the fiscal situation: where do we go from here? governing washington, dc february 1, 2011 scott...
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The Fiscal Situation: Where Do We Go From Here?
GoverningWashington, DC
February 1, 2011
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
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NASBO 2
Current Fiscal Situation:
Overview
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NASBO 3
Recent State Fiscal Situation
The “Great Recession” - Extremely difficult fiscal period for states States experienced significant shortfalls and large
revenue declines Widespread budget cuts, layoffs/furloughs
continue across the nation Despite media attention, default and
bankruptcy are not at all expected ARRA funds ending
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NASBO
MAJOR CHALLENGES TO STATE BUDGETS: Fiscal 2011 and 2012
Slow Revenue Growth Unlikely to return to 2008 levels until 2013 or 2014
Medicaid Enrollment Increase 8.5 percent growth in 2010, 6.1 percent growth estimate for 2011
Wind Down of Recovery Funds $151 billion in flexible funding ends in June 2011
Dealing with Long Term Liabilities Health Care Reform
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NASBO
Rethinking State Government: Health Care Costs Alone
“Containing growth in our health care costs… is something we absolutely need to do, because it is unsustainable at the rate that it’s been growing,’’ said Jay Gonzalez, Patrick’s budget chief. “There are going to be some hard decisions.’’
“We now have to begin messing with Medicaid,’’ said House Member Harriett Stanley.
Boston Globe 1/3/11
5
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NASBO 6
Current Fiscal Situation:
Indicators
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NASBO
Negative Spending Two Years in a Row, Increase in 2011
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
%
General Fund Expenditure Growth (%)
*33-year historical average rate of growth is 5.7 percent *Fiscal ‘11 numbers are enacted Source: NASBO Fall 2010 Fiscal Survey of States
* Average
The New Long-Term Normal?
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NASBO
Balances as a Percentage of Expenditures
* FY 2008, and 2009 are actual. FY 2010 is preliminary actual and FY 2011 is enacted.
(per
cen
tage
s)State Balances Near Historic Lows for Many States
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NASBO
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
Enacted State Revenue Changes, Fiscal 1979 to Fiscal 2011
Fiscal Year
($ in
bill
ions
)Tax and Fee Increases Continue
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NASBO
Budget Cuts Made After the Budget Passed ($ millions)
*FY 2011 mid-year budget cuts are ongoing
Mid-Year Budget Cuts Continue
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NASBO
Percentage Change in Medicaid Spending and Enrollment
11
%
Source: Kaiser Commission on Medicaid and the Uninsured
Adopted
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NASBO 12
Outlook
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NASBO 13
No Additional Aid Likely from Federal Government
“We have no expectation or intention to get involved in state and local finance.” Federal Reserve Chairman Ben Bernanke, January 7, 2011
“I think most of the solutions for state government will have to come from state government.” Senate Majority Leader Harry Reid, January 17, 2011
“We are not interested in a bailout.” House Budget Committee Chairman Paul Ryan, January 6, 2011
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NASBO
Who gets out first? Historical Boost to State Earnings and Employment due to Oil & Natural Gas
14
Source: Federal Reserve Bank of Kansas City, Economic Review, Fourth Quarter 2009
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NASBO 15
State Fiscal Outlook
Austere state budgets for at least the next several years Slow revenue growth; ARRA declines
Health care reform will have an impact on state finances
Limited federal funds
Tough competition for general funds, BUT…
Opportunity for reform, restructuring