Missouri

Budget Update

August 2011

Missouri Division of Budget and Planning

MISSOURI BUDGET UPDATE

August 2011

Economic Data – Actual & Projected

State revenue update.

State spending update.

What’s ahead for FY 2012 and FY 2013.

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MISSOURI BUDGET UPDATE

August 2011

Economic Data – Actual & Projected

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Personal Income growth has accelerated over the last five quarters, but

growth in Wages & Salaries has been slower to recover.

Near-term increases in Personal Income will be in the same modest range

as recent data until the employment level consistently increases, which is

more likely in Calendar Year 2012.

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

200

6q

3

200

7q1

200

7q3

200

8q

1

200

8q

3

200

9q

1

200

9q

3

2010

q1

2010

q3

2011q

1

2011q

3

2012q

1

2012q

3

2013q

1

Growth in MO Personal Income Q/(Q-4)

Personal Income

Wages & Salaries

4

5

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

Jan-0

7

Ap

r-07

Jul-0

7

Oct-0

7

Jan-0

8

Ap

r-08

Jul-0

8

Oct-0

8

Jan-0

9

Ap

r-09

Jul-0

9

Oct-0

9

Jan-10

Ap

r-10

Jul-10

Oct-10

Jan-11

Ap

r-11 Change in US Total Industrial Output

Over Previous Three Months

Industrial Production has slowed in the past three months. Inventories of

manufacturers and retailers have increased relative to sales, leading to

fewer orders.

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4%

5%

6%

7%

8%

9%

10%

11%

200

7q1

200

7q3

200

8q

1

200

8q

3

200

9q

1

200

9q

3

2010

q1

2010

q3

2011q

1

2011q

3

2012q

1

2012q

3

2013q

1

2013q

3

US & MO Unemployment Rates Seasonally Adjusted Data

US

MO

US Unemployment is expected to remain high, though decline slightly,

through 2012.

In general, the unemployment rate in MO follows the national trend.

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(2%)

(1%)

0%

1%

2%

3%

4%

5%

6%

200

7q1

200

7q3

200

8q

1

200

8q

3

200

9q

1

200

9q

3

2010

q1

2010

q3

2011q

1

2011q

3

2012q

1

2012q

3

2013q

1

2013q

3

Inflation (CPI) Q/(Q-4)

CPI

Core CPI

The lack of consumption or wage growth is keeping inflation subdued,

despite the impacts of high gasoline prices earlier this year.

There is some evidence that higher energy prices may impact “core”

inflation, the statistic that monetary policy makers generally emphasize.

MISSOURI BUDGET UPDATE

August 2011

STATE REVENUE UPDATE

Sources of general revenue.

General revenue projections.

Federal stabilization & relief funds.

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Total $7,176.2

FY 2011 NET GENERAL REVENUE COLLECTIONS ($ in millions)

Individual Income,

$4,640.3, 65%

Sales, $1,759.8, 24%

Corporate, $385.5, 5%

County Foreign, $193.3, 3%

All Other, $197.3, 3%

NET GENERAL REVENUE COLLECTIONS ($s in millions)

5,210

1,931

459 186 218

8,004

4,434

1,732

288 177 144

6,775

4,815

1,823

331 186 141

7,295

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Individual Sales Corporate CF Ins All Other Total

FY 08 FY 09 FY 10 FY 11 FY 12 Est

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REVENUE COLLECTIONS

HOW ARE WE DOING?

Consensus forecast for FY12 would require growth of about 2%

above FY11 actual collections.

Positive signs are seen in withholding taxes, biggest source of state’s

income. Growth in FY11 was 2.5%.

Sales tax collections continue to be stagnant with growth of only

0.3% for FY11.

Lottery and Gaming revenues projected to fall short.

Hurdles: high unemployment rate; continuing housing market flux;

European debt crisis; continuing federal budget saga.

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FEDERAL STABILIZATION FUNDS ($s in millions)

FY 09 FY 10 FY 11 FY 12 Total Resources

Enhanced FMAP $432.1 $702.8 $638.0 $0.0 $1,772.9

Education $0.0 $753.2 $0.0 $0.0 $753.2

General Purpose $0.0 $167.6 $0.0 $0.0 $167.6

Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7

Total $432.1 $1,623.6 $827.7 $0.0 $2,883.4

Estimated

Expenditures

Enhanced FMAP $255.8 $611.7 $595.9 $309.5 $1,772.9

Education $0.0 $530.0 $158.3 $64.9 $753.2

General Purpose $0.0 $88.5 $75.5 $3.6 $167.6

Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7

Total $255.8 $1,230.2 $1,019.4 $378.0 $2,883.4

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MISSOURI BUDGET UPDATE

August 2011

STATE SPENDING UPDATE

State spending pie.

Operating budget summary.

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All Other

$949

12%

Higher Education

$790

10% Judiciary, Elected Officials, &

General Assembly

$275

4%

Elementary & Secondary

Education

$2,813

36%

Corrections & Public Safety

$632

8%

Human Services

$2,384

30%

Total $7,843

FY 2012 General Revenue Available Spending Includes Federal Stabilization Funds ($ in millions)

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FY 2009-2012 OPERATING BUDGET

($s in millions)

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FY 2009 FY 2010 FY 2011 FY 2012 FY 2012

Expenditures Expenditures Expenditures Budget Available

Total Operating Budget

General Revenue $ 8,380.1 $ 7,530.3 $ 7,582.5 $ 7,897.5 $ 7,774.8

Federal Funds 6,264.9 6,818.0 6,809.3 7,470.7 7,468.2

Federal Stabilization 0.0 811.4 419.9 64.9 68.5

Other Funds 7,465.2 7,458.9 7,709.1 7,800.2 7,773.6

Total $ 22,110.1 $ 22,618.6 $ 22,520.8 $ 23,233.3 $ 23,085.1

MISSOURI BUDGET UPDATE

August 2011

FY 2012 and FY 2013 BUDGET

What’s Ahead?

How Do We Make It Work?

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FY 2012 AND FY 2013 BUDGETS

WHAT’S AHEAD?

Hopeful that revenue will remain on track with consensus forecast.

Continuing economic situation adds uncertainty.

Gaming and lottery funds projected to fall below appropriations.

Recovering and rebuilding from multiple disasters will require

significant investment from the state.

Federal budget negotiations could lead to significant reductions in

federal funds for state programs.

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FY 2012 AND FY 2013 BUDGETS

WHAT’S AHEAD? (continued)

Over $400 million in one-time revenue sources in

FY2012 budget will not be available in FY13.

Continued improvement in economy should lead to better

revenue numbers for FY13.

Health care cost increases will continue to impact budget.

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FY 2013 BUDGET

HOW DO WE MAKE IT WORK?

More people working in good jobs!

More focused use of tax credits.

- Discussion on special session could lead to long term solution.

Improved collections of existing taxes.

- Legislation did not pass in 2011 regular session, some discussion for

inclusion in special session.

Reduced spending.

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MISSOURI BUDGET UPDATE

August 2011 Summary

State revenue update – on track for FY12. Positive signs

in individual income tax; but some hurdles.

Anticipating continued revenue improvement in FY12 and

FY13. Some sources (gaming and lottery) may be down.

What’s ahead for FY12 & 13 – funding disaster recovery.

Phase out of one-time sources creates challenges.

To balance budget – better jobs tools, continued

spending review, tax credit reform, improved collection of

existing taxes.

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