WHAT SHALL WE DO WITH THE SURPLUSES?:

Most States Have Budget Surpluses (Lois Romano, 8/19/06, Washington Post)

For first time since Sept. 11, 2001, the vast majority of states reported saving an average of 10 percent of their budgets, one of the highest percentages of unspent money in decades. The $57 billion in unexpected revenue has afforded states an opportunity to find all sorts of creative ways to spend and save their cash, according to a report released this week by the National Conference of State Legislators. [...]

Nationwide, state lawmakers have been struggling with budgets since the 2001 attacks triggered an economic downturn. After several years of fast-declining revenues, states were conservatively planning based on scaled-back expenditures. Even as revenues started to climb, states were reluctant to count on the money and based budgets on lesser income. As a result, all but five states -- Illinois, Kansas, Louisiana, Michigan and Wisconsin -- reported surpluses.

The study noted that revenues had been projected to grow by only 2.7 percent for last budget year, but they ended up growing by nearly 7.7 percent. Because state budget drafts forecast 18 months in advance, it is often difficult to accurately predict actual revenue.

In New Mexico, the state was bestowed with unexpected revenues from oil and gas leases, and in Connecticut capital gains taxes proved more generous than expected.

"We saw it coming, but what we didn't see coming was the bounce that we got through capital gains revenues," said Susan Shimelman, director of Connecticut's Office of Fiscal Analysis. "So it wasn't budgeting. It's sort of a largess."