NESTOA
September 16, 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
NASBO 3
Current Fiscal Situation
NASBO 4
State Fiscal Outlook
Revenue Improvement Spring Spending Pressure Health care reform Limited federal funds Significant restructuring
NASBO
Medicaid
5
Fiscal 2011 data is based on enacted budgets and fiscal 2012 data is based on governors’ proposed budgetsSource: NASBO Spring 2011 Fiscal Survey of States
NASBO 6
National Economic Indicators
2nd Quarter GDP grows 1.0% 8th straight quarter of some growth; grew 0.4% in 1st Q.
Growth forecasts revised downward CBO revises GDP forecast to 1.5% in 2011 and 2.5% in 2012 NABE revises GDP forecast to 1.7% in 2011 and 2.3% in 2012
Other economic figures: Unemployment rate unchanged at 9.1% in August CBO projects it will remain near 9% through 2012 12 Federal Reserve Districts report modest or slow growth Manufacturing grows for 25th straight month in August, although
growth slows Home Sales fell in July; still higher than last year
NASBO 7
State and Local Employment Continues to Decline
State and local employment has declined 620,000 from the start of the recession through July
State employment declined 145,000 from Aug. 2008-July 2011 Local employment declined 475,000 from Sept. 2008-July 2011
State governments eliminated 23,000 positions in July alone
States have also taken other personnel actions such as furloughs, early retirement, salary reduction, cuts to state employee benefits, etc.
Source: Bureau of Labor Statistics
NASBO
State Debt Level Remains Comparatively Low
8
Debt-to-GDP: U.S. States Compared to Advanced G20 Nations – Moody’s Investor Services & International Monetary Fund
%
NASBO
Tax and Fee Increases
NASBO 10
Current Fiscal Situation:Indicators
NASBO
BudgetImprovement
-8
-6
-4
-2
0
2
4
6
8
10
12
%
General Fund Expenditure Growth (%)
*34-year historical average rate of growth is 5.7percent *Fiscal ‘12 numbers are recommended Source: NASBO Spring 2011 Fiscal Survey of States
* Average
NASBO
Budget Cuts Made After the Budget Passed
($ millions)
*FY 2011 mid-year budget cuts are ongoing Source: NASBO Spring 2011 Fiscal Survey
Mid-Year Budget Cuts Decline
NASBO
FY 2012 Proposed Spending Still Less than FY 2008
($ in
bill
ions
)
* FY 2007, 2008, 2009 and 2010 are actual. FY 2011 is estimated and FY 2012 is proposed..
NASBO
6 Quarters of Revenue Growth Following 5 Quarters of Declines
-20
-15
-10
-5
0
5
10
15
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011%
Year-Over-Year Real Change inQuarterly State Tax Revenue
Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau
NASBO* FY 2007, 2008, 2009 and 2010 are actual. FY 2011 is estimated and FY 2012 is proposed.
($ in
bill
ions
)
Revenue Remains Below Pre-Recession Levels
NASBO
Balances as a Percentage of Expenditures
* FY 2006, 2007, 2008, 2009, 2010 are actual, FY 2011 is estimated and FY 2012 is proposed.
(per
cent
ages
)Balance Levels are Below Historical Average for Most States
NASBO 17
Background on State Finance Trends
NASBO 18
Spending by Funding Source(Percentage)
General Funds38.1%
Federal Funds34.7%
Other State Funds24.5% Bonds
2.7%
Total State Expenditures By Funding Source, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 19
Total State Expenditures
K-1220.8%
Higher Education10.1%
Medicaid21.8%
Public Assistance1.7%
Corrections3.1%
Transportation8.1%
All Other34.4%
Total Expenditures by Function, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 20
General Fund: Medicaid & Education Over 63%
Elementary & Secondary Education
35.7%
Higher Education12.1%
Medicaid15.4%
Public Assistance1.9%
Corrections7.2%
Transportation0.8%
All Other27.0%
General Fund Expenditures by Function, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO
Percentage Change in Medicaid Spending and Enrollment
21
%
Source: Kaiser Commission on Medicaid and the Uninsured
Adopted
NASBO 22
What Can Be Done?
Financial Management
Ask performance questions
Ask for outcome data
Use performance information to justify changes to programs
NASBO 23
Outlook
NASBO
Major Challenges to State Budgets
Spending Demands and Some Revenue Growth Dependent on Economic Growth
Health Care Cost Pressures
Wind Down of Recovery Funds (Planned For)
Dealing with Long Term Liabilities Court Cases/Federal Government Mandates
NASBO 25
Source: New York Times, 6/12/11
Tough Decisions to Make…