Alabama lawmakers are exploring options for spending the $2.1 billion allocated for the state government in federal COVID-19 relief funds, including costs related to prisons. The State Council on the Arts launched an arts recovery program to provide organizations with financial support as they return to in-person events. The city of Mobile is planning to reallocate $5.1 million of federal COVID-19 relief funds to gun violence prevention following new federal guidance on eligible uses of the funds. The state received $40.5 million in federal public health funding targeting COVID-19 response for rural and underserved populations.
Alaska’s governor signed the state’s fiscal 2022 budget into law, averting a government shutdown; the governor also announced line item vetoes totaling $215 million. The enacted budget, as amended by the governor, preserves education funding, funds the state’s largest capital budget in seven years, eliminates vacant positions, and saves general fund dollars by asking local governments to rely on federal relief funds. The fiscal 2022 operating budget totals $4.0 billion in unrestricted general fund spending, a roughly 10 percent reduction from the fiscal 2021 budget. The governor also vetoed the smaller dividend payment amount included in the budget passed by the legislature, calling on lawmakers to approve a larger dividend.
Arizona’s governor signed the state’s $12.8 billion general fund budget for fiscal 2022, which includes investments in wildfire prevention and mitigation, border security, special education and state trooper body cameras. The budget also includes a substantial tax cut, which replaces the state’s progressive income tax system with a flat tax of 2.5 percent and is expected to reduce annual revenue by $1.3 billion initially and by $1.9 billion once fully phased in. Before adjourning, the legislature approved last-minute changes intended to expand access to private school vouchers. Lawmakers also approved a proposal to create a new income tax category for small businesses to exempt that income from the tax surcharge approved by voters in 2020.
Arkansas’ general revenue surplus for fiscal year 2021 set a record at $945.7 million, more than twice the previous record of $409.3 million from fiscal year 2007; yearly collections increased by $1.1 billion over the prior year and outpaced the April 2020 forecast by $1.2 billion. The governor authorized an increase of $212.3 million, to $5.89 billion, for the general revenue forecast for fiscal year 2021, allowing the state to fully fund its general revenue budget for the year. The state education department’s plan for federal COVID-19 relief funds prioritized student mental and emotional health and loss of instructional time during the pandemic. A legislative committee recommended changes to the pay grid for lower-paid state employees to improve recruitment and address high turnover rates.
California’s governor signed a $262.6 billion spending package for fiscal 2022, though more details in the budget still need to be negotiated in legislation known as “budget trailer bills” later this summer related to funding for wildfires and drought, the state’s high-speed rail project, broadband, and child care. The budget restores spending cuts to public schools, higher education and other areas, as well as provides: ongoing funding to expand the state’s two-year kindergarten program to include all four-year-olds; $12 billion for homelessness programs over the next two years; rebates for most taxpayers totaling $8.1 billion; and other targeted investments.
Colorado’s governor signed a transportation funding plan into law, which will raise $5.4 billion over the next decade, mostly from new fees. School districts will start the next school year with between 10 percent and 12 percent more funding per pupil compared to last year, as the state invested nearly $500 million in K-12 education in the fiscal 2022 budget and made numerous changes to school funding mechanisms, including raising some property tax rates and increasing the number of students considered at-risk. The governor signed a series of tax code changes that reduce tax credits for high-income earners, expand the Earned Income Tax Credit and fund the Colorado Child Tax Credit, remove tax breaks for certain industries, and reduce property taxes.
Connecticut’s governor signed the fiscal 2022-2023 biennial budget that makes significant investments in education, healthcare, childcare, workforce development, cities and towns, and nonprofit social service providers, while not raising taxes. The budget remains $58 million under the spending cap and includes an additional $1 billion toward paying off unfunded pension debt. Analysts expect the state to end the current fiscal year with a surplus that leaves the rainy day fund at its largest amount in history. The state enacted legislation that legalizes recreational marijuana for anyone over the age of 21. The governor signed a bill investing in climate change resilience projects.
Delaware’s governor signed the fiscal 2022 operating budget of $4.77 that is about 4.9 percent above the prior year, while also signing the $221 million supplemental spending bill. The budget includes $500 across the board raises for state employees and $1,000 bonuses; additionally, it includes a 1 percent pay raise for educators along with step increases. The governor also signed the $1.36 billion capital budget for construction, transportation and economic development projects. The state’s final revenue estimate for the current budget cycle adds about $93 million for fiscal 2021, but decreases revenues by $27 million for 2022 from the previous forecast. The legislature voted to raise the minimum wage to $15 an hour by 2025.
Florida’s governor signed three bills to improve workforce education that include provisions for dual-enrollment scholarships and tuition refunds for state college graduates who are not able to find jobs within six months of graduating from certain workforce programs. The governor vetoed a bill creating an emergency preparedness and response fund after the identified funding source of federal COVID-19 relief funds was determined to be unusable under federal guidelines. The state’s plan to use federal COVID-19 relief funds for $1,000 teacher and principal bonuses may conflict with federal requirements.
Georgia’s governor announced three bipartisan committees to consider applications for the $4.8 billion in federal COVID-19 relief funds allocated to the state; applications may be submitted August 1-31 with the governor making the final decision on committee recommendations. The governor signed an order ending his emergency powers as of July 1, saying the powers are no longer needed. Several new laws took effect on July 1 including a state tax cut that increases the standard deduction for filers and tax credits to spur business investment.
Hawaii’s governor announced he vetoed 26 bills approved by the legislature during the 2021 session, including one that would overhaul the state hotel room tax and a measure that would have provided one-time teacher bonuses. The governor signed the state budget, but vetoed provisions in the bill that would have used federal relief funds to pay down debt and pay for programs with federal fund matching requirements. The various vetoes were driven both by improvements in the state’s revenue projections and guidance on allowable uses of federal relief funds issued after the legislature adjourned. The legislature returned to work this week to override some of the governor’s vetoes as well as make amendments to some legislation, including the budget, as requested by the governor.
Idaho is expected to end fiscal 2021 with a surplus exceeding $800 million. The governor has said he would advocate using the state’s surplus funds to provide additional tax relief and strategic investments. The governor’s budget office has told state agencies that state spending will be kept lean to allow for investments in education and a focus on structural balance. The state Supreme Court ruled it was unconstitutional to jail someone who was unable to pay court fines and fees. The governor announced the drawdown of the state National Guard’s COVID-19 response teams.
Illinois’ governor signed the state’s fiscal 2022 budget which calls for $42 billion in total spending and includes $2.5 billion in ARPA funds. The governor called the budget a giant step forward towards true fiscal stability and noted it helps the state rebuild from pandemic losses and address long-term structural imbalances. The state recently had its credit rating upgraded by one rating agency, and its outlook upgraded by another. A new law included a number of measures aimed at improving access to health care and affordability for those on Medicaid. The state’s gas tax rose half a cent; the rate is now tied to the consumer price index following passage of a 2019 law.
Indiana saw a number of laws go into effect on July 1 including ones impacting school funding, access to out-of-state children’s hospitals, police training, school internet access, the business personal property tax, civics education, telehealth, gaming, and juvenile justice. A federal judge temporarily halted the governor’s order to stop providing federal pandemic unemployment benefits; the state is determining how to proceed since the federal program no longer exists. The federal government recently eliminated the work mandate for Healthy Indiana Plan participants. The State Budget Committee released $1.6 billion in ARPA funds for a variety of programs and construction projects.
Iowa’s governor signed into law a tax package that cuts income and property taxes and realigns the state’s mental health funding system. The governor said further tax reform remains on the table. The governor also signed a 'Back the Blue' bill. The state is creating a new mental health center to help schools, using $20 million in federal relief funds. Iowa is also expanding aid to childcare providers impacted by the pandemic. The state is anticipating double digit revenue growth in fiscal 2021 after adjustments are made.
Kansas’ fiscal 2021 tax collections exceeded projections by approximately 9.3 percent, giving the state its largest reserve level in at least forty years. The state has seen a rebound in enrollment for its community and technical colleges; additionally, a new program provides scholarships that pay up to 30 months of full tuition to community college students when certain conditions are met. Kansas public schools are determining how to use $830 million in federal pandemic aid, including to help address learning deficits.
Kentucky’s general fund receipts have been 14.3 percent above forecast for the first eleven months of the fiscal year. As an alternative to eliminating the additional $300 a week in federal unemployment payments, the governor is offering a $1,500 bonus to the first 15,000 unemployed Kentuckians who return to work by July 30. The state’s first $1 million vaccine lottery winner was announced, along with five children aged 12-17 who won four-year, full-ride scholarships as a result of getting vaccinated. The state auditor has released a report on the expenditure of Kentucky’s CARES Act dollars. The largest categories of expenditures were qualified state government expenditures; aid for cities and towns; replenishing the unemployment insurance trust fund; and PPE, contact tracing, testing and public awareness.
Louisiana’s governor signed legislation providing the state’s biggest investment in transportation since 1984; the measure shifts 60 percent of sales tax revenue collected from the sale of motor vehicles from the general fund to the transportation fund. The transfer would be limited to $150 million per year in case of a dire financial outlook. Louisiana ended the state’s participation in the $300 per week federal unemployment benefits, replacing it with a $28 per week increase to state benefits. Voters will decide in October whether to exchange lower income tax rates for corporations and individuals for the right to deduct federal tax payments on their state tax returns; the tax swap is designed to make the state more attractive as a place to live and invest, while ensuring stability for tax collections.
Maine’s governor signed the updated $8.5 billion fiscal 2022-2023 biennial budget that commits the state to funding 55 percent of operating costs for K-12 schools, a measure voters approved through a referendum in 2004, and earmarks $45 million for public school renovation projects. The budget adds $60 million to the state’s emergency fund, increases funding to long-term and senior care facilities, and provides property tax relief. Lawmakers approved the governor’s proposed transportation bonds of $100 million, but not two other bond proposals related to conservation and forestry. Lawmakers gave final approval to a bill directing state government and pension funds to stop investing in fossil fuel companies as part of the global divestment movement in response to climate change, although timing is uncertain.
Maryland extended its pandemic unemployment benefits for an additional 10 days after a court ruled against the governor’s action to end benefits on July 3. The state’s COVID-19 state of emergency ended as of July 1 with a 45-day grace period for adjustments like driver’s license renewals and an eviction moratorium extension. Total visits to state parks grew more than 45 percent in 2020 as lawmakers included $305 million in funding for parks and conservation in the state budget.
Massachusetts’ governor signed a $5.4 billion interim spending plan covering costs through July until a final budget for fiscal 2022 is enacted. The governor proposed to immediately put to use approximately $2.8 billion of the direct federal COVID-19 aid to support key priorities including housing and homeownership, economic development and local downtowns, job training and workforce development, health care, and infrastructure. Legislative leaders are planning a public process for disbursing the latest round of COVID-19 federal aid. The governor proposed expanding the sales tax holiday this year to two months.
Michigan’s legislature recently passed a $17.1 billion K-12 budget which the governor is currently reviewing; the state’s fiscal year does not begin until October 1. Schools are set to see increased funding this year between federal funding and a record school budget. The governor proposed investing $150 million in federal relief money to improve local parks. The state announced a vaccine sweepstakes program including cash prizes and scholarships. Earlier, the governor signed a $2.2 billion spending bill that allocates federal COVID-19 aid for a continued boost in food assistance benefits and rental relief along with new grants to municipalities.
Minnesota’s governor signed the state’s two-year budget that includes increased investments in K-12, small business relief, economic development grants, child care support, and financial support for essential workers. Earlier, the legislature finished passing spending bills averting a partial state government shutdown. State revenues through the first eleven months of the fiscal year are approximately 10.4 percent above forecast.
Mississippi’s May revenue report showed fiscal year to date revenue collections were up $1 billion, or 20.1 percent, over the sine die estimate and were up $951.1 million, or 18.8 percent, over the prior year. The state’s rental assistance program received more than 15,000 applications for assistance as the state received $200 million in federal emergency rental assistance and $18 million in federal Emergency Solution Grants program funding. Several new state laws went into effect on July 1 including a $1,000 teacher pay raise, universal recognition of occupational licensing, and the fiscal year 2022 state budget.
Missouri’s governor signed the state’s $35 billion fiscal 2022 budget after vetoing $115 million in spending. The budget includes rate increases for some Medicaid providers, higher funding for colleges and universities and new mental health crisis centers. The governor also signed a bill requiring online sales tax collections. Before concluding their special session, the legislature passed a new Medicaid tax bill. A judge ruled that Missouri’s August Medicaid expansion ballot measure is unconstitutional; the ruling is currently being appealed. Fiscal 2021 revenue collections were up more than 25 percent over the prior year.
Montana’s governor approved recommendations by a state commission to spend federal COVID-19 relief funds to expand child care access across the state, including by establishing grants to offset tuition rates and raise provider pay. During this year’s session, lawmakers passed legislation to help define the relationship between the state’s child protective services system and the ombudsman that helps provide system oversight. The governor’s vetoes of eight bills were upheld due to lawmakers failing to override the vetoes.
Nebraska’s tax collections are nearly 19 percent ahead of forecast through the first eleven months of the fiscal year. Gas taxes in the state dropped 1 cent on July 1 due to changes in the wholesale price of fuel, one of the three components of the state gas tax. The state has begun issuing additional payments for 2019 flood relief. The University of Nebraska Board of Regents agreed to freeze tuition rates for the next two years. State prisons and jails have been contending with an easily concealed form of liquid marijuana known as liquid K2.
Nevada’s Interim Finance Committee last month formally voted to accept the state’s direct allocation from the State Fiscal Recovery Fund program under ARPA. The state, which was especially hit hard economically by the pandemic, recorded the highest percentage increase in gross domestic product (GDP) in the first quarter of 2021, according to federal data. The governor announced that the state will seek assistance from Federal Emergency Management Administration (FEMA) “surge teams” to respond to rising COVID-19 cases.
New Hampshire’s governor signed a $13.5 billion fiscal 2022-2023 biennial budget that reduces the room and meals tax and the business enterprise tax. It also includes the first step toward phasing out the interest and dividends tax. The budget includes a new paid family leave program and school choice programs. The state ended the fiscal year with a record $280 million revenue surplus. The U.S. Supreme Court chose not to hear a case New Hampshire brought against Massachusetts over taxing remote workers during the pandemic.
New Jersey’s governor signed the $46.4 billion fiscal 2022 budget that allocates $6.9 billion to the state pension plan and $2.5 billion to retire state debt. The budget also includes $500 tax rebates to households that qualify and expands other tax credits. Additionally, the budget includes an expansion to the free tuition college program for certain eligible individuals, funding for a universal healthcare initiative for children, and $25 million in health insurance marketplace subsidies. Localities in the state are considering how to handle legal marijuana.
New Mexico received a $1.75 billion deposit in federal aid under ARPA while the governor and legislature continue to disagree over which branch has authority to allocate the funds.
The governor significantly expanded eligibility for child care assistance, which will be paid for with $300 million in federal stimulus dollars over the next two years; future funding could come partially from a proposal to increase the annual distribution rate for the state’s largest permanent fund, which will be considered by voters in the November 2022 election. The state education agency is distributing $15 million for a new two-year program approved this session that sends aid to public schools that serve the greatest share of students from low-income families.
New York’s governor signed into law legislation to establish an Opioid Settlement Fund, ensuring all funds from future settlements with drug manufacturers and distributors are directed to substance use disorder treatment, prevention, and recovery programs. State tax receipts continue to come in ahead of updated projections as a result of robust sales and income-tax collections, according to the comptroller’s cash report. The Department of Health released emergency regulations allowing the state to continue Medicaid telehealth flexibilities for the duration of the federal public health emergency. The governor declared a state of emergency due to a surge of gun violence.
North Carolina’s new revenue forecast projects an additional $6.5 billion over the next two years and expects fiscal year 2021 general fund revenue to outpace prior year collections by 23.3 percent. The state Senate approved a budget with enough votes to override a potential gubernatorial veto; the budget includes an average of 3 percent raises to teachers and most state employees, allocates $5.4 billion in federal COVID-19 relief funds, cuts the personal income tax rate from 5.25 percent to 3.99 percent by 2026, increases the standard deduction to $25,500, and phases out the corporate income tax. The $5.4 billion in federal relief funds allocated in the Senate’s budget includes money for business relief, drinking water and wastewater infrastructure grants, and high speed internet grants. A judge signed a court order approving a plan from the governor and State Board of Education to comply with constitutional requirements in public education, at a potential cost of $5.6 billion through 2028. Most state Medicaid recipients switched over to managed care on July 1.
North Dakota’s Emergency Commission met for the first time since a new law went into effect, after the legislature overrode the governor’s veto, and limits the panel's spending authority of federal funds to $50 million and special funds to $5 million in a two-year budget cycle; critics say that the new law could hamper the state’s ability to address emergency spending since the legislature can only meet 80 days every two years. A committee approved a measure allowing the University of North Dakota to adopt a subscription tuition model for online students. The state is asking the federal government for more drought flexibility to give farmer and ranchers more ability to protect their soil and feed their livestock.
Ohio’s governor signed into law the state’s $74 billion two-year budget after making 14 line-item vetoes. The new budget includes money to improve internet access, overhaul K-12 funding, expand access to private school vouchers, invest money for police recruitment and body cameras, cut income taxes, and does not use the state’s rainy day fund. The House is expected to consider a sports betting bill approved by the Senate in the fall. The state allocated $2.2 billion in American Rescue Plan funds to repay a federal loan to the state's unemployment fund, make grants for water and sewer projects, and provide mental health services for children. A federal judge ruled the federal government cannot prohibit Ohio’s use of American Rescue Plan funds for tax cuts. Earlier, the state increased its revenue forecast by up to $3 billion for the next two years.
Oklahoma’s Board of Equalization voted to certify $9.1 billion in authorized expenditures and an estimated $9.9 billion in available revenue for the fiscal year 2022 budget, with an estimated $884 million in unspent funds. Medicaid expansion in the state took effect July 1, with adults aged 19-64 with income of 138 percent or lower of the federal poverty level now eligible. Legislators held a hearing over the proposed closure of a state prison due to decreasing populations.
Oregon lawmakers concluded their session after passing a series of budget bills, approving a $29.4 billion spending plan for the fiscal 2022-2023 biennium that increases school funding and makes investments in housing, mental health, and water infrastructure. Earlier in the session, the governor line-item vetoed the legislature’s use of reserve funds in the state education budget and encouraged lawmakers to use other money to increase state school fund spending. Lawmakers also passed legislation to allocate much of the money the state received under ARPA, as well as passed major bills on clean energy, wildfire prevention, and policy reform and equity, and housing assistance.
Pennsylvania’s governor signed the $40.8 billion fiscal 2022 budget that includes a $416 million increase in state funding for public education. The budget also allocated $2 billion out of the $7.3 billion in federal relief funds from the American Rescue Plan Act (ARPA). Drivers on the Pennsylvania Turnpike will see a 5 percent rate increase for 2022 tolls which has been driven largely by debt-service costs related to the turnpike commission’s required payments toward state transit operations. The legislature is expected to consider a number of issues when it returns in the fall including election reform, allocating the remaining ARPA funds, lobbying reform, and cannabis legalization.
Rhode Island’s governor signed the $13.1 billion fiscal 2022 budget that pays back all of the $120 million borrowed from the state's rainy day fund at the early part of the pandemic, continues to phase-out the car tax, and does not include any broad-based tax increases. The budget includes investments in affordable housing and does not yet allocate any funds from the American Rescue Plan, with the governor noting the state will use them in the months ahead. The legislature also passed a series of other bills shortly before the conclusion of its session. The Senate passed a bill legalizing recreational marijuana with the House expected to consider it later this year in a special session.
South Carolina’s governor signed a $10.8 billion fiscal year 2022 budget after vetoing $153 million for local projects; the legislature subsequently overrode most of the vetoes, restoring all but $14 million. The budget includes a 2.5 percent pay raise for state employees, a $1,000 teacher pay raise, $100 million to build schools in rural areas, and $600 million for the rainy day fund. The governor reconvened the AccelerateSC group to help guide recommendations for spending federal COVID-19 relief funds.
South Dakota saw a number of new laws go into effect on July 1 including ones dealing with electric vehicle fees, water pollution permits, and cigars by mail. An amendment is being considered requiring future ballot measures that raise taxes or require more than $10 million in annual spending to receive 60 percent of voter approval; opponents say the amendment itself, as well as its move to the primary ballot, are geared toward curtailing passing Medicaid expansion. South Dakota’s health department compiled a preliminary list of health conditions that will be covered by the state's medical marijuana program.
Tennessee tax revenues in May were $1.6 billion, an increase of 38 percent over the budgeted estimate and an increase of 34.5 percent over May 2019. More than 200 bills took effect on July 1 including the $42 billion state budget, a one-week sales tax holiday on food, and several criminal justice laws. A bill overhauling the state’s Temporary Assistance for Needy Families (TANF) program also took effect on July 1, sending grants to nonprofit service providers, increasing the monthly cash benefit and changing financial standards. A new initiative would fund plane tickets for tourists planning to visit the state’s largest cities while an ad campaign is aimed at filling leisure and hospitality jobs.
Texas’ governor signed a $248.6 billion biennial budget after vetoing the portion that funds the state legislature; the fiscal year begins September 1. Lawmakers approved another $100 million over two years for the Texas Enterprise Fund, a corporate incentive program. The governor directed the Public Utility Commission to take actions on improving electric reliability including requiring renewable energy companies to pay for power at certain times and incentivizing companies to build and maintain nuclear, natural gas and coal power generation for the power grid.
Utah’s transportation agency is targeting that all cars participate in the state’s “road usage charge” program by 2031, where all drivers will pay fees for miles driven rather than the state collecting transportation revenue primarily from gas taxes. According to a recent state revenue summary, general fund collections (mainly from sales and use taxes) are up 10.5 percent compared to the same time last year, while the education fund (mostly income taxes) is up 60.6 percent over the same period last year due both to the tax deadline shift in calendar year 2020 and the impact of federal stimulus. Last month, the governor appointed the state’s first chief innovation officer.
Vermont’s property taxes are expected to go down slightly in fiscal 2022 due to a $20 million surplus in the state education fund and lower-than-expected education spending. The state’s accountable care organization has yet to realize any health care savings, according to a final report from the state auditor. Severe weather events are projected to increase in frequency, and the property and casualty insurance industries may face new challenges as a result, according to a report by the Vermont Department of Financial Regulation. A group of lawmakers have begun work on a potential overhaul of the state’s K-12 funding system.
Virginia could end fiscal year 2021 with a revenue surplus close to $2 billion, with statutory requirements triggering deposits to the state’s rainy day and water quality improvement funds. The state surpassed $1 billion in sports betting wagers in about four months, the fastest state to reach that number. The governor extended additional childcare subsidies provided during the pandemic through the end of 2021, using federal COVID-19 relief funds. Several new bills took effect on July 1, including legalization of marijuana possession and a change in overtime laws.
Washington expects to end the fiscal 2020-2021 biennium with $838 million more in revenue than originally forecasted in March 2021, while revenue projections for the new fiscal 2022-2023 biennium are up $1.8 billion compared to the March forecast. The governor announced a ‘bridge’ program to help transition away from the state’s eviction moratorium. The governor also recently announced the approval of state strategic reserve funds to support a critical business to provide food security for a community that has faced hardships due to the pandemic and closure of the US-Canada border.
West Virginia ended fiscal 2021 with an overall budget surplus of more than $458.1 million. For the year, sales tax revenue came in 10.9 percent above the prior year, personal income tax was up 15.7 percent, and corporate tax more than doubled; severance tax collections on coal, oil, and natural gas also increased. Lawmakers approved spending $250 million of the state’s budget surplus on business incentives and tourism; $50 million was also directed to the state’s rainy day fund. State unemployment rates dropped from 5.8 percent in April to 5.5 percent in May as the leisure and hospitality category saw an increase of 1.8 percent in employment.
Wisconsin’s governor signed into law the state’s two-year budget after eliminating or modifying 50 provisions in the spending plan; the governor left intact $2.2 billion in income tax cuts. Besides the tax cuts, the budget approved by the legislature makes additional K-12 investments, but less than what the governor proposed, expands I-94, provides additional funds for broadband expansion that is less than requested by the governor, and ends a tuition freeze at the University of Wisconsin. The governor also signed bills to allow sports betting, work with localities on opioid settlements, and reform some police practices.
Wyoming’s reduction in revenue over the past year may allow the state to use an estimated $300 million in ARPA funds to cover revenue loss. The Joint Appropriations Committee was told that the state is also likely to end fiscal 2021 with roughly $250 million more in general fund and budget reserve account revenue than what was forecasted in January. The governor and legislature have outlined a three-pronged plan for using the state’s ARPA allocation, with a series of near-term (“survive”), mid-term (“drive”) and long-term (“thrive”) spending strategies.