General fund spending jumps in states across the country

It leapt over the last two fiscal years at the highest rate in the 36-year history of the National Association of State Budget Officers annual expenditure report.
The state Capitol building in Lansing, Mich. (AP Photo/Carlos Osorio, File)

State general fund spending leapt between fiscal 2021 and 2022 at the highest rate in the 36-year history of the National Association of State Budget Officers annual expenditure report.

That’s according to the group’s report released Friday, which found that state leaders spent 18% more general fund dollars in fiscal 2022. Most states ended fiscal 2022 on June 30.

California’s enormous general fund jumped by almost 50%, over $80 billion, between the two fiscal years. The typical state’s general fund spending increased by about 9%.

The spending increases came as governors and lawmakers spent down massive surpluses, with much of the extra used to pay for one-time expenses, such as improving infrastructure, paying off debt and shoring up rainy-day funds, the report found.

The general fund spending increase “can be tied back to the increase in state tax collections we’ve seen in the past two years,” said Brian Sigritz, director of state fiscal studies for NASBO and author of the report. “We’ve had two straight years where state revenues have actually grown greater than 15%, which is very high from a historical perspective.”

General funds typically comprise the bulk of the money state lawmakers appropriate each year to spend on schools and other key programs.

States have been flush with cash in recent years thanks in part to federal COVID-19 aid. The federal government sent hundreds of billions of dollars directly to states and pumped money into the economy in a variety of ways, including by sending people checks.

Federal stimulus, low unemployment, rising wages and — until this year — a booming stock market all helped increase tax collections in recent years.

Total state spending, which includes federal grants, general funds and other types of state funds, increased by 7.3% overall to $2.86 trillion in fiscal 2022, the report found. General funds and federal funds each comprised about $1 trillion of that total.

State leaders spent more on everything from schools to corrections, the report found.

Total transportation spending jumped 19.5%, and capital spending — such as on infrastructure, repairs and new equipment — jumped 15.3% in fiscal 2022.

Those increases are driven by several factors, Sigritz said. For instance, leaders in many states have in recent years directed more funding to transportation, such as by imposing fees on electric vehicles.

State leaders are also taking advantage of federal COVID aid and federal funding authorized by the 2021 infrastructure law, he said.