Are you balancing your budget?
Are you balancing your budget? - 
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Kai Ryssdal: Here's today's second 'economic news can be baffling' story. There's some new data out that shows state tax revenues are expected to climb to their highest levels in five years. Given the growing but still completely sluggish economy, we asked Marketplace's Nancy Marshall-Genzer to find out how that can be.

Nancy Marshall-Genzer: The report is based on a survey of state budgets for fiscal 2013, and it shows they’re expecting tax revenue to go up by about 4 percent. The biggest tax take since the recession started. Why is money flowing into state piggy banks? More people are working, and paying state income taxes. And they’re starting to spend again, boosting state sales taxes. Those are the biggies.

Howard Cure: And then there are other taxes for things like gasoline or corporate taxes. And they’ve all gone up recently as well.

That’s Howard Cure, an economist at Evercore Wealth Management.

What will the states do with their extra cash? Scott Pattison heads the National Association of State Budget Officers, which did the survey (PDF) along with the National Governors Association. Pattison says the states should behave like prudent consumers.

Scott Pattison: I look at this as a state being someone who receives a modest bonus, and they’re not really able to go on vacation. But they can use it to pay down some of their credit cards.

The states’ biggest bills? For education and Medicaid.

But fiscal prudence is problematic. Therese McGuire is an economist at Northwestern University.

Therese McGuire: In the good times, as the revenues just start flowing in, a lot of states have a tendency to just spend every dime that comes in.

But the states’ tax windfall still isn’t up to boom-time levels. McGuire says maybe that’s a good thing -- it would just be too tempting for states to dive off a fiscal cliff again.

In Washington, I’m Nancy Marshall-Genzer for Marketplace.

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