state fiscal conditions: temporary downturn or new normal? magny march 15, 2013 new york scott...
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State Fiscal Conditions: Temporary Downturn or New Normal?
MAGNYMarch 15, 2013
New York
Scott PattisonExecutive Director
National Association of State Budget Officers
444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org
NASBO
Major Challenges to State Budgets - Spring 2013
Improved revenue growth, but not enough to go around…
Federal government
Health care changes, implementation
Dealing with long term liabilities
NASBO 4
Federal Overhang…
Sequester
Debt ceiling
Many program authorizations set to expire
“Grand bargain” tax reform?
NASBO 5
National Economic Indicators
4th Quarter GDP grows a modest 0.1% 3rd Quarter GDP increased 3.1% 14th straight quarter of at least some growth
Federal Reserve projects 2.3%-3.0% growth in 2013
Other economic figures: Unemployment rate at 7.7% in February Manufacturing grows for 3rd consecutive month in February New Home Sales rose 15.6% in January
- “… the still-moderate underlying pace of economic growth…”
- Federal Reserve Chairman Ben Bernanke, 2/26/13
NASBO
GF Growth
-8
-6
-4
-2
0
2
4
6
8
10
12
%
General Fund Expenditure Growth (%)
*35-year historical average rate of growth is 5.6 percent *Fiscal ‘13 numbers are appropriated Source: NASBO Fall 2012 Fiscal Survey of States
* Average
NASBO
FY 2013 Appropriated Spending Still $5.9 Billion Below FY 2008
8
Source: NASBO Fall 2012 Fiscal Survey of States
NASBO
FY 2013 General Fund Revenue is Expected to Surpass FY 2008 by $13B
9
Source: NASBO Fall 2012 Fiscal Survey of States
$655
$680
$626
$610
$650
$667
$693
$560
$580
$600
$620
$640
$660
$680
$700
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
General Fund Revenue: FY 2007-FY 2013
NASBO
State Revenue Continues to Grow in 4th Quarter
-20
-15
-10
-5
0
5
10
15
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012%
Year-Over-Year Real Change inQuarterly State Tax Revenue
Total
Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau
NASBO
Budget Cuts Made After the Budget Passed
($ millions)
Source: NASBO Fall 2012 Fiscal Survey
Minimal Midyear Budget Cuts in FY 2012, 8 States Cut $1.7 Billion
NASBO
Strategies Used to Reduce or Eliminate Budget Gaps, FY 2013
Reduce Local Aid: 8 states
Layoffs: 9 states
Furloughs: 3 states
Cuts to Employee Benefits: 9 states
Across-the-Board Cuts: 13 states
Targeted Cuts: 21 states
Rainy Day Fund: 4 states
Reorganize Agencies: 10 statesSource: NASBO Fall 2012 Fiscal Survey of States
NASBO 14
States and Locals Continue to Eliminate Positions
State and local employment has declined 753,000 from the start of the recession through this February
State employment declined 195,000 from Aug. 2008-Feb. 2013 Local employment declined 558,000 from Aug. 2008-Feb. 2013
State governments eliminated 8,000 positions in February; local employment declined by 2,000
Source: Bureau of Labor Statistics
NASBO
Personnel Strategies Used to Reduce or Eliminate Budget Gaps
Fiscal 2010
Layoffs: 26 states
Furloughs: 22 states
Early Retirement: 6 states
Salary Reductions: 12 states
Cuts to Employee Benefits: 9 states
Fiscal 2013 Layoffs: 9 states
Furloughs: 3 states
Early Retirement: 2 states
Salary Reductions: 4 states
Cuts to Employee Benefits: 9 states
Source: NASBO Fiscal Survey of States
NASBO 17
Spending by Funding Source(Percentage)
General Funds39.8%
Federal Funds31.2%
Other State Funds26.5% Bonds
2.5%
Total State Expenditures By Funding Source, Estimated Fiscal 2012
Source: NASBO State Expenditure Report
NASBO 18
Total State Expenditures
K-1219.8%
Higher Education9.9%
Medicaid23.9%
Public Assistance1.4%
Corrections3.2%
Transportation8.1%
All Other33.7%
Total Expenditures by Function, Estimated Fiscal 2012
Source: NASBO State Expenditure Report
NASBO 19
Total Expenditures Percentage Growth in Spending Categories Over 10 Years
-5
31.8 33.9 34.5
44.8 47.7
59.7 60.9
-10
0
10
20
30
40
50
60
70
%
Percentage Growth in Spending CategoriesBetween Fiscal 2003 and Fiscal 2012 (Total Funds)
Public Assist. Higher Ed K-12 Corrections Transport. Total All Other Medicaid
Sources: NASBO State Expenditure Reports
NASBO 20
General Fund: Medicaid & Education 64.3%
Elementary & Secondary Education
34.7%
Higher Education10.0%
Medicaid19.6%
Public Assistance1.5%
Corrections7.0%
Transportation0.5%
All Other26.6%
General Fund Expenditures by Function, Estimated Fiscal 2012
Source: NASBO State Expenditure Report
NASBO 21
General Fund Percentage Growth in Spending Categories Over 10 Years
-10.1
8 11.7
30.6 31.5 34.4
45.853.2
-20
-10
0
10
20
30
40
50
60
%
Percentage Growth in Spending CategoriesBetween Fiscal 2003 and Fiscal 2012 (General Funds)
Public Assist. Higher Ed Transport. K-12 Corrections Total All Other Medicaid
Sources: NASBO State Expenditure Reports
NASBO 22
State Spending from Federal Funds
Elementary & Secondary Education
10.9%
Higher Education3.5%
Medicaid43.9%
Public Assistance2.6%
Corrections0.2%
Transportation8.0%
All Other30.9%
Federal Funds Spending, Estimated Fiscal 2012
Source: NASBO State Expenditure Report
NASBO 24
State Fiscal Outlook
Below average state budgets for at least the next several years
Health care reform implementation
Tough competition for general funds and limited federal funds
Dealing with infrastructure, long-term liabilities
States will continue to make some painful choices