States' financial condition improves in 2006, NGA says

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States' fiscal health grew more robust in fiscal 2006, according to the National Governors Association. These favorable conditions help states better cope with Medicaid and other budgetary pressures, the organization said.

Higher revenues and strong budget reserves allowed states to offer tax cuts, increase funding for programs and replenish budget stabilization funds, the NGA said. But they are mindful of projections of more modest growth in 2007, and major expenditures. Medicaid, which funds most of nursing home care, represents a major drain on state budgets.

State general fund spending grew by 8.7% in fiscal 2006 – significantly higher than the 29-year average of 6.4%. State revenue growth was strong, with fiscal 2006 revenues exceeding expectations in 46 states and on target in four states.