States are fiscally fit, survey finds

NEW YORK -- State finances are the healthiest they have been in years, a new survey of state governments found, with tax collections higher than expected over the past several months. Costs remain a concern, however, as governments pay more for energy, healthcare, and education.

Cash coming into states through tax collection is markedly improved, and while spending pressures are still a worry, they are less so than in previous years, according to the latest report from the National Conference of State Legislatures.

The findings put hard numbers to anecdotal evidence that state officials across the country have reported.

''This continues the trend that began in 2003 and is a dramatic turnaround from three years ago," the report said, citing improved revenue performance in the current fiscal year, which began in most states in July, as well as outlook for the rest of the fiscal year.

The study found that 26 states reported stable budgets, and 22 more were optimistic about the rest of the year. Only Rhode Island and Katrina-ravaged Louisiana were, respectively, concerned and pessimistic about their finances this year.

In 2002, states' financial health was at its worst in decades; only two were optimistic about their finances, and 38 were concerned or pessimistic.

Still, the report found that finance directors in more than a third of states already reported spending beyond what leaders had budgeted, with Medicaid, prisons, energy, and education driving those overruns.

''The positive news about revenue performance is tempered by soaring spending demands," the report concludes.