State Fiscal Roundtable National Association of Legislative Fiscal Offices

Arturo PérezFiscal Affairs Program

National Conference of State Legislatures

Overview The state fiscal situation is growing increasingly

dire.

The current revenue situation is nearly unprecedented, at least in recent decades.

To date, states have reported a total estimated budget gap of $348.3 billion (FY 2008 through FY 2012).

States are bracing for prolonged fiscal problems.

U.S. Business Cycle Downturns 1929-2009: Duration in Months

43

13

811 10

810 11

16

6

16

8 8

19

0

5

10

15

20

25

30

35

40

45

1929-1933

1937-1938

1945 1948-1949

1953-1954

1957-1958

1960-1961

1969-1970

1973-1975

1980-1980

1981-1982

1990-1991

2001 2007-?

Source: National Bureau of Economic Research

FY 2010 Revenue Outlook

Rhode Island

Delaware

Source: NCSL survey of state legislative fiscal offices, April 2009.

Stable n = 1Concerned n = 28

Pessimistic n = 21

Optimistic n = 0No response n = 1

Puerto Rico

How Bad is the Revenue Situation?

Florida reports that annual revenues today compare to FY 2001 levels and are not expected to return to peak levels (which occurred in FY 2006) until FY 2013.

Colorado reports that annual revenues today are similar to amounts collected in FY 2005.

In Kansas, general funds revenues are coming in at FY 2006 levels.

Year-Over-Year Percent Real Change in Major Taxes

Four-Quarter Average of Percent Change

Source: The Nelson A. Rockefeller Institute of Government. State Revenue Report, July 2009 .

FY 2010 Highest Budget Gaps

as a Percentage of General Fund Budget

Rhode Island

Delaware

Source: NCSL survey of state legislative fiscal offices, April, June and July 2009.

5% to 9.9%, n = 51% to 4.9%, n = 5

Less than 1%, n = 1

More than 10% = 35Not applicable or not reporting, n = 5

Puerto Rico

FY 2009 Net State Tax Changes by Type of Tax

Type of Tax Dollars (in millions) Percent of Total

Personal Income $10,601.4 43.5%

Corporate Income $1,387.4 5.7%

Sales and Use $6,163.0 25.3%

Health Care $1,544.0 6.4%

Tobacco $1,589.3 6.5%

Motor $1,807.6 7.4%

Alcoholic Beverage $179.7 0.7%

Miscellaneous $1,066.3 4.4%

Net Change $24,348.7 100%

Source: National Conference of State Legislatures, 2009.

Net State Tax Changes by Year of Enactment

$8.7 $15.4 $2.6

-$3.3 -$4.0 -$2.6 -$7.1 -$1.5

$9.1 $8.8 $4.1 $3.4 $1.1 $4.1 $3.8 $24.3

-$7.3

$1.8$1.4

-$9.9

1.6% 1.6%0.8% 0.6% 0.2% 0.6% 0.5%

3.1%

-0.3%

-1.7%

0.5%

-1.6%

-0.6%-1.0%

0.9%

3.3%

5.4%

0.9%0.4%

-2.0%

-$12

-$10

-$8

-$6

-$4

-$2

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$22

$24

$26

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Billions of dollars

Percent of previous year'scollections

Source: NCSL survey of legislative fiscal offices, various years

Use of Spending Cuts as Percentage of Actions To Close FY 2010 Budget Gaps (preliminary)

Rhode Island

Delaware

Source: NCSL survey of state legislative fiscal offices, July 2009.

Used spending cuts to close FY 2010 budget gaps, n = 24

Puerto Rico

44.7%

43.0%

17.0%

3.9% 40.0%

20.8%

19.1%

19.5% 58.0%

32.0%

23.7%

MD - 28.0%NJ- 38.7%

22.7%

RI- 48.7%

36.7%VT- 25.0%

26.6% 45.1%

45.5%

100.0%

WV-100.0%

48.0%

40.0%

Rhode Island

Delaware

Source: NCSL survey of state legislative fiscal offices, July 2009.

Used ARRA funds to close FY 2010 budget gaps, n = 25

Puerto Rico96.7%

88.0%

28.6%26.0%

54.0%

33.0%

3.0%

60.0%

45.5% 43.0%

57.3%

64.3%

68.4%30.0%

29.0%

30.2%

MD - 47.0%NJ- 27.3%

27.1%

RI- 40.3%

39.2%VT- 62.0%

61.4% 43.4%

21.0%

Use of ARRA Funds as Percentage of Actions To Close FY 2010 Budget

Gaps (preliminary)

Federal Outlays for Major Provisions of ARRA Affecting

State and Local Governments ($ in billions)

$11.8

$0.1

$16.1

$2.4

$96.9

$50.6

$12.5

$43.9

$33.9$28.4

$6.5

$47.4

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

2009 2010 2011 2012

Medicaid/State Fiscal Relief(Enhanced FMAP-Plus)State Fiscal Stabilization Fund

Total

Source: Congressional Budget Office

$49.1

$78.4

$36.3 $26.9$40.3

$142.6

$58.5

$21.1$37.2

$29.9

$5.3

$12.8

$72.9

$0.7

$0$10$20$30$40$50$60$70$80$90

$100$110$120$130$140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fiscal Year

Billi

ons o

f Dol

lars $79.0

$83.7

$37.0

$113.2

43 states 45 states 42 states 33 states 26 states 1 state 20 states* 44 states* 46 states* 24 states** 9 states***

State Budget Gaps FY 2002-FY 2012 (projected)

No estimate

* Includes Puerto Rico ** 31 states and Puerto Rico forecast FY 2011 gaps. The amount shown for FY 2011 indicates the 24 states that provided gap estimates. *** 15 states forecast FY 2012 gaps. The amount shown for the FY 2012 indicates the nine states that provided gap estimates.Source: NCSL survey of legislative fiscal offices, various years

Amount After Budget Adoption

Amount Before Budget Adoption

Projected Amount (expected to grow)

Current and Past Recession Budget Gap Numbers

Past Recession Current Recession

Year Amount(in Billions)

Year Amount(in Billions)

2002 $37.2 2008 $12.8

2003 $79.0 2009 $113.2

2004 $83.7 2010 $142.6*

2005 $37.0 2011 $58.5**

2006 $26.9 2012 $21.1**

Total $263.8 Total $348.2*

Past Recession: March 2001 to November 2001 (8 months).Current Recession: Began December 2007 to present (19 months and counting)*Preliminary figure (expected to increase)** Projected figure (expected to increase)

Source: NCSL survey of state legislative fiscal offices, various years.

Projected Budget GapsFY 2008 to FY 2012

Rhode Island

Delaware

Source: NCSL survey of state legislative fiscal offices, various years.*Includes Puerto Rico

Projecting 3 years of budget gaps, n= 17Projecting 4 years of budget gaps n,= 18*

Puerto Rico

Projecting 5 years of budget gaps n,= 4

Conclusion

The states are facing a "cliff" once ARRA funding ends.

State governments will face severe budgetary problems at least 12-24 months after the US recession ends.

Lawmakers' endurance to resolve massive budget gaps will be tested in the coming years.

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