States including Indiana are in better financial position now than they've been in the last few years but many of their budgets "remain vulnerable to economic shocks," according to a report released Tuesday by the National Conference of State Legislatures.
The group's survey of state legislative fiscal officers has found that few states are now in the red, year-end balances have increased and many states are now shoring up their rainy day funds, the report said.
State fiscal leaders also told the conference that they expected reserves to keep increases.
"The prevailing economic outlook is one of continued growth but at a slow to moderate pace in most states," the report said. "At the same time, an air of uncertainty hangs over most economic outlooks for the new fiscal year as concerns linger over the European debt crisis, the potential impact from federal deficit reduction measures, and employment growth, to name a few."
The report found that 10 states expected to finish Fiscal Year 2012 with year-end balances that equaled at least 10 percent of their annual spending. Indiana is in the group with a reserve balance of roughly 15 percent of state spending.
"Put simply, Indiana has a $500 million structural surplus and more than $2 billion in reserves because Gov. Daniels insisted that the state spend less money than it takes in," said Indiana State Budget Director Adam Horst.
"While many states are still working to balance their budgets, Indiana is in the enviable position of having numerous options, from cutting taxes to increasing spending."
NCSL reports that 36 states expected to finish the fiscal year with money in the bank that equaled less than 10 percent of spending while two states expected to end the year with zero balances.
Only two states - California and Washington - project deficits at the end of FY 2012.
State officials also told NCSL they expected their balances would increase by the end of FY 2014.