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The Tell: Spending by U.S. states surged at the fastest pace on record in fiscal 2021, report finds

U.S. states increased their spending at the fastest rate in at least four decades in the 2021 fiscal year, boosted by historic federal stimulus aimed at combatting the economic effects of the coronavirus crisis.

The 2021 State Expenditure Report from the National Association of State Budget Officers, out Friday, covers the period July 1, 2020 – June 30, 2021. States spent an estimated $2.65 trillion in the fiscal year, up 16.2%, for the fastest annual growth rate in the 35-year history of the report.

Source: National Association of State Budget Officers

Most of that increase came from a sharp spike in federal aid: spending from states’ own funds was up 5.7%, while spending from federal funds rose 35.7%. Some money from each of the two largest coronavirus stimulus packages hit state budgets during this fiscal year: the CARES Act was signed into law in late March 2020, and the American Rescue Plan in March 2021.

Earlier coverage: U.S. state budgets will tick up in 2022, report finds

A miscellaneous category of expenditures, known as “all other” in NASBO reporting, saw the biggest annual increase, in large part because it contains most of the expenses that saw the greatest need during the pandemic: unemployment insurance, housing assistance, economic relief, and aid to local governments, among others.

Public assistance programs, defined as Temporary Assistance for Needy Families “and other cash assistance programs,” which differ greatly from state to state, was the category with the second-largest jump in spending from 2020 to 2021, up 25.7%.

“Although state fiscal conditions are expected to remain stable in fiscal 2022, future state budgets will need to contend with the one-time nature of much of the additional federal aid and a shifting economic landscape brought on by the pandemic, as well as both new and ongoing spending pressures,” the report concludes.

Read next: States rushed to slash taxes after a banner 2021. They may regret it

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