April 7, 2016
Over the course of the past several months, governors in 33 states have released their fiscal 2017 budget proposal. Seventeen states enacted a biennial budget last year covering both fiscal 2016 and fiscal 2017, although governors in six of these states have proposed a supplemental budget to adjust spending by some extent. This document provides summaries of governors’ budget proposals and links for further information.
For the most part, governors’ budget proposals for fiscal 2017 demonstrate continued fiscal improvements. In both State of the State speeches and in discussing their budget proposals, governors noted improvements in their state since the end of the economic downturn including strong job growth, lower unemployment rates, continued balanced budgets, higher rainy day fund levels, tax reductions, pension reforms, government restructurings, and record high investments in areas such as elementary and secondary education. While most recommended budgets for fiscal 2017 continue to show both revenue and spending growth, governors also expressed the need to remain cautious, show fiscal restraint, prioritize spending, and ensure long-term sustainability. Additionally, in some states, governors’ budget proposals seek to address serious fiscal challenges, most notably revenue shortfalls brought on by the decline in oil and natural gas prices, and issues associated with long-term structural imbalances.
In the vast majority of states, governors’ budget proposals call for increases in general fund spending. However, in most of these states the recommended level of growth remains below the historical average growth rate of 5.5 percent. Governors once again prioritized K-12 in their recommended budgets, and called for such actions as adjusting the school funding formula, expanding early education, and increasing teacher pay. Most recommended budgets also increased higher education funding, with a number of governors calling for tuition freezes and proposing programs that link higher education to job training and economic development. Transportation and infrastructure was another priority area as a number of governors recommended increased investments to help address deferred maintenance and the long-term needs of the state. Regarding healthcare, most states anticipate smaller increases in overall Medicaid spending as enrollment growth is expected to slow. Finally, some areas received added emphasis this year with many governors calling for increased funding to help address substance abuse, and expanded services for people with mental illnesses and developmental disabilities.
For the most part, changes in tax policy were relatively modest in fiscal 2017 recommended budgets. Several governors called for further reductions in personal income and corporate income taxes, while others called for additional property tax relief. Most tax increase proposals focused on smaller revenue sources such as increasing tobacco and alcohol taxes. However, some governors from states facing significant fiscal challenges proposed a series of reforms including reducing tax credits, sales tax modernization efforts aimed at increasing revenue, and in one instance the implementation of a modest individual income tax.
Summaries of Fiscal Year 2017 Proposed Executive Budgets