When states prepare their budgets, they usually base revenue and expenditure projections upon forecasts of national and state economic and demographic trends. This brief presents findings of a Center for the Study of the States survey that asked state budget offices what they were assuming for many key variables. The survey obtained 41 state forecasts, most of which were used to prepare official executive budget projections for 1996-97. The most commonly forecasted state-level variables included employment (39 states), nominal personal income (41), Medicaid caseloads (25), Aid to Families with Dependant Children (AFDC) caseloads (29), and prison populations (27). State budget-office forecasts of the national economy were slightly more conservative than those of private forecasters. The median budget forecast of 1996 real GDP growth was 2.4 percent, slightly below the comparable Blue Chip consensus of 2.6 percent. The states' median forecast of 1996 consumer price inflation was 2.8 percent, compared to the median Blue Chip forecast of 2.9 percent. States expect a significant slowdown in corporate profits over the next 2 years, with eight states expecting declines in 1996. States do not appear to suffer from a "provincial illusion": fast-growing states were not more optimistic about the national economy than slow-growing states. Finally, many states are expecting declines in AFDC caseloads in the next 2 years. More than 60 percent of reporting states expect a decline in 1997, with Delaware's anticipated decline of 22 percent by far the largest. Two tables and three figures are included. (LMI)