intergovernmental dependency and transparency
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Intergovernmental Dependency and Transparency. Joe Kull PwC January, 2012. We have been doing so much for so long with so little, that soon we’ll be able to do everything with nothing forever. Budget Formulation, Budget Execution, and Financial Management—Per the Constitution (1787) - PowerPoint PPT PresentationTRANSCRIPT
Intergovernmental Dependency and Transparency
Joe KullPwCJanuary, 2012
We have been doing so much for so long
with so little, that soon we’ll be able to do
everything with nothing
forever.
Budget Formulation, Budget Execution, and Financial Management—Per the Constitution (1787)
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law;”
—Budget Formulation and Execution
“and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”
—Financial Management
(Article I, Section 9)
5
Analysis of Federal Liabilities, Intragovernmental Debt, and Social Insurance Obligations
Source of Data: 2010 Financial Report of U.S. Government $ Billions
2010 2009Federal Liabilities:Publicly-held Debt $9,060* $7,583**Federal Employee & VA Benefits 5,720 5,284Other 1,576 1,257
Intragovernmental Debt—Owed to Social Security, Medicare/Other Trust Funds
Federal Social Insurance ObligationsSocial Security 7,947 7,677Medicare—Parts A, B & D 22,813 38,107Other 97 94 Total Liabilities, Intragovernmental Debt & SI Obligations $51,790 $64,393
Current-dollar GDP 3rd qtr 2010, 4th qtr 2009 (Source: BEA) $14,750 $14,119 Liabilities and Obligations as % GDP 351% 456%
* 62% of 2010 GDP **53% of 2009 GDP
4,577 4,391
Percentage Composition of Federal Government Outlays
National Defense
Net Interest
All Other
Payments to Individuals
0%
20%
40%
60%
80%
100%
40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 00 04
Fiscal Year 2007
$1,494 B
$528 B
$247 B
$501 B
1940 1971 2007 Current $ $9.5B $210.2B $2,770B
President proposes;
Congress disposes.
Both sign on.
State Fiscal Situation• Largest revenue collapse on record
- ARRA replaced about $140B• Recovery slow and lag times growing
- Shortfalls continue - Using reserves, taxes hikes, federal funds- Pressure from education, healthcare,
OPEB• States tend to lag national recovery• Housing is key
The Cliff: Temporary Federal Aid to States (FY ’11 totals include both ARRA & Education Jobs Funds)
Source: Recovery Act data come from GAO Report to Congress, September 2010
In Billion
s
Fiscal Year
Significant Lag
Housing leverage• Link between housing, values, consumption and taxes•Turnover
‘05: 1.3M new @ $290K = $370B 7.0M exisiting @ $269K = $1.9T ‘08: .3M new @ $244 = $70B existing = $890B• Jobs: 2M on site lost since ‘06; 2:1 off/on site
Translates to ~ $2T and 6M jobs • Unemployment/economic uncertainty, diminished wealth,
fallen values depress consumption, taxes - Property taxes 4% below prior year
Spending Pressure
Medicaid and Health CareK-12 and Higher EducationDemographic ChangesCorrectionsTransportationInfrastructurePensions
Key DependencyMeasurements
VA2008
MA2008
NV2008
NC2008
WV2008
NY2008
FL2008
AL2008
Direct Federal Revenues to State (billions)(VA & NY 2009)
$10.8 $10.5 $2.4 $15 $2.7 $48.9 $24.5 $8.7
Percentage of Total State Revenues—All Sources 26.9% 23% 33% 31.8% 29% 30.6% 28% 31.4%
Direct Federal Grants to Local governments
(millions)$1,075 $758 $475 $1,799 $232 $5,571 $4,033 $900
Federal Purchases from State Businesses (billions) $53.9 $13.3 $2.7 $5.8 $1.3 $13.7 $16.6 $10.4
Federal Payments to Individuals-wages,
pensions, S.S., Medicare (billions)
$53.9 $36.2 $11.3 $47.6 $12.8 $102.4 $110.7 $33.3
Total Direct and Indirect Federal Flows
(billions)$119.7 $60.8 $16.9 $70.3 $17.1 $165 $155.8 $53.3
KeyMeasurements
VA2008
MA2008
NV2008
NC2008
WV200
8
NY2008
FL2008
AL2008
Real GDP by StateInflation Adjusted to 2000
(billions) $324.5 $312.5 $103.2 $329.4 $46.3 $964.8 $603.5 $137.1
Total Federal FlowsGross State Product 36.9% 19.5% 16.4% 21.3% 36.9
% 17.1% 25.8% 38.9%
Federal Leased/Owned Buildings (millions sq/ft)
As of March 201050.4 6.9 2.4 4.3 4.0 23.3 14.0 3.9%
Federal Debt Securities Held by State (billions) $6.3 N/A $6.9 N/A $6.6 N/A $40.1 -
Estimated 2009 Population (millions) 7.8 6.6 2.6 9.4 1.8 19.5 18.5 4.7
19
KeyMeasurements
VA2008
MA2008
NV2008
NC2008
WV2008
NY2009
FL2008
AL2008
Military Facilities (9/30/08) 148 63 57 124 47 216 235 96
Military Facilities--Present Replacement Value (9/30/08, billions)
$37.6 $5.0 $10.6 $20.4 $1.1 $11.7 $23.4 $10.0
Military Facilities--Military and Civilian Personnel (9/30/08, thousands)
181.8 16.6 15.2 147.2 8.5 60.0 91.2 66.9
What are the Risks Associated with Intergovernmental Financial Dependency
Disruptions to current direct and indirect intergovernmental revenue flows
Impact on investment income, asset values
Build-up of unfunded pensions, post employment benefits
Deferred infrastructure
Volatilityshifting role of federal gov’testimated that 1/3 of $1T in cuts would hit states
20
What can we do?• Evaluate sustainability and dependency risks
in your environment- States refusing federal funds, cutting
services- Watch the world, and the world economy
•Awareness that something has to give
- Don’t raise taxes, don’t cut benefits- Infrastructure does not last forever- Catastrophes, conflicts happen - Spend your way out of debt - - Compromise by everybody winning
• Show up• Provide simple, clear information-No MEGO
stuff -
“You can always count on Americans to do the right thing-after they’ve tried everything else.”
PM Winston Churchill
27
AppendixReport of the U.S. Government http://www.fms.treas.gov/fr/index.html
The Federal Government's Long-Term Fiscal Outlook www.gao.gov
Intergovernmental Financial Dependency and Related Risks—Proposed Reporting By State and Local Governments
Available at no cost at—www.cbh.com/intergovernmentalreport