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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


  • 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


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



    • 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



    • 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


    • 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.


    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


    • 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


    • 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


    • 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


    • 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


    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


    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


    • 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%


    • 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


    • 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)


    • 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?


    • 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.


    Home Run Program

    Utah Science, Technology, and Research Initiative (USTAR)

    Motion Picture Incentive

    Energy Development Initiative

    Transportation Infrastructure


    Largest Road Project in Nation

    Agreed upon configuration $1.7 billion


    Questions (cont’d)

    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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