Fiscal Condition of the States

Presentation to the Rhode Island House of Representatives

Economic ForumDecember 1, 2009

Arturo PérezFiscal Affairs Program

NCSL

Overview The state fiscal situation is dire.

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

To date, states have reported a total estimated budget gap of $386.8 billion (FY 2008 through FY 2012).

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

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.

Pre-Enactment FY 2010 Budget Gaps as a Percentage of General Fund Budget

Rhode Island

Delaware

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

10% to 19.9%, n = 185% to 9.9%, n = 5

0.1% to 4.9%, n = 6

More than 20% n= 17Not applicable or not reporting, n = 5

Puerto Rico

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, 2009.

Used spending cuts, n = 39Puerto Rico- 61.8%

44.7%

43.0%

17.0%

3.9% 40.0%

20.8%

19.1%

19.5%58.0%

32.0%

23.7%22.7%

36.7%VT- 25.0%

26.6% 45.1%

45.5%

100.0%

48.0%

40.0%48.0%

15.8%

47.4%

46.0%

36.4%

49.4%

60.0%

No Response, n = 5Not Applicable, n = 7

4.1%

74.3%

MD - 28.0%NJ- 38.7%RI- 48.7%WV- 60.0%

CT - 28.8%DE - 37.8%MA - 43.0%

Rhode Island

Delaware

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

Used ARRA funds, n = 40

Puerto Rico- 17.9%

96.7%

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%27.1%

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)

13.0%

44.7%

32.9%

40.0%

30.7%

24.3%

25.0%

No Response, n = 5Not Applicable, n = 6

41.6%

MD - 47.0%

NJ- 27.3%RI- 40.3%

CT - 21.7%DE - 29.0%

NH- 41.1%

WV- 40.0%

MA - 34.0%

Rhode Island

Delaware

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

3

Tapped Rainy Day Fund & Other Funds, n = 5

Puerto Rico

Tapped Rainy Day Funds and Other Funds

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

No Response, n = 6Not Applicable, n = 22

Tapped Other Funds, n = 12Tapped Rainy Day Fund, n = 6

8.4%

35.0%

28.8%

8.4%

15.0%

15.7%

3.0%

5.0%

7.6%

12.0%

4.2%

3.8%

5.5%

3.1%

5.1%

5.6%

3.0%

1.0%

5.0%

MD - 11.4%

NJ- 1.5%

CT - 27.6%

MA- 6.5%

Rhode Island

Delaware

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

3

Raised Taxes, n = 22

Puerto Rico- 15.7%

VT- 8.0%

Use of Tax Increases as Percentage of Actions To Close FY 2010 Budget Gaps

(preliminary)

No Response, n = 4

MD - 0.3%

NJ- 13.5%RI- 9.5%

CT - 17.3%DE - 24.0%

NH- 22.6%

Not Applicable, n = 25

24.0%7.3%

12.1%

0.7%

6.8%

2.1%

14.8%

39.3%

21.6%

18.3%

7.0%

26.0%

MA - 12.3%

2009 Net State Tax Changes by Type of Tax

Type of Tax Dollars (in millions) Percent of Total

Personal Income $11,340.7 41.6%

Corporate Income $1,696.8 6.2%

Sales & Use $7,003.2 25.7%

Health Care Providers

$1,995.5 7.3%

Cigarette & Tobacco $1,750.5 6.4%

Motor Fuel $1,866.8 6.8%

Alcoholic Beverage $215.3 0.8%

Miscellaneous $1,409.0 5.2%

Net Change $27,277.8 100%

Source: National Conference of State Legislatures, 2009. Figures represent 47 reporting states. States not included are: MI, PA, and RI.

Net State Tax Changes by Year of Enactment

Source: NCSL survey of legislative fiscal offices, various years. 2009 figures represent 47 reporting states. States not included are: MI, PA, and RI.

Federal Outlays for Major Provisions of ARRA Affecting State and Local Governments

($ in billions)

Source: Congressional Budget Office

43 states 45 states 42 states 33 states 26 states 1 state 20 states* 44 states* 46 states* 28 states** 16 states***

State Budget Gaps FY 2002-FY 2012 (projected)

No estimate

* Includes Puerto Rico ** 33 states and Puerto Rico forecast FY 2011 gaps. The amount shown for FY 2011 indicates the 28 states that provided gap estimates. *** 24states forecast FY 2012 gaps. The amount shown for the FY 2012 indicates the 16 states that provided gap estimates.Source: NCSL survey of legislative fiscal offices, various years

Amount After Fiscal Year Began

Amount Before Budget Adoption

Projected Amount

Rhode Island

Delaware

Source: Various media and government outlets, July through November 2009.

3

New Budget Gap, n = 31

Puerto Rico

Post-Enactment FY 2010 Budget Gaps

Not Applicable, n = 20

FY 2011 Budget Gapsas a Percentage of General Fund Budget

Rhode Island

Delaware

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

Puerto Rico

More than 20.0%, n = 610% to 19.9%, n = 11

0.1% to 9.9%, n = 9

Budget gap projected, amount unknown, n= 8Not applicable or not reporting, n = 17

FY 2012 Budget Gapsas a Percentage of General Fund Budget

Rhode Island

Delaware

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

Puerto Rico

More than 20.0%, n = 210% to 19.9%, n = 9

0.1% to 9.9%, n = 5

Budget gap projected, amount unknown, n= 8Not applicable or not reporting, n = 27

Budget Gap Numbers Past and Current Recession

Past Recession Current Recession

Fiscal Year Amount(in Billions)

Fiscal Year Amount(in Billions)

2002 $37.2 2008 $12.8

2003 $79.0 2009 $116.7

2004 $83.7 2010 $145.3*

2005 $37.0 2011 $65.1**

2006 $26.9 2012 $46.9**

Total $263.8 Total $386.8*

Past Recession: March 2001 to November 2001 (8 months)Current Recession: Began December 2007 to present (21 months)*Preliminary figure ** Projected figure

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

Conclusion

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

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

States are bracing for prolonged fiscal problems.

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