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State Budgets
Capital Campus PennsylvaniaMercatus Center
George Mason UniversityHarrisburg, PA
January 26, 2009
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 2
Current Fiscal Situation
NASBO 3
Recent State Fiscal Situation
Flat spending/declining revenue Shortfalls in the billions Across the board budget cuts, layoffs Credit crisis impacting short- and long-
term borrowing Most states in recession All states at some risk
NASBO 4
Flat and Declining Expenditure Growth
*31-year historical average rate of growth is 6.3 percent **Fiscal 08 numbers are preliminary actual
***Fiscal 09 numbers are appropriated Source: NASBO December 2008 Fiscal Survey of States
NASBO
State Tax Revenue Growth by Source
Source: Fiscal Studies Program, Rockefeller Institute of Government
NASBO 6
Budget Cuts
Source: December 2008 Fiscal Survey of States
NASBO 7
Balances Declining
*31-year historical average is 5.7% Source: NASBO December 2008 Fiscal Survey of States
NASBO 8
Limited Tools to deal with Critical Budgetary Issues
NASBO 9
FY 2009-2010Budgetary Issues
Recession: Revenue and spending declining States recover slower because of the “lag”
Concerns over High Expenditure Areas: K-12 Medicaid & Health Care Costs
Other High Cost Needs: Infrastructure/Transportation Corrections Higher Education
NASBO 10
NASBO 11
Enrollees Expenditures
68% of Medicaid Spending on Benefits in 2007 is for Elderly and Disabled
Children = 19%
Elderly = 22%
Disabled = 46%
Adults = 13%Children = 48%
Elderly = 9%
Disabled = 17%
Adults = 26%
2007 U.S. Total = 62.2 million U.S. Total = $305 billion in 2007
26% 68%
Source: Vernon Smith, Health Management Associates
NASBO 12
Financial Management
NASBO 13
Volatile Financial Management
Spending fluctuations Higher education cycle Budget cuts
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Financial Management Practices
Adding flexibility to the process Contingencies Prudent use of debt Rainy day funds One time only Use of performance information
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What Can Be Done?
Ask performance questions
Ask for outcome data
Use performance information to justify changes to programs
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Financial Management and Performance
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Use of Performance Information
Focus on results and outcomes
Accountability
Spend funds for effective programs
Efficiency
Improve management
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What Should Be Done?
Ask performance questions Use performance information to make the
case Ask for outcome data Use performance information to justify
changes to programs Ideas are already there -- Encourage state
employees to think about goals and outcomes
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Fiscal Outlook
NASBO 20
State Fiscal Outlook
Much will depend on the national economy
Expect significant drops in revenue and spending
States will face dramatic budget cuts
States will look for creative financing and revenue opportunities to meet these spending demands
Recovery for states at best in FY ‘11
NASBO 21
Silver Lining?
Efficiencies Priorities Public-private partnerships Outsourcing Necessary reforms
NASBO 22
www.nasbo.org