Outlook2023 Biennium and Beyond

2023 Outlook Both general fund revenues and expenditures

Balances in the general fund and other reserve fund

Risks of revenues and expenditures

Cost pressures

As usual, we will take the 2023 Outlook to legislators in preparation for session

A “ Zoom tour” by region will be available to all legislators in late September and early October

This year on our “tour” I will be joined by Susan Fox to discuss the up coming legislative session and the preparations that are being made for a potential remote or hybrid session

Beginning Fund Balances are Strong

Fund balances were strong going into FY 2020

FY 2020 ended strong with less expenditures and more revenue than anticipated

Reserve fund balances at the beginning of FY 2021 are strong

General Fund

Balance$452

Budget Stabilization

Reserve Fund Balance, $118

Fire Fund Balance, $55

$0

$100

$200

$300

$400

$500

$600

$700

Beginning FY 2021

Reserve Balances Beginning FY 2021

($ millions)

Revenue Forecast

Individual Income Tax

• There is significant uncertainty in forecasting individual income taxes due:

• Taxpayer behavior and the impacts of the CARES Act

• Potential for economic changes

Key Modeling Assumptions and Changes from the August Revenue Update

August Assumption September Assumption September Baseline Optimistic Forecast Pessimistic Forecast

Taxpayers will maximize liquidity and opt to choose Unchanged from August Baseline includes a reduction Same as baseline Same as baseline

refunds as opposed to putting them towards future of $30 million in FY 2021

payments

The CARES Act suspended required minimum distributions Unchanged from August Reduces tax liabiilty by Same as baseline Same as baseline

from tax deferred retirement account. approximately $20 million

The Federal Cares Act provides additional abilities for CY 2018 return data suggests Reduction of $44 million Reduction of $29 million Same as August

taxpayers to carryback Net-Operating Losses. In August that losses in this amount in FY 2021 and $5 million in FY 2021 and $3 million assumption

it was assumed that this would reduce FY 2021 revenues would reduce MT net business in FY 2022 in FY 2022

by $58 million and FY 2022 revenues by $6.5 million income to nearly $0. This

seems unlikely

The Federal Cares Act provides additional abilities for CY 2018 data suggests that nearly 2/3 Reduction of $47 million Reduction of $32 million Same as August

taxpayers to offset non-business income with business of additional non-business in FY 2021 and $41 million in FY 2021 and $27 million assumption

losses. it was assumed that this would reduce FY 2021 income would need to be offset in FY 2022 in FY 2022

revenues by $63 million and FY 2022 by $54 million to reach the August assumption

CY 2018 income contained one-time money due to tax- Strong individual income tax Some of the growth $100 million is on-going Assumes it was all

payers shifting money into CY 2018 to take advantage of collections in FY 2020 indicate is ongoing. Increases FY 2021 before gradually decreasing one-time-only

the federal tax reform late in CY 2017 that some of this may be ongoing & FY 2022 by $50 million. down to $50 million

Individual Income Tax Variation

• Note that the variation between Optimistic and Pessimistic – at this time, does not vary the wage assumption. A wage assumption range will be included in the November Estimate update.

• Over the three-year period, the range of possibilities from individual income tax vary by $560 million.

General Fund

• Note that there is a significant range of possible final collections, especially in FY 2021.

• The baseline forecast is $274 million below the previously adopted HJ 2 for FY 2021.

• Even in the optimistic scenario, collections fall short of HJ 2 by $127 million in FY 2021.

3 year Revenue Estimate

• Variation high (3-year totals vary by $650 million)

• Likelihood of a higher or lower actual revenue strong

• Wage variable when extrapolate in November is expected to widen this variation

Expenditures

Quinn Holzer

Base Budget and Present Law

-20,000,000 20,000,000 60,000,000 100,000,000

Sec E - Education & Cultural

Sec D - Judicial Branch, Public Safety,& Corrections

Sec C - Natural Resources andConservation

Sec B - Public Health and HumanServices

Sec A - General Government

General Fund Present Law by Section of Government

- 400,000,000 800,000,000 1,200,000,000

Sec E - Education & Cultural

Sec D - Judicial Branch, Public Safety, &Corrections

Sec C - Natural Resources and Conservation

Sec B - Public Health and Human Services

Sec A - General Government

Agency General Fund Base Budgets by Section of Government

Deep Dive into Health and Human Services

Josh Poulette

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Enrollment in Traditional Medicaid and Medicaid Expansion Jan 2016 - June 2020

Traditional Medicaid

$-

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

$1,800,000,000

2017 2018 2019 2020 2021 2022 2023 2024 2025

Traditional Medicaid Expenditures

General Fund State Special Federal Total

Base General Fund Base State Special Base Federal Base Total

Expansion

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Mill

ions

Medicaid Expansion Expenditures($ Millions)

Actuals Projected

-

20

40

60

80

100

120

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Thousands

Medicaid Expansion Enrollment

Actual Projected

Children's Health Insurance (CHIP)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

6/1

/201

7

9/1

/201

7

12

/1/2

017

3/1

/201

8

6/1

/201

8

9/1

/201

8

12

/1/2

018

3/1

/201

9

6/1

/201

9

9/1

/201

9

12

/1/2

019

3/1

/202

0

6/1

/202

0

9/1

/202

0

12

/1/2

020

3/1

/202

1

6/1

/202

1

9/1

/202

1

12

/1/2

021

3/1

/202

2

6/1

/202

2

CHIP Enrollment

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2018 2019 2020 2021 2022 2023 2024 2025

CHIP Expenditures

General Fund State Special Federal Funds Total

Base General Fund Base State Special Base Federal Funds Base Total

Children and Families

6400

6600

6800

7000

7200

7400

7600

7800

Ju

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17

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Child & Family Services Division Caseload: Foster Care, Guardianship, & Adoption

FY 2018 FY 2019 FY 2020

2015 2016 2017 2018 2019 2020 2021 2022

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

Child and Family Services Division Expenditures

General Fund State Special Federal Funds Total

Base General Fund Base State Special Base Federal Funds Base Total

Section C and D Highlights

Quinn Holzer

Fire Fund Balance

$0.0$10.0$20.0$30.0$40.0$50.0$60.0$70.0$80.0$90.0

$100.0

Wildfire suppression fund balances actual and projected for FY 2008-FY 2025

($ millions)

K-12 Education

Julia Pattin and Nick VanBrown

Present Law Growth

Component Growth

BASE Aid (Inflation & ANB Growth) 63.7

K-12 Facilities Payment (2017 Session) 2.8

Transformational Learning (2019 Session) 4.3

Advanced Opportunities (2019 Session) 4.2

All Other 1.2

Total (Including BASE Aid) $76.1

OPI Present Law Detail ($ in millions )

K-12 Inflation

Enrollment Trends (ANB)

MUS, Long Range, and Pensions

Joe Triem

University System Risk

• Most University System spending is not state funds

Current Unrestricted (tuition, state

appropriations), $542.5

Current Restricted (research, grants, financial aid, gifts),

$292.7

Plant Funds (campus building projects,

debt service), $285.7

Current Designated (fees, indirect costs, continuing education,

athletics), $140.2

Auxiliary (dorms, food service,

bookstore), $126.5

Agency Funds, $10.3

Student Loan Funds, $2.4

Endowments, $0.0

Expenditures for the Montana University System totaled $1.4 billion in FY 2020

($ millions)

Debt Service Update

$0.0

$2.5

$5.0

$7.5

$10.0

$12.5

$15.0

$17.5

$20.0

$22.5

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

General Fund Debt Service($ millions)

GF IDGF Imminent Authorized/Unissued

Pensions – 20 year Layered - potential pressure

PERS TRS

Funding Source ($ Millions)

City $4.37

Consolidated 0.6

County 5.6

Other Local Gov't 1.1

School Districts* 2.9

University System 1.9

General Fund 4.6

State Special Funds 3.7

Federal 2.1

Other State Funds 1.2

Total $28.0

* Approximately $0.8 million of this would be GF

Funding Source ($ Millions)

State Retirement GTB (General Fund) $6.9

Local Retirement Mills 18.1

Total $25.0

Overview and Wrap up

Amy Carlson

General Fund Ending Fund Balance General Fund

Balance, $452

General Fund Balance, $193

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

Beginning FY 2021 FYE 2021 (baseline assumptions)

The bar on the left shows the state general fund financial reserves at FYE 2020. The bar on the right shows what reserves might look like at FYE 2021 if

baseline assumptions materialize.

Statutory

Minimum

Operating

Reserve

All Reserve Fund Balances

• FY 2021 is uncertain

Baseline Optimistic Pessimistic

Capital Maint. Fund $5 $5 $5

Fire Fund Balance $91 $91 $91

Budget StabilizationReserve Fund Balance

$113 $113 $30

General Fund Balance $193 $366 $104

$0

$100

$200

$300

$400

$500

$600

$700

Uncertain FY 2021 Ending Fund Balances

Base plus Present LawPresent law above anticipated revenues by $142 million or 2.7%

4,000

4,200

4,400

4,600

4,800

5,000

5,200

Base & Present Law

2023 Biennium General Fund Present Law

2023 Biennium Base budget Present Law

Pressures Potential Pressures

Baseline Revenue Optimistic Revenue

Pessimistic Revenue

Present Law Plus Pressures

• Present Law and minimal pressures are $194 million above baseline revenues or 3.7%

• In the 2025 Biennium this is anticipated to be less than 2%

• Potential pressures are unlikely

4,000

4,200

4,400

4,600

4,800

5,000

5,200

2023 Biennium General Fund Present Law + All Pressures

2023 Biennium Base budget Present Law

Pressures Potential Pressures

Baseline Revenue Optimistic Revenue

Pessimistic Revenue

End