Fiscal caution for the states
If there's an extra smile or two evident these days in state legislative chambers around the United States, the reason is understandable. At least 40 states posted modest treasury surpluses last year - thanks to a combination of rising tax collections and the upturn in the economy. Thus, perhaps the two top issues in the state legislative sessions now under way are what to do with the surpluses - assuming such funds are on hand - and, for almost all the states, what to do about taxes in general, now that the economy is in a second year of recovery.
What needs to be kept in clear focus is that despite modest surpluses, careful budgeting is perhaps more important than ever for the states. Although at least 18 of them have set aside emergency funds of one size or other, most will continue to face severe fiscal problems during the next several years because of rising public demands for services, as well as sharp cutbacks in the level of federal grant programs.
* Since 1981, federal outlays to the states have fallen sharply. By one measurement, federal grants totaled $105 billion in 1981. In 1982 the amount dropped to $92 billion. In '83 it rose slightly, to about $95 billion. The states took in an additional - and record - $7.5 billion in new tax revenues last year, which helped offset reductions in federal grants. But the important point is that the additional taxes did not provide enough revenues to offset the impact of inflation on state costs since the Reagan budget cuts began in earnest back in 1981.
* The proposed fiscal year 1985 federal budget includes new cuts in outlays for local services. Cuts for the cities are particularly noticeable - estimated to be about $8 billion.
In many cases, the states would have to make up the spending shortfalls for financially hard-pressed cities if existing programs are to be maintained.
* Meantime, there is still strong public resistance in many parts of the US to increasing local taxes. In Florida, for example, which has no income tax and is considered a ''low tax'' state, proponents have now won a slot on the November ballot for a proposition that would sharply slash government revenues and impose a lid on future tax increases. Similar anti-tax sentiment is strong in Western states and the industrial Midwest.
Ironically, all but 11 states raised taxes during 1983. The outlook for this election year, according to state tax experts, is that increases will be modest at best, and restricted to far fewer states than in '83.
What that means for the states, then, seems clear:
* States should use this period of recovery to upgrade and improve existing services at the least possible additional cost. Such an upgrading is necessary, since most states - at least 41 - cut or limited essential services last year to stay within budget contraints.
* Major new state programs would seem best left deferred until it is certain that the recovery proves durable.
* The most important legislative need for the states would seem to be in the area of education. Education programs could be strengthened in a number of ways - such as tightening student and teacher standards - without having to commit substantial new dollar outlays.
* Finally, the states and the cities need to take their case to Washington to ensure that if additional budget cuts are made, they are not undertaken in such a way as to prove financially injurious and, thus, counterproductive at the local level.
