Budget Outlook Appropriations Presentation December 4, 2003 3:30 pm HHR A

1. Budget Outlook Appropriations Presentation December 4, 2003 3:30 pm HHR A

2. 2003-05 GFS Balance Sheet November forecast added $65.2 million Office of Program Research

3. 2004 Supplemental Budget Outlook Office of Program Research

4. Estimate of Selected 2004 Supplemental Request ItemsDollars in millions Estimated Ending Fund Balance 543.8 Caseload, Rate, Disaster and Federal Funds Issues K-12 48.2 Corrections 71.0 Economic Services (GAU) 26.0 Medical Assistance (29.3) Other DSHS Programs (JRA, DDD, AASA, Mental Health, Childrens, etc.) 8.1 Fire Suppression (Primarily DNR) 30.0 Fall 2003 Floods 3.8 State Supplemental Payments (Federal Disallowance) 28.0 Ecology "Envirotest" Settlement 2.5 Eliminate Primary Election (6.0) Debt Service (7.3) Subtotal of Caseload, Rate, Disaster and Federal Funds Issues 175.0 Revised estimate of federal match rate savings 57.7 Office of Program Research

5. K-12 - $48.2 million Updated information on enrollment, bus depreciation, pupil transportation miles, levy equalization, and inflation will add $48.2 million to the 2004 Supplemental Budget. $60.0 $50.0 Levy Equalization $3.3 Pupil Transportation $40.0 Miles $10.8 Total $48.2 Bus Depreciation $30.0 $12.3 $s in Millions $20.0 Enrollment $24.3 $10.0 Inflation, -$2.4 $0.0 Puts Takes Net -$10.0 Office of Program Research

6. Estimated K-12 enrollment increased in the November caseload forecast by about 1,600 in the 2003-04 school year and by about 4,560 in the 2004-05 school year. 966,000 964,000 November Enrollment Forecast Update 962,000 960,000 Original 2003-05 FTE Students Budget Assumptions 958,000 956,000 954,000 952,000 2001-02 2002-03 2003-04 2004-05 Office of Program Research

7. 4.0% 3.5% 3.0% 2.5% 2.0% Change in FTE Enrollment 1.5% Current Biennium 1.0% 0.5% 0.0% 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Annual K-12 enrollment growth is projected to be less than one-half of one percent for the next few years. Office of Program Research

8. DOC - $71.3 million Increases in both inmate and community corrections caseloads account for $67 million of the increase. $1,400 $1,235 $1,164 $1,200 $1,000 $800 Dollars in Millions $600 $400 $200 $0 Enacted 2003-05 Budget 2003-05 New Forecast Office of Program Research

9. Prisons The November 2003 caseload forecast adds over 900 inmates by FY 2005. 20,000 18,000 New forecast 16,000 2003-05 budgeted 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 FY 02 FY 03 FY 04 FY 05 Office of Program Research

10. Community Corrections The November 2003 caseload forecast projects 7,000 more offenders on community supervision than were anticipated in the 2003-05 budget. 40,000 New forecast 35,000 30,000 2003-05 budgeted 25,000 Number of Offenders 20,000 15,000 10,000 5,000 0 FY 02 FY 03 FY 04 FY 05 Office of Program Research

11. Why is the forecast changing? • Inmate Forecast • A number of counties are not permitting DOC to authorize the imposition of jail confinement as a sanction for offenders that violate conditions of community supervision, resulting in a transfer of inmates from county to state responsibility. • Increased admissions to prison for assault, property, and drug offenses. • Community Supervision Forecast • Recently enacted legislative changes have resulted in the placement of offenders under community supervision earlier than under previous sentencing guidelines. • Roughly 2,000 misdemeanants were transferred to DOC supervision as a result of King County terminating their supervision contract. Office of Program Research

12. DSHS/GAU - $25.8 million Caseload increases in the GA-U/X program are projected to cost $25.8 million, an increase of 28%. $140.0 $117.50 $120.0 $100.0 $91.72 $80.0 Dollars in Millions $60.0 $40.0 $20.0 $0.0 2003-05 Budgeted 2003-05 New Forecast Office of Program Research

13. The GA-U/X caseload is increasing significantly above the 2003-05 budgeted level. 26,000 24,000 New forecast 22,000 20,000 18,000 2003-05 budgeted 16,000 14,000 Number of cases 12,000 10,000 8,000 6,000 4,000 2,000 0 FY 02 FY 03 FY 04 FY 05 Fiscal Years Office of Program Research

14. MAA Saves $29.3m GFS Medical Assistance general fund expenditures are expected to be about 1.2% less than originally budgeted. $3,000 $2,800 $2,600 $2.40 B $2.37 B $2,400 $2,200 $2,000 $1,800 $1,600 Dollars in Millions $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 2003-05 Budgeted 2003-05 New Forecast Office of Program Research

15. The November 2003 Medical Assistance forecast is down from the budgeted level, however, total caseload is still increasing by approximately 2 percent per year in FY 04 and FY 05. 920,000 2003-05 budgeted 900,000 New forecast 880,000 860,000 Number of Clients 840,000 820,000 800,000 780,000 FY 02 FY 03 FY 04 FY 05 Office of Program Research

16. Federal Fiscal Relief Is Less Than OriginallyExpected Original Estimate: GFS Grants 200.4 FMAP 200.1 (10.0) Less Spending* 390.5 Current Estimate: GFS HSA/Trauma Total Grants 200.4 - 200.4 FMAP 142.4 25.9 168.3 Less Spending* (10.0) - (10.0) 332.8 25.9 358.7 * $10 million was appropriated in the 2003-05 Biennium for local government assistance. Office of Program Research

17. K-12 48.2 Corrections 71.0 Economic Services (GAU) 26.0 Medical Assistance (29.3) Other DSHS Programs 8.1 Fire Suppression (Primarily DNR) 30.0 Fall 2003 Floods 3.8 State Supplemental Payments (Federal Disallowance) 28.0 Ecology "Envirotest" Settlement 2.5 Eliminate Primary Election (7.3) Debt Service (6.0) All Other Items 25.0 225.0 Total Spending Changes Subtotal Other Spending Issues Home Care Worker Contract 25.0 Revised estimate of federal match rate savings 57.7 Revenue Issues Tax exemption legislation (as assumed by OFM)) (72.4) Adjusted Ending Balance ($188.7m = 0.83% of biennial revenues) 188.7 Estimate of Selected 2004 Supplemental Request ItemsDollars in millions Estimated Ending Fund Balance 543.8 Caseload, Rate, Disaster and Federal Funds Issues 175.0 Office of Program Research

18. Potential 2003-05 2003-05 Enacted With 2004 Supp Revised Balance Sheet RESOURCES Beginning Fund Balance 412.4 408.1 September 2003 Forecast 22,755.7 22,755.7 November 2003 Forecast Update 65.2 65.2 Current Revenue Totals 22,820.9 22,820.9 Fund Transfers to General Fund 81.2 81.2 (72.4) Potential Tax Policy changes (as assumed by OFM) 58.1 58.1 Transfer from Emergency Reserve Fund Federal Fiscal Relief - Grant ** 90.2 90.2 Total Resources (Includes Fund Balance) 23,462.8 23,386.1 APPROPRIATIONS AND SPENDING ESTIMATES 23,081.4 23,081.4 Biennial Appropriation Potential 2004 Supplemental Budget*** 225.0 Federal Fiscal Relief - FMAP * (162.4) (109.0) Spending Level 22,919.0 23,197.4 UNRESTRICTED GENERAL FUND BALANCE 543.8 188.7 Projected Ending Fund Balance EMERGENCY RESERVE FUND 57.6 57.6 Beginning Fund Balance 0.5 0.5 Actual/Estimated Interest Earnings (58.1) (58.1) Transfers and Appropriations Projected Ending Fund Balance 0.0 0.0 TOTAL RESERVES Combined General and Emergency Reserve Projected Ending Fund Balance 543.8 188.7 Office of Program Research

19. I-601 Expenditure Limit Office of Program Research

20. 601 Basics • The expenditure limit applies to General Fund-State expenditures only. • The “baseline” expenditure limit is calculated by multiplying the previous year’s limit by the “fiscal growth factor.” • The fiscal growth factor is a three year average of inflation plus population growth. • The baseline expenditure limit is adjusted for: • actual expenditures in the previous fiscal year (called “re-basing”). • and for money transfers and program cost shifts to and from the General Fund. Office of Program Research

21. Rebasing to prior year actual spending has the effect of lowering the limit over time. 13,500 13,000 FY 03 Limit Carried Forward (Not Rebased) 12,500 Official Limit (Rebased to FY 03 Actual Spending) Rebased to Current FY 05 Appropriation 12,000 Dollars in Millions Rebased to Current FY 04 Appropriation 11,500 11,000 10,500 10,000 FY 03 FY 04 FY 05 FY 06 FY 07 Office of Program Research

22. Potential Supplemental Changes 05 Spending Limit 12,100.0 Assume a $225m Supplemental Revised Spending Limit 11,900.0 04 Spending Limit 11,700.0 Revised Spending Limit 11,500.0 Dollars in Millions 11,300.0 11,100.0 10,900.0 10,700.0 FY 04 FY 05 Office of Program Research

23. 2005-07 Outlook Office of Program Research

24. Based on the Office of Financial Management’s “most likely” revenue and cost estimates, the 2005-07 outlook assumes: • Revenue Growth at 5%. • Medical Inflation at 10%. • Current Law Funding of I-728 & I-732. • COLA of 0.85% in FY 06 and 1.5% in FY 07 year for Vendor/Employees. • Employer Pension Rate Increases of $440 million. • Higher Ed Enrollments at current participation rates. Office of Program Research

25. Costs in 05-07 are Estimated To Exceed Revenue by $1.1 Billion 13,500.0 And, By FY 07, Projected Costs and Revenue Exceed The Projected Spending Limit $13.1 B 13,000.0 12,500.0 $12.5 B Dollars in Millions 12,000.0 $11.8 B Expenditure Limit Revenue 11,500.0 $11.4 B 11,000.0 10,500.0 10,000.0 FY 04 FY 05 FY 06 FY 07 Office of Program Research

26. Most Likely Optimistic Pessimistic 5% 6% 3% 10% 6% 12% 24,512 24,874 23,795 25,668 25,351 25,830 (1,156) (477) (2,035) The Office of Financial Management has calculated three alternatives for the 2005-07 Outlook (dollars in millions) Revenue Growth Medical Inflation 2005-07 Revenue 2005-07 Costs Surplus/(Shortfall) Office of Program Research