States Boost Spending at Fastest Pace Since Recession

America’s states are increasing their spending at the fastest pace since the end of the Great Recession.

Their budgets swelled by 5.9% in the 2019 fiscal year to about $2.1 trillion, the biggest annual increase since the recession ended in 2009, according to a report Thursday by the National Association of State Budget Officers.

That’s up from a 3.7% pace in the year before as state officials pumped more money into transportation projects, pensions and reserves that will help them weather the next economic rout.

The figures show how the record-long expansion is reviving the finances of states that were hit hard by the fallout from the real estate bust. That shift has lifted the credit ratings of California, Washington and Michigan and driven down the yield penalties that investors demand to buy bonds of states such as Connecticut and Illinois.

The jump in spending was spurred by “strong gains” in tax collections over the past two years, the budget officers group said. Eighteen states increased transportation spending by at least 10% in the 2019 year, chipping away at a backlog of deferred maintenance that the Volcker Alliance estimates to stand at $873 billion.