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2010 General session budget review. Phillip Jeffery, Deputy Director for the Governor’s Office of Planning & Budget Association of Government Accountants July 15, 2010. 2010 GENERAL SESSION BUDGET OVERVIEW. THE ENVIRONMENT : Revenue Downturn THE CHALLENGES : Pre-Session Budget Situation

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2010 general session budget review

2010 General session budget review

Phillip Jeffery, Deputy Director for the Governor’s Office of Planning & Budget

Association of Government Accountants

July 15, 2010

slide3
2010 GENERAL SESSION BUDGET OVERVIEW
  • THE ENVIRONMENT: Revenue Downturn
  • THE CHALLENGES: Pre-Session Budget Situation
  • THE PRINCIPLES: Responsible Solutions
  • THE SOLUTIONS: Cuts, One-time “Backfill”
  • MOVING FORWARD: Upcoming Challenges, Available Tools
slide4
CONSENSUS REVENUE ESTIMATES

Revenue Assumptions Committee (RAC) Economists from:

    • Governor’s Office of Planning & Budget
    • Tax Commission
    • Legislature
    • State Agencies
    • Higher Education
    • Local Government
    • Private Sector
  • Economic Outlook
  • November 2008
slide6
CONSENSUS REVENUE ESTIMATES (cont’d)
  • Revenue Estimates Committee
    • Quarterly CONSENSUS Revenue Estimates
      • Point Estimates in November & February
      • Range Estimates in June & September
    • Committee Members Include Directors of:
      • Governor’s Office of Planning & Budget
      • Office of the Legislative Fiscal Analyst
      • Tax Commission
slide9
THE ENVIRONMENT: REVENUE
  • State Budget
  • FY 2008
    • $11.5 billion total
    • $5.3 billion General Revenue
  • FY 2011
    • $11.6 billion total
    • $4.3 billion General Revenue
  • Revenue Picture
  • Loss of $1.1 billion or 21% top to bottom
slide10
2009 LEGISLATIVE ACTION
  • Working Rainy Day Fund
    • Utah funded $516 million in capital investment for FY 2009
    • Of this amount $346 million is from ongoing revenue sources
  • One-time Funding Sources Available
    • $418 million Rainy Day Funds
    • $103 million Student Population Growth Account
  • Federal ARRA Package allowed us to maximize working rainy day fund and save one-time sources for future needs.
slide11

2009 LEGISLATIVE ACTION

  • Revenues dropped $950 million from original FY 2009 projection (about 18%)
  • How Utah dealt with the shortfall
    • Agency budget reductions $355 million
      • Pub. Ed. held to 6% reduction ($182 M)
      • Higher Ed. held to 9% reduction ($77 M)
    • Capital funding reductions including buildings & roads of 28%
    • ($134 M)
    • Structural Deficit of $460 million (10%) funded mostly with ARRA
slide12
THE CHALLENGES: PRE-2010 SESSION BUDGET SITUATION
  • Shortfall and One-time Funding
    • Additional $177 Million Shortfallin FY 2010
      • Ongoing Base Budget Reductions ≈ 18% partially backfilled with
      • American Recovery & Reinvestment Act and other One-Time funds
    • Total One-Time Funding of $460 Million
      • Public Education: $293 Million
      • Higher Education: $66 Million
      • Health & Human Services: $76 Million
slide13
THE CHALLENGES: PRE-2010 SESSION BUDGET SITUATION (cont’d)
  • New Costs and Resources
    • New Costs
      • Enrollment Growth
      • Medicaid & Human Services
      • Employee Health & Retirement
    • One-time Funding Sources Available
      • $418 Million Rainy Day Funds
      • $103 Million Student Population Growth Account
      • $73 Million Additional ARRA anticipated
slide14
THE PRINCIPLES: RESPONSIBLE SOLUTIONS
  • Governor’s Budget Recommendation Principals
    • Protect Public and Higher Education
    • Avoid exacerbating the structural budget imbalance
    • Retain a responsible Rainy Day Fund balance
    • Balance the budget with no tax increases
slide15
THE SOLUTIONS: FY 2010
  • December Executive Order
    • Reduced state agency and higher education budgets by $39 million
    • Instituted a flexible hiring freeze
    • Delayed IT purchases
    • Provided other spending guidance
slide16
THE SOLUTIONS: FY 2010

FY 2010 BUDGET ACTIONS

GAP: $177 Million

Budget Cuts: $57 Million

Rainy Day Funds: $86 Million

Restricted Funds, Unallocated, etc: $14 Million

Medicaid Lawsuit Settlement: $20 Million

$177 Million

slide17
THE SOLUTIONS: FY 2011

FY 2011 BUDGET ACTIONS

GAP: $482 Million

Budget Cuts/Funding Shifts: $75 Million

Rainy Day Funds: $123 Million

Student Population Account: $103 Million

ARRA FMAP: $73 Million

Tobacco Tax: $43 Million

Restricted Funds, Unallocated, etc: $65 Million

$482 Million

slide18
THE SOLUTIONS: FUNDING FOR EDUCATION
  • Public Education
    • Additional cut could have been as high as $400 Million, limited to $10 Million in non-classroom cuts
    • Ongoing budget cut of approximately 6%
  • Higher Education
    • Additional cut could have been as high as $100 Million, limited to $33 Million
    • Ongoing budget cut of approximately 13%
slide19
2010 General Session PENSION REFORM
  • In 2008 Pension lost 30% of its value creating a $6.5 billion dollar gap
    • Increased contributions $400 million per year for the next 25 years
  • Three Goals
    • Fully Fund Pension Liability
    • Meet 100% of obligation to current and retired employees
    • Remove bankruptcy risk imposed on state
slide20
2010 General Session PENSION REFORM (cont’d)
  • SB 43, Post-retirement Employment Amendments
    • SB 63, New Public Employees’ Tier II Contributory Retirement Act
      • Applies to new employees after July 1, 2011
      • Limits State contributions to 10%
      • Can elect DB or DC plan
      • Increases years of service to 35 years (25 public safety)
slide22
MOVING FORWARD
  • 2010 GENERAL SESSION OUTCOMES
  • Reductions to Public and Higher Education Minimized
  • Structural Imbalance reduced from $460 Million to $320 Million
    • $210 Million left in Rainy Day Funds
    • Revenue Enhancements like Quarterly Estimated Payments
    • Revenue Growth?
slide23
MOVING FORWARD, ECONOMIC DEVELOPMENT
  • Economic Vitality
  • Utah was ranked #1 by the American
  • Legislative Exchange Council as the state
  • most likely to emerge first from the economic
  • recession.
  • Utah was ranked top ten states for business
  • in 2010 by Chief Executive Magazine.
slide24
UTAH’S ECONOMIC STIMULUS PACKAGE

Home Run Program

Utah Science, Technology, and Research Initiative (USTAR)

Motion Picture Incentive

Energy Development Initiative

Transportation Infrastructure

slide25
EXAMPLE: 1-15 SOUTH

Largest Road Project in Nation

Agreed upon configuration $1.7 billion

slide26

Questions

Phillip Jeffery

Governor’s Office of Planning and Budget

Utah State Capitol

350 North State Street

Salt Lake City, Utah 84114

www.governor.utah.gov/gopb

801-538-1027

[email protected]

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