state fiscal outlook namm washington, dc may 11, 2010 brian sigritz director of state fiscal studies...
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State Fiscal Outlook
NAMM
Washington, DC
May 11, 2010
Brian SigritzDirector of State Fiscal Studies
National Association of State Budget Officers
444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org
NASBO 2
Current Fiscal Situation
NASBO 3
Recent State Fiscal Situation
The “Great Recession” - Extremely difficult fiscal period for states States experiencing significant shortfalls and large revenue
declines Fiscal 2010 revenue projections: For the year, 41 states lower than
projected, 6 on target, 3 higher March and April revenue collections a mixed bag
Widespread budget cuts, layoffs/furloughs continue across the nation
ARRA helping, but does not fully solve shortfalls
NASBO 4
Economics
1st Quarter GDP grows 3.2%
Slow economic growth likely in calendar 2010
Some economic improvement: Stability in many indicators Conference Board LEI up 11 straight months Economy adds 290,000 jobs in April 9 straight monthly increases in manufacturing
NASBO 5
Source: Federal Reserve Bank of Philadelphia State Coincident Index (March 2010)
3-Month Index: Increases in 31 states, decreases in 17, unchanged in 2
NASBO 6
This downturn vs. Post ‘01
Last Time: Housing sector relatively strong in ’01 Primarily income tax decline
This Time: Broad economic decline; Longer recession Localities will be hit this downturn
17 states reduced local aid in ‘09; 20 in ‘10
NASBO 7
State of the State Speeches
Common themes include the need for a smaller and more efficient government, and prioritizing job creation
A number of governors have called for tax hikes, often temporary sales tax increases
Several governors have called for increased federal aid Especially extension of enhanced FMAP
NASBO
2010 Governor Races:37 Races, 23 Open Seats
8
NASBO
Negative Spending in Both FY 2009 and FY 2010
*32-year historical average rate of growth is 5.6 percent **Fiscal 10 numbers are appropriated Source: NASBO Fall 2009 Fiscal Survey of States
*
The New Normal?
NASBO
37 States with Negative Growth Budgets in FY 2010
10
Source: December 2009 Fiscal Survey of States
NASBO 11
Balances Declining
*32-year historical average is 5.5% Source: NASBO Fall 2009 Fiscal Survey
NASBO
Budget Cuts at Record Levels
12
20
28
35
22
9 813
72 3 1
16
37 37
18
5 2 3
13
43
0
10
20
30
40
50
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Budget Cuts Made After the Budget Passed,Fiscal 1990-Fiscal 2009($ millions)
Number of states Amount of reduction
Recession ends Recession ends
Source: NASBO Fall 2009 Fiscal Survey of States
NASBO
State Revenue Down 4.2% in 4th quarter; 5th Straight Quarter
Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau
NASBO 14
Job Growth – “The Lag”
Source: Washington Post; Bureau of Labor Statistics
NASBO
State Budget Gaps(in millions)
NGA & NASBO State Fiscal Update – February 2010
NASBO 16
Michigan GF Revenue less in 2010 than in 1997
Source: Michigan Office of Revenue and Tax Analysis, Dept. of Treasury, 7/31/09
$8,533$8,844
$9,503$9,788
$8,990$8,427
$7,959 $8,042$8,309 $8,266 $8,319
$9,359
$7,435$6,950
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010May 2009 estimates
NASBO
CA general fund spending declining at least $18B in 2 years
17
Source: December 2009 Fiscal Survey of States
NASBO 18
American Recovery and Reinvestment Act (ARRA)
NASBO 19
American Recovery and Reinvestment Act – State $
Approximately $246 billion+ going to or through states
State Fiscal Stabilization Fund - $53.6 billion: $39.5 billion to schools and higher ed $5 billion in incentive grants $8.8 billion in flexible funds
Medicaid Funding: $87 billion $48 billion to transportation: highway and bridges
$27.5B; transit $8.4B; passenger rail $8B Also safety net expansions, economic development,
other appropriated programs
NASBO 20
The Cliff…
Source: Stateline.org
NASBO
Significant Lag?
21
NASBO 22
Background on State Spending Trends
NASBO 23
Spending by Funding Source(Percentage)
General Funds45.7%
Federal Funds26.3%
Other State Funds25.7%
Bonds2.4%
Total State Expenditures By Funding Source, Fiscal 2008
Source: NASBO 2008 State Expenditure Report
NASBO 24
General Fund: Medicaid & Education Over 62%
Elementary & Secondary Education
35.1%
Higher Education11.1%
Medicaid16.2%
Public Assistance1.9%
Corrections7.2%
Transportation0.7%
All Other27.8%
General Fund Expenditures by Function, Estimated Fiscal 2009
Source: NASBO 2008 State Expenditure Report
NASBO 25
State Spending from Federal Funds
Elementary & Secondary Education
11.9%
Higher Education3.5%
Medicaid41.7%
Public Assistance2.8%
Corrections0.2%
Transportation8.5%
All Other31.4%
Federal Funds Spending, Estimated Fiscal 2009
Source: NASBO 2008 State Expenditure Report
NASBO 26
Health Care and Medicaid
NASBO 27
Total Expenditures Percentage Growth in Spending Categories Over 10 Years
Sources: NASBO 1999 and 2008 State Expenditure Reports
NASBO
Increases in Medicaid Spending and Enrollment
28
NASBO 29
Outlook
NASBO 30
Slow Fiscal Recovery…
NASBO 31
Long Term Spending Pressures
Medicaid and Health Care
K-12 and Higher Education
Demographic Changes
Corrections Transportation Infrastructure Pensions
NASBO
The “New Normal” is Here
32
NASBO 33
State Fiscal Outlook
Austere state budgets for at least the next several years
Health care reform will have an impact on state finances Already seeing increases in Medicaid spending
& enrollment; 21% of total expenditures Tough competition for general funds Demand for performance and results Opportunity for reform
NASBO 34
www.nasbo.org
Brian Sigritz
Director of State Fiscal Studies
(202) 624-8439
bsigritz@nasbo.org
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