More than half of U.S. states have larger 2014 general-fund balances than anticipated at the start of the year because of the strengthening economy, according to Standard & Poor’s.
Thirty-six of the governments expect to end this fiscal period, which lasts through June for most states, with a higher balance than the year’s beginning, showing “progress in bringing their fiscal structures into ongoing alignment,” wrote analysts led by Gabriel Petek in San Francisco.
States should be wary of increasing spending given the potential for volatility in equities and tax receipts, according to the S&P report. The governments’ revenue rose in fiscal 2013 for a third straight year, pushing collections to a record $846.2 billion, according to the Census Bureau.
“State sector credit quality through at least the next 12 to 18 months may, in our view, be linked to whether the states maintain a restrained fiscal posture,” Petek said.
Some states’ finances haven’t rebounded from the recession that ended in June 2009. Less than half -- 24 states -- have 2014 reserves bigger than in 2008. Also, 27 states don’t regularly fund annual pension contributions, according to the report.