a proposed $500 million deposit into its Emergency Budget Reserve Fund, Hawaii estimates its emergency and BRF balance will be about 13% of fiscal 2024 expenditures; the state legislature approves the proposed transfer to the emergency and budget reserve fund during the current legislative session.


The state wrapped up its work on the fiscal 2024 budget prior to the end of its 2023 legislative session. The governor's proposed fiscal 2024 general fund budget included a 5% increase compared with fiscal 2023 appropriations. One of the primary areas that grew was K-12 education, which rose by 16%, or $378.6 million, compared with fiscal 2023 appropriations. We understand this was driven by $330 million the legislature set aside for the K-12 public school fund in its special session in 2022. Among the new budget's education investments is a salary increase for teachers of $6,359, totaling $145 million. In the state's 2022 special session, it also consolidated to a flat tax, which took effect Jan. 1, 2023. The budget is balanced and includes a combined $61.7 million transfer to the BSF and public education stabilization fund. Idaho estimates that its BSF will reach $880.2 million, or 17% of budgeted GF expenditures, which we consider very strong. In addition, its public education stabilization fund and higher-education stabilization fund are estimated to increase to $234.5 million and $11.3 million, respectively. Collectively with the BSF, these reserves would total 22% of budgeted fiscal 2024 GF expenditures.


We believe the governor's fiscal 2024 $49.6 billion executive budget proposal, still under consideration in the state GA, represents a continuation of previous improving financial trends. The proposal would raise the state's BSF to a good 5.1% of proposed revenues at fiscal year-end 2024 and increase pension contributions to a level above statutorily required amounts for the second year in a row, although still below actuarial requirements. Fiscal 2023 revenues year-to-date through March have come in ahead of the originally enacted budget and 0.3% of upwardly revised revenue estimates. The proposed budget expenditures would increase 7.8% above the enacted 2023 budget, but still 2.8% under the revised 2023 actual revenue estimate. The proposed budget would generate an operating surplus equal to $303 million, although, including actuarial pension underfunding, we calculate an 8%-10% structural budget gap. We expect a final budget to be enacted by the end of May for the July 1 fiscal start.


The state legislature is currently working on passing its budget for the next biennium (2023-2025). The governor's proposed budget would increase GF appropriations by approximately 18% in fiscal 2024 compared with fiscal 2023. The budget would increase the state's K-12 tuition support over the biennium, including a nearly 6% increase in fiscal 2024 compared with fiscal 2023, and another 2% increase in fiscal 2025. The state proposal also significantly increases economic development appropriations, from about $600 million in the current biennium to over $1 billion. Appropriations for education and health and human services account for over 80% of the total GF appropriations over the course of the biennium. The proposed budget is structurally balanced and includes fully funding its pension obligations and incorporating Medicaid growth. The state is projecting to maintain reserves at 14% over the course of the biennium. The state's latest revenue forecast, which was released in April, projects that the state will have $1.5 billion more in revenue for the next biennium than contained in the December forecast that was used to form the governor's proposed budget. As a result, we anticipate there will be changes when compared with the state's final enacted budget. 


Iowa has a history of keeping reserves near 10% of appropriations and maintaining structural balance, and we expect similar results in the future, despite recently enacted income tax cuts and new tax exemptions that will phase in multiyear cuts through 2026 and reduce revenues for fiscal years 2023 and 2024 in the governor's fiscal 2024 executive budget projection. Tax cuts, beginning in tax year 2023, will lead to a 3.9% flat income tax in 2026. Current tax brackets range from 4.4% to 6.0%. The eventual 3.9% flat tax is projected to reduce Iowa tax revenues by more than $1.67 billion by tax year 2026, or around 20% of fiscal 2023 GF appropriations. Residents aged 55 and older also will be exempt from state tax on Individual Retirement Account distributions, taxable pensions, and annuities. In addition, beginning in tax year 2023, Iowa farmers aged 55 and older who farmed for at least 10 years but have retired from farming can elect an exemption of income from either cash rent or farm crop shares for all years the income is earned, or elect one lifetime exemption to exclude the net capital gains from the sale of farmland. There is also a net capital gain exemption allowing a once-per-lifetime election excluding net capital gains from one stock of one qualified corporate or employee stock ownership plan from state income tax.


The governor's proposed budget for fiscal years 2023 and 2024, based on April 2023 consensus estimates as well as enacted, but not vetoed, legislative actions and a proposed one-time tax rebate in fiscal 2023, shows ending GF balances of 9% and 17% of expenditures in fiscal 2023 and 2024, respectively. The one-time tax rebate replaces other tax relief proposed by the legislature, that among other tax policy changes, included a 5.15% flat personal income tax, which the governor vetoed in April. While the amended budget for fiscal 2023 is structurally imbalanced by about $143 million, excluding the proposed one-time tax rebate, the amended budget for fiscal 2024 is structurally balanced. The April 2023 consensus revenue estimates show total tax revenues (before effects of the proposed tax policy changes) increasing 1.3% to $10.3 billion for fiscal 2024. The governor's amended fiscal 2023 budget still includes a $500 million deposit into the BSF, which would increase the current estimated BSF balance at the end of fiscal 2023 to about $1.48 billion. The governor's recommended budgets for fiscal years 2023 and 2024 show very strong combined GF and BSF balances of about 26% (fiscal 2023) and 34% (fiscal 2024) of recurring expenditures.


The Commonwealth of Kentucky's 2022-2024 biennial budget was finalized on April 13, 2022, and is structurally balanced, with healthy GF revenue growth projected. The budget is one of the most significant in the state's history in terms of calling for significant contributions to the pension funds beyond what is required in future actuarially determined contributions (ADCs). The budget also includes continued funding of the budget reserve trust fund with a large $250 million deposit that will help maintain financial flexibility. We view the budget positively as the state continues to focus on improving pension funding as well as maintaining a high budget reserve trust fund. The budget also has eliminated all one-time items to achieve balance. The biennial budget also broadened the sales tax base and lowered the income tax rate over time with House Bill 8. Future reductions are based on the amount of state tax revenue received, and because conditions were met, on Feb. 17, 2023, the governor signed House Bill 1, reducing the individual income tax to 4.5% for taxable years starting Jan. 1, 2023, and 4.0% beginning Jan. 1, 2024. The Consensus Forecasting Group revised the GF revenue projections upward in December 2022 for fiscal years 2023 and 2024 by $1.4 billion and $1.3 billion, respectively, driven primarily by higher sales-and-use taxes.


The governor's budget for fiscal 2023-2024 recommends $11.4 billion in state GF spending, representing a conservative 1.5% increase from the 2022-2023 budget. Key spending changes will primarily fund education, with $197 million for K-12 teacher pay increases, $114 million to higher education, $53 million for cyber security initiatives, and $23 million for supplemental pay to local law enforcement, which represents a 20% increase. The budget recommendation will guide the current legislative session, which convened on April 10, 2023, and will adjourn no later than June 8. Fiscal 2023 revenue growth has remained robust. At the most recent revenue estimating conference (REC) meeting in December 2022, estimates projected approximately $929 million and $608 million in excess revenues (revenues over forecast) for fiscal years 2023 and 2024, respectively. The REC meets again in May, and current trends suggest excess revenue projections could be revised before the close of the fiscal year.


Maine's governor submitted a $10.3 billion fiscal 2024-2025 executive GF budget plan, with appropriations of $5.1 billion for fiscal 2024 and $5.2 billion for fiscal 2025; this reflects annual spending increases of 13.9% and 2.9%, respectively. The legislature has since passed, and the governor signed into law on March 31, 2023, an approximately $9.8 billion current services budget to ensure continuing operations for Maine's government. The legislature was called into special session in April 2023 to consider $386 million in additional general fund spending proposals apart from the current services budget, including increased funding for education, health and senior care services, and housing initiatives. This includes a $101 million increase for K-12 education, covering 55% of local education costs for a second consecutive biennium, and $58 million to fully fund universal free school lunch programs. In addition, the budget proposal includes $30 million for affordable rental housing and $400 million in state funds to match approximately $1 billion in federal funds under the Bipartisan Infrastructure Law for infrastructure improvements to the state transportation system. Maine's Revenue Forecasting Committee (RFC) projects annual revenue growth of 2.8% in 2024 and 2.7% in 2025, and we believe the state will hold reserves in its BSF at the current level of $896 million, or 17.8% of proposed fiscal 2024 GF appropriations. 


The fiscal 2024 budget was signed into law on April 24, 2023. Final legislative budget action for fiscal 2024, which considered two supplemental budgets from the administration, a combined $477.6 million revenue write-down across fiscal years 2023 and 2024, and budget reconciliation and other legislation, shows an estimated closing GF balance of nearly $2.4 billion in fiscal 2023 and $357 million in fiscal 2024, and an estimated closing RDF balance of approximately $2.9 billion in fiscal 2023 and $2.5 billion in fiscal 2024. These combined reserves as a percentage of total expenditures for fiscal years 2023 and 2024 are 19% and 10.6%, respectively. The legislative appropriated budget for fiscal 2024 shows a structural balance with ongoing GF revenues exceeding ongoing GF spending by $146 million. The "90 Day Report--A Review of the 2023 Legislative Session," prepared by the GA, however, shows projected structural imbalances beyond fiscal 2024, growing to more than $1.8 billion by fiscal 2028 from $426 million in fiscal 2025. We expect state officials will make adjustments to spending and revenues as needed to achieve structural balance. The GA provided an additional $400 million to the Blueprint for Maryland's Future Fund, redirecting a total of $900 million from the statutory RDF Fund appropriation to the Blueprint Fund in fiscal 2024, providing adequate funding for Blueprint programs through at least fiscal 2026.


The governor's budget proposal reflects a 1.6% increase in tax revenue (excluding new surtax revenue), based on the consensus revenue estimate of $40 billion. The budget provides for a total of $55.5 billion in authorized spending, including projected transfers to the Medical Assistance Trust Fund. This represents an increase of 4.1% above the fiscal 2023 budget, including new investments supported by the surtax revenue. The $1 billion surtax revenue is proposed to be segregated for education and transportation programs outside of the general funds. The budget also proposes various tax relief initiatives, including new family and child tax credits, real estate tax relief, and reduction of the tax rate for short-term capital gains from 12% to 5%. All proposed tax measures are expected to reduce the commonwealth's tax revenues by $859 million in fiscal 2024. The proposed budget also projects another deposit into the BSF, to end fiscal 2024 at about $9 billion. In recent years, Massachusetts has enacted its budget after the July 1 start of its fiscal year, using short interim budgets until a final budget is enacted.


Michigan's fiscal 2024 budget proposal includes $81 billion in total spending, with $13 billion in GF spending, which is 5% lower than GF spending for fiscal 2023, largely spurred by slower projected revenue growth and a decrease in nonrecurring expenses. The proposed budget is structurally balanced with GF/general purpose revenue expected to be higher than expenditures. Nearly 75% of recommended GF appropriations are for health care, protection of vulnerable children and adults, human services, education, and public safety. Michigan plans to add to its BSF for the third year, leading to a balance of about $1.9 billion, or what we view as a good 6% of combined GF/general purpose and school aid fund expenditures at fiscal year-end Sept. 30, 2024. The most recent state revenue forecast was made in January 2023, forecasting GF revenue to increase by 2%.


The Minnesota governor's revised 2024-2025 biennial budget proposal includes total GF spending of $66.3 billion, a 27.6% increase from 2022-2023 biennium spending projections. Compared with Minnesota Management and Budget's February forecast of 2024-2025 expenditures, the governor's proposal increased spending by $11 billion (19.6%). The governor's additional funding items include $2.3 billion for infrastructure projects, $2.9 billion in new funding for pre-K-12 education, $1.2 billion for children and families, $1 billion for housing, and $650 million for public safety. The governor's proposal also includes a $5.4 billion decrease in revenues from the forecast, mostly resulting from $3.9 billion in one-time tax credits and a $1.1 billion increase in child tax credits. As a result, total GF expenditures exceed revenues by $11 billion (20%), although, notably, a large portion of the reduced revenues and certain expenditure items are one-time in nature. The budget is balanced by the state's significant carryforward balance, currently forecast to be $16.1 billion (26.5% of biennial expenditures), inclusive of reserve accounts. The governor's proposal would maintain $4.75 billion (7.2% of biennial expenditures), inclusive of reserve accounts, at the close of the 2024-2025 biennium.


The Mississippi legislature passed its version of the fiscal 2024 budget in early April, and it now awaits governor action. The $7.6 billion budget is approximately $340 million greater than the governor's recommendation that was proposed in November. It includes no major tax decreases or rebates. Mississippi's Joint Legislative Budget Committee budget book estimates ending fiscal 2024 with a $579.4 million balance in the working cash stabilization reserve fund, which is, in our view, strong at 7.6% of the legislatively approved fiscal 2024 budget.


The governor's proposed budget for fiscal 2024 is relatively flat to fiscal 2023, at about $14.1 billion. In part, the modest revenue forecast in fiscal 2024 of $13.2 billion (0.7% higher than fiscal 2023) reflects the income tax reduction effective Jan. 1, 2023, as well as an economic slowdown, along with inflation and ongoing shifts in consumer behavior. Expenditures are indicative of the state's legislative priorities, including infrastructure and continued funding for the state's road and bridge network, education, public safety, and mental health services. The state plans to exhaust its remaining federal stimulus funds to cover expenditures associated with bolstering workforce initiatives, broadband expansion, and water, wastewater, and stormwater improvements. We anticipate that at fiscal year-end 2023, the state will maintain its solid level of reserves in its budget reserve fund, equal to between 6% and 7% of general fund expenditures.


The governor's budget for fiscal years 2024 and 2025 recommends GF base spending of $2.34 billion each year, a 0.3% decline compared with fiscal 2023. Proposed total disbursements of $2.79 billion in fiscal 2024 represent a $2.2 billion, or 44.6%, decrease from the enacted 2023 budget. However, this is largely attributable to a $1.6 billion decrease in one-time investments, which were elevated in fiscal 2023. The GF ending fund balance is projected at $638.3 million and $525 million for fiscal 2024 and 2025 year-ends, respectively, representing, in our view, a very strong 27% and 22% of recommended base appropriations. Several tax changes and spending bills included in the budget were recently approved by the legislature and signed into law by the governor, including spending $284 million for property tax rebates, $480 million for income tax rebates, $125 million to pay down state debt, and reducing the state's top income tax bracket to 5.9% from 6.5%, at an estimated cost of approximately $150 million annually. Through February, year-to-date recurring GF revenues of $2.31 billion are 13% above prior-year collections. The legislative fiscal division's most recent GF forecast update, published in March 2023, estimates revenue of $3.72 billion for fiscal 2023 (average of multiple revenue forecasts), which is $183 million above the forecast used for the budget.


The governor's budget proposal for the fiscal 2023-2025 biennium recommends $5.29 billion of GF appropriations for fiscal 2024 and 2025, representing an average increase of 1.3% per year (2.6% in 2024 and no growth in 2025). It further recommends lowering individual income and corporate tax rates to 3.99% by 2027 and fully exempting social security income from taxes. If implemented, these reductions are projected to reduce annual revenues by approximately $678 million , or approximately 9.8% of the estimated 2027 GF net revenue, when fully phased in. Another budget priority is the creation of an Education Future Fund (EFF) funded with a $1 billion investment in fiscal 2024 and an additional $250 million each year thereafter. The EFF's purpose is to provide financial assistance to school districts, including an additional $1,500 per student. Property tax relief, including annual increases in funding for the Property Tax Credit Relief Fund over the budget period, is also proposed. The appropriation committee's most recent budget report, published in February, forecasts the state's GF balance will reach a low point in 2024 after the $1 billion transfer out to create the EFF, at $312 million, or approximately 5.8% of GF appropriations. Still, this excludes an additional $1.6 billion in cash reserves, which increases reserves to 31% of appropriations, which we consider very strong.


Nevada's legislature is currently working on passing the budget for the next biennium (2023-2025). The state's latest Economic Forum forecast from December 2022 projects GF revenues to increase by 2.9% from the current biennium, to $11.4 billion. The governor's budget proposal represents an 18.5% increase over legislatively approved GF appropriations for the current biennium. The proposal provides an additional $2 billion to the state's K-12 education funding formula, the Pupil Centered Funding Plan. The proposed budget appropriations include a 12%-14% salary increase for state employees and retention bonuses and two-grade increases for certain correctional officers and Department of Public Safety Officers. Overall, education and health and human services make up the majority of appropriations, composing approximately 80.5% of proposed GF appropriations. The governor's proposed package also includes a one-time transfer for fiscal 2023 into the state's RDF, along with the creation of a new RDF subaccount. Prior to the start of the 2023 legislative session, $904 million was available in the RDF, and the governor's proposed fiscal 2023 transfers ($630 million) would increase this to $1.5 billion, or about 32% of the annualized budget. For the upcoming biennium, the proposed budget plans for GF balances above the required 5% level in each year, as well as an additional transfer to the RDF in fiscal 2024 ($143 million).

New Hampshire

The governor's combined GF and ETF budget proposal totals approximately $3.12 billion in fiscal 2024 and $3.25 billion in fiscal 2025, representing a 5.5% decrease and a 4.1% annual increase, respectively, which we consider modest, from the previous fiscal biennium. The executive budget assumes essentially flat revenue growth and includes the use of $224.5 million of one-time surplus funds carried forward from the 2022-2023 fiscal biennium to fund affordable housing projects, construct a new state correctional facility, and fund wastewater state aid grants to municipalities. It also includes $100 million to fund the largest pay increase for state workers over the biennium, and a $200 million (or 9.0%) increase in proposed education spending to fund the state's adequacy funding formula. The governor also recommends an additional $87.4 million to be deposited to the Revenue Stabilization Revenue Account, which could bring the balance to $341.3 million, or approximately 11.0% of proposed fiscal 2025 appropriations--the highest level in the state's history.

New Jersey

Although New Jersey has budgeted reserve drawdowns in recent years, and even sold a large deficit bond in fiscal 2021, revenues have consistently exceeded budget projections, resulting in increased reserves to high levels. The governor's fiscal 2024 executive budget proposal would fund the full actuarial pension contribution for the third consecutive year in a row, after over 20 years of funding less than full actuarial requirements. As a result, we see New Jersey as finally having achieved structural budget balance, excluding continued pay-as-you-go OPEB contributions. Future budgets could still be challenged in the event of a revenue downturn by high fixed-cost carrying charges due to high liabilities left over from previous pension underfunding, high debt, and high OPEB (the state pays teachers' OPEB). Combined pension, debt, and OPEB payments in fiscal 2023 total 24% of operating funds appropriations. The governor's proposal to not renew a 2.5% CIT surcharge would keep the corporate rate high, but the state would no longer have the highest rate in the nation.

New Mexico

New Mexico's enacted fiscal year 2024 budget recognized an increase of about 14% from fiscal 2023. Public school funding saw an increase of 7.8% over the previous year, which will account for 44% of the total GF budget. The state also increased its GF appropriation for Medicaid by 21%, but, inclusive of federal funds, recognized about 12.6% budget growth, with an aim of supporting provider network growth, especially in behavioral health, primary care, and rural providers. In addition, the budget includes 6% compensation increases for all state, public school, and higher-education employees. The budget also includes a transfer to reserves, increasing them to $3.4 billion, or 35.6% of recurring appropriations, which we consider strong. The state enacted a variety of tax changes in the 2023 legislative session, including an increased child income tax credit, increased film tax credits, additional income tax rebates, film credits, and additional health care practitioners' gross receipt tax deductions. Historically, about one-third of New Mexico's GF revenue derives from oil and gas production; about half from direct severance taxes, as well as mineral rents and royalties deposited in the GF; and about half indirectly from gross receipts taxes on oil and gas activity, which we see as a volatile revenue source.

New York

New York's proposed state budget, based on preliminary estimates, totals $125 billion among state operating funds. While the current fiscal year is structurally balanced, the state's five-year financial plan returns to showing outyear gaps as revenue growth softens. The budget recognizes that weakening economic trends will lead to lower revenues starting in fiscal 2024, and completed its planned deposits to principal reserves in 2023, two years ahead of schedule. However, the budget also includes significant increases in education and Medicaid spending. Key priorities in the proposed budget address ongoing support for the Metropolitan Transport Authority (MTA), affordable housing, public safety, climate change, and health care capital funding. Available reserves (rainy day and economic uncertainties) were increased to about 16% of GF disbursements at the end of fiscal year 2023. The budget includes an increase in payroll mobility tax to support the MTA and $300 million in nonrecurring support for the authority's operations.

North Carolina

Fiscal 2023 GF revenues are projected to end $3.25 billion over budget. Key spending priorities in the governor's proposed biennial budget for fiscal years 2024 and 2025 include increasing salaries of state employees and teachers, court-mandated funding of education, and other initiatives to address mental health and workforce needs and to enhance public safety. Relative to tax rates in current law, officials estimate annual negative GF impact will be $210 million (0.6% of expenditures) in fiscal 2024 and $760 million (2.5% of expenditures) in fiscal 2025. Officials estimate Senate Bill 651, which proposes lowering the PIT further to 2.49%, instead of 3.99%, over the next four years, would decrease GF revenues by $6.2 billion by 2028, on top of the $3.8 billion reduction in GF revenues under current tax policies. In the governor's recommended budget, however, the PIT remains at 4.75% for higher incomes and the CIT remains at 2.5%. The House passed its version of the budget on April 6, 2023; now being reviewed by the Senate, it recommends spending $3.2 billion and $3.3 billion less in fiscal years 2024-2025 than the governor's budget. At the close of fiscal year 2023 and 2024, the state's savings reserve balance is projected to be $4.75 billion (17% of GF expenditures) and $4.5 billion (13.8% of the governor's proposed GF expenditures and 14.3% of House-recommended GF expenditures), respectively. While a late budget is not uncommon for North Carolina, the state has historically put actions, including continuing resolutions, in place to ensure continued operations in the absence of an enacted spending bill.

North Dakota

The governor's executive budget for the 2024-2025 biennium proposes $18.5 billion in appropriations across all funds, an 8.9% increase from the previous biennial budget. The GF budget totals $5.9 billion, a 17.5% increase, and includes $5.5 billion in ongoing spending and $375 million in one-time spending. Key changes in this year's biennial budget include $170 million in spending to address the state's workforce shortage; increases in K-12 per-pupil education funding of 4% for 2024 and 3% for 2025; more than $3 billion in infrastructure investment; and a permanent reduction in personal income taxes that would completely eliminate the state individual income tax for most taxpayers and reduce the rate to a flat 1.5% for those who do pay, which is projected to cost $500 million over the next two years. This budget cycle comes on the heels of a year of exceptionally strong growth across major GF revenue sources, with sales and use, motor vehicle excise, and individual and corporate income taxes all projected to rise by double-digits in 2023 before normalizing in 2024 and beyond. Reserve balances will therefore be well-funded at the start of the new biennium and are projected to remain at a healthy 28% of ongoing GF expenditures through the end of the biennium between the GF, BSF, and strategic investments and improvements fund.


The governor's budget proposal for the fiscal 2024-2025 biennium is structurally balanced and recommends $28.1 billion of state-only GF appropriations in fiscal 2024 (a 3.2% increase from 2023) and $29.4 billion in fiscal 2025 (a 5.4% increase over 2024). The Office of Budget and Management's January revenue forecast, used to guide the budget recommendation, projects state-only revenue of $29.3 billion and $30.7 billion for fiscal 2024 and 2025, respectively. The budget also recommends spending plans for a significant portion of the greater than $6 billion balance held in the general revenue fund, including $2.5 billion to support site infrastructure and attract new businesses, $307 million to improve water quality, $150 million to establish innovation hubs, and approximately $130 million to provide a $2,500 per child income tax exemption. The general revenue fund balance is estimated to be $884 million by fiscal 2024 year-end. The forecast also projects that the BSF will be maintained over the biennium, with a projected $3.53 billion balance at fiscal year-end 2024 and a $3.57 billion balance for 2025, representing 12.6% and 12.1% of the respective years' recommended appropriations, which we consider very strong.


Oklahoma's executive budget recommendation for fiscal 2024 increases total agency appropriations to $10.06 billion, approximately 3.7% above the current year's budget (net of one-time federal appropriations and other supplemental adjustments). Following the executive budget proposal's release, Oklahoma's Board of Equalization certified the general revenue fund at $8.7 billion, with $8.3 billion in appropriation authority for all certified funds (at 95% of projected general revenues) for fiscal 2024, which reflects a $379.9 million (or 4.2%) decrease compared with the appropriation authority estimated in December 2022. This modest downward revision reflects state expectations for some moderation in oil and gas prices that have spurred substantial growth in gross production, income, and sales tax collections, albeit still above previous fiscal years. The executive budget proposes tax relief measures to lower individual and CIT rates that could reduce revenue by $304.6 million, and to eliminate the state's 4.5% sales tax on grocery items, which could reduce revenue by $351.1 million. On a combined basis, the executive budget estimates revenue growth and essentially flat spending could increase the state's carryforward of unspent general revenue and reserves to nearly $3.0 billion, or nearly 26.3% of total recommended budget appropriations, by the end of fiscal 2023. With this unspent surplus, the governor proposes the creation of a new Oklahoma Legacy Fund and the initial deposit of $1.0 billion to potentially mitigate future revenue and budget volatility.


The governor's combined general and lottery funds budget proposal for the 2023-2025 biennium totals $32.1 billion, or a 9.7% increase above the 2021-2023 legislatively approved budget. Spending priorities aim to transition the state's budget as extraordinary federal spending in response to the pandemic winds down. The budget includes a combination of recurring and nonrecurring funding for affordable housing production and reducing homelessness, maintaining or expanding mental health and addiction care programs, increasing education funding, and expanding early child care programs. The executive proposal estimates combined general and lottery fund resources of $32.5 billion, including $3.86 billion in beginning balances and approximately $1.08 billion in anticipated reversions of unspent agency resources that will shift back to the GF for allocation in the 2023-2025 biennium. The proposal retains $2.05 billion of combined balances in the RDF and ESF funds projected at the end of the current biennium, but repurposes $765 million of projected biennium-end deposits and interest earnings to fund nonrecurring expenditures in the 2023-2025 biennium. Under state statute, however, a three-fifths vote of the legislature is required to repurpose deposits to Oregon's reserve accounts, and we expect there will likely be further negotiations and changes from the governor's proposal to the final budget.


The governor's $44.4 billion fiscal 2024 GF budget proposal is generally credit neutral. The 8% increase in spending from the current budget includes a $567.4 million increase in public school funding to begin toaddress a court decision that cited a failure to comply with constitutional rights of students in poorer districts. The court case did not obligate Pennsylvania to budget any specific amount, and this could remain a source of budget pressure in future years. The budget projects fiscal 2024 GF expenditures exceeding revenues by over $2 billion, but this imbalance is covered through a $7.9 billion fiscal 2023 surplus carryforward. We view use of prior-year carryforwards as creating a current-year structural imbalance, in this case of 5% of expenditures. Even using this surplus, the governor's budget estimates the RDF balance at $5.2 billion, which we consider strong at 11.9% of proposed fiscal 2024 GF expenditures. This structural gap is expected to recur at about the same size and remain covered from carryforwards through our two-year outlook period.

Rhode Island

Rhode Island's balanced fiscal 2024 budget recommendation includes a GRF budget spending plan totaling $5.3 billion, a $260.6 million increase (or 5.2%) in operating appropriations compared with the fiscal 2023 enacted budget. The state also projects a $374 million, or 7.6%, increase in net general revenue compared with the fiscal 2023 enacted budget, including its anticipated surplus of $250.4 million carried forward. The state estimates ending fiscal 2024 with approximately $276.3 million, or 5.2% of general expenses, in its budget reserve and cash stabilization account, an increase of $5.3 million compared with the start of the current fiscal year, and in alignment with its 5% statutory reserve target. The proposed fiscal 2024 budget is awaiting legislative approval.

South Carolina

The GF executive budget totals nearly $11.4 billion, or an increase of about 9.9% from the previous year's. The executive budget was announced on Jan. 6, 2023, before the release of the February revenue forecast that estimates GF revenue for fiscal 2024 of about $12.4 billion (slightly lower than current year). The bulk of expenditures in fiscal 2024 are allocated to K-12 education and cultural funding ($4.0 billion, or 35%) and health and social services ($3.2 billion, or 28%). Other priorities include economic development, teacher and state personnel salary increases, and ongoing infrastructure development. The fiscal 2023 revenue forecast reflects the retroactive income tax reduction to Jan. 1, 2022, but through January 2023 shows other revenue trending 8.4% above the previous year. Nonetheless, modest reserve growth at year-end is expected as well as a subsequent $500 million appropriation to South Carolina's rainy day reserve.

South Dakota

The legislature approved the state's fiscal 2024 budget, and the governor provided her signature of approval on March 20. The enrolled budget increases GF spending to $2.27 billion, $84 million above the governor's $2.19 billion recommendation, and represents a 15% increase from the $1.98 billion fiscal 2023 enrolled budget. The budget includes a reduction to the state's sales tax rate of 0.3%, to 4.2% (including a sunset provision in 2027), which is estimated to reduce revenues by approximately $100 million annually. Additional prison funding was also approved, including a $279 million in transfers to the incarceration construction fund for future prison construction and approximately $110 million for new prisons in Rapid City and Sioux Falls. Reserves are estimated to fall to approximately $239 million at fiscal year-end 2023, equal to 12.1% and 10.5% of the fiscal years 2023 and 2024 enrolled budgets.


Tennessee's legislature is in session and working through the next budget. The governor's proposed budget is effectively flat compared with the state's fiscal 2022 budget, although GF appropriations would increase by slightly more than 11.5% if adopted as proposed. This rise is attributable to a targeted increase in public education, transportation, and infrastructure projects, and higher personnel costs. Reserves are anticipated to rise to $3.2 billion, or a little more than 10.5% of GF appropriations.


Texas general revenue-related funds for the 2024-2025 biennium are estimated to total $188.2 billion, with a potentially historical $32.7 billion in fiscal year-end (Aug. 31) revenues available for general spending (net of required transfers) for the fiscal 2024-2025 biennium. On April 6, 2023, Texas' House of Representatives passed its $136.9 billion version of the budget. In addition, the House approved some executive budget priorities, including $17.3 billion in property tax relief, $5.0 billion in additional funding for the state school funding formula, $1.6 billion for school safety, and $3.5 billion for cost-of-living pension adjustments for retired teachers. The House also passed $400 million for water and wastewater protection projects and an additional $1.5 billion for the Texas Semiconductor Innovation Fund to complement other federal funds available under the U.S. CHIPS and Science Act. On April 17, 2023, the Texas Senate approved its $141.3 billion version of the general revenue budget, with $4.4 billion (or 3.2%) more in spending than the House bill; both bills will be negotiated in conference committee, with approximately one month remaining in the legislative session. Not accounting for potential additional legislative changes, the ending balance in the state's economic stabilization fund totals approximately $13.72 billion by biennium end (fiscal 2023), or approximately 22.0% of general revenue appropriations (average annual), levels we view as very strong.


In March 2023, the state enacted a combined GF, income tax fund, and uniform school fund in its fiscal 2024 budget, totaling $14.6 billion. This represents an increase of $3 billion, or 20.5%, above its fiscal 2023 originally enacted budget. Of the state's $14.6 billion combined GF, income tax fund, and uniform school fund budget, public education represents the largest portion of appropriations, at 37%. The state increased its Weighted Pupil Unit by 6% and appropriated $196.9 million for educator salary bonuses. In addition, year-over-year increases also include nonrecurring transportation ($1.2 billion) and one-time debt reduction expenditures ($915 million). The budget includes an income tax rate cut, to 4.65% from 4.85%, that is estimated to reduce state revenue by $380 million, along with a variety of other tax relief measures. At the same time, the state's budget is forecasting flat revenues for fiscal 2024. We expect the state will adhere to its long history of budgetary balance and containing expenditures should economic conditions lead to pressure on other revenue sources. Utah's combined RDF is expected to be approximately $1.4 billion in fiscal 2024, or what we view as a very strong 9.6% of budget.


The fiscal 2024 executive budget includes $8.4 billion in appropriations across all funds, with $2.3 billion in the GF and $2.1 billion in the education fund. The all-funds budget represents a 2.8% decrease from the 2023 adjusted budget, primarily due to the use of $567 million in ARPA funds in 2023. The proposal includes spending increases of 13% in the GF and 6% in the education fund, with key priorities that include $77 million in new and ongoing spending on initiatives such as expanded child care subsidies; $230 million in surplus funds for one-time uses such as workforce development and housing programs; and $150 million to meet state match requirements for future federal funding from the Infrastructure Investment and Jobs Act and other federal programs. In late March, the House Appropriations Committee passed its own $8.5 billion budget proposal that includes, among other things, an additional $87 million in GF spending compared with the governor's budget proposal. Both proposals fund budget stabilization accounts for the general, education, and transportation funds at the maximum statutory levels of 5% of the previous year's budgetary appropriations.


The governor's budget amendment for the current biennium proposed tax policy adjustments, including lower individual and CIT rates, at an estimated cost of $1.0 billion ongoing revenue this biennium (1.9% of 2022-2024 GF biennium revenue) and about $1.5 billion per year thereafter (4.8% of 2025-2026 estimated GF biennium revenue). In addition to the proposed taxpayer relief measures, proposed budget amendments include ongoing spending on public education and environmental programs and one-time spending on economic development site development, state employee merit bonus payments, resiliency funding, and environmental projects. The governor is proposing an additional $200 million of GF resources to capitalize a newly formed resilient revolving loan fund meant to fund local resiliency projects, including flood mitigation. The governor's proposed GF budget amendments also include $100 million to mitigate combined sewer overflows in the city of Richmond. A total of $685 million is proposed for conservation and resiliency efforts this biennium, including federal and non-GF sources. To date, the legislature passed amendments to the current biennium budget to make deposits to the revenue stabilization fund and retirement funds and direct more than $260 million for education spending. We understand the legislature could continue to deliberate on further budget amendment proposals.


The legislatively adopted budget for the next biennium (2023-2025), currently awaiting the governor's signature, totals approximately $69.3 billion, up slightly more than 10.5% from the preceding biennium, supported by $70.7 billion in total resources. Of note, the budget utilizes $1.3 billion available in the Washington Rescue Transition Account (WRPTA) for biennial operating needs and initiatives, or just shy of 2% of total resources and preserves $798 million in the fund. The state created the WRPTA in 2021 to enhance support for education, human services, health care, and the economy, following pandemic-induced pressures. The estimated biennial ending balance of $1.4 billion, coupled with a forecast $1.3 billion balance in the budget stabilization account and $798 million in the WRPTA, totals a little more than 10% of total annualized appropriations, levels we view as strong.

West Virginia

The governor signed the legislatively enrolled budget for fiscal 2024 in March. The budget increases spending by $239 million, or 5.2%, to $4.87 billion. PIT rates were reduced by 21.25%, with provisions to reduce rates further (up to 10% annually) beginning in 2025 if revenue growth exceeds specific thresholds. The reduction is retroactive for 2023 and is estimated to return more than $750 million to taxpayers. The state ended fiscal 2022 with $956.7 million in its combined RDFs, equal to 21% and 20% of the enacted fiscal 2023 and 2024 budgets, respectively, which we consider very strong. Fiscal 2023 revenues are exceeding estimated collections by $1.3 billion (38%) year-to-date through March, largely attributable to severance tax collections that are $605 million above estimated. In the short term, we believe the tax cuts are manageable, provided they are accompanied by conservative budgeting, multiple years of strong revenue growth, and high reserves; however, in our view, the permanent tax reductions could result in budgetary pressure and difficult spending decisions in the medium-to-long term.


Wisconsin's governor submitted his executive budget proposal for the fiscal 2023-2025 biennium, including a GF base budget spending plan totaling $24.2 billion for fiscal 2024 and $23.9 billion for fiscal 2025, reflecting a 23.2% annual increase for fiscal 2024 and a modest 1.2% reduction in GF expenditures in fiscal 2025. The proposal includes spending down a large portion of the state's projected $7.0 billion net cash balance at the end of the 2021-2023 biennium to fund key spending initiatives. Under the proposal, $2.8 billion would be appropriated for K-12 education, along with $1.1 billion for local government aid and tax relief, $1.0 billion to the Department of Administration to administer various grant programs--including health care and housing infrastructure programs--and $500 million transferred to the BSF. If enacted, the BSF balance would reach approximately $2.2 billion, or 9.2% of proposed fiscal 2024 expenditures. Assuming no budgetary adjustments, this would potentially result in a net structural imbalance of 2.6% of biennial appropriations (5.4% of annual appropriations) by the end of the fiscal 2023-2025 biennium. However, we expect there will likely be substantial revisions from the budget proposal to the final budget, given the division of political control between the governor and the legislature.


Wyoming enacted its 2023-2024 biennium budget in the 2022 budget session. The adopted budget reduces state government appropriations with the assistance of federal funds and state support for K-12 schools as a result of increased local revenues compared with the previous biennium. The state's latest consensus revenue forecast, released in January 2023, revised its investment income from the Permanent Wyoming Mineral Trust Fund down for the current fiscal year, and slightly decreased its forecast for natural gas prices for calendar year 2023. In the 2023 General Session, the state legislature increased appropriations for the general operations of government and K-12 schools from the GF and school foundation program account. The state legislature also directed more than $1.4 billion into intermediate and permanent savings. Combined budget reserve account, legislative stabilization reserve account, GF, and school foundation program balances as of June 30, 2024, are forecast to be $1.9 billion, or about 70% of combined budgeted GF and school foundation program biennium appropriations on an annualized basis.

This report does not constitute a rating action.

Primary Credit Analyst:Ladunni M Okolo, Dallas + 1 (212) 438 1208;
Secondary Contacts:Geoffrey E Buswick, Boston + 1 (617) 530 8311;
Sussan S Corson, New York + 1 (212) 438 2014;
David G Hitchcock, New York + 1 (212) 438 2022;
Oscar Padilla, Dallas + 1 (214) 871 1405;
Cora Bruemmer, Chicago + 1 (312) 233 7099;
Anne E Cosgrove, New York + 1 (212) 438 8202;
Savannah Gilmore, Englewood + 1 (303) 721 4656;
Rob M Marker, Denver + 1 (303) 721 4264;
Joseph J Pezzimenti, New York + 1 (212) 438 2038;
Scott Nees, Chicago + 1 (312) 233 7064;
Scott Shad, Englewood (1) 303-721-4941;
Nora G Wittstruck, New York + (212) 438-8589;
Thomas J Zemetis, New York + 1 (212) 4381172;

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