Five years into a recovery from the worst economic crisis since the Great Depression, state budget planning remains closer to an austerity mind-set than reflecting what has been an extended bull market.
For five consecutive fiscal years through 2013, state spending has trended up—an encouraging sign—but it's still well below the long-term average growth in annual state spending. The fiscal 2015 proposed spending increase across U.S. states of 2.9 percent is just a little more than half the historical average of 5.5 percent since 1979, according to the National Association of State Budget Officers (NASBO).
Debt issuance by states, meanwhile, has declined in recent years, even as the economy has expended and during an unprecedented low-interest-rate environment. State governments and state agencies issued less debt than in the prior year in 4 out of the past 5 years. In 2013, states issued 26.5 percent less debt than they had four years earlier, according to Bond Buyer data. The trend has persisted into 2014 as well, with total debt issuance through the first quarter coming in 23.9 percent below that of the first quarter of 2013.
"There is an austerity mind-set even six years after the crash," said Brian Sigritz, director of state fiscal studies for the NASBO, which released its latest fiscal survey of the states in mid-June. "I think they are more hopeful and things have improved, but states have not returned to the level where they were before the crash. Things are still too tight," Sigritz said.