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State Fiscal Outlook for 2008. NASCIO January 16, 2008 Scott Pattison Executive Director National Association of State Budget Officers. 444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org. Current Fiscal Situation. Recent State Fiscal Trends.

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state fiscal outlook for 2008

State Fiscal Outlook for 2008

NASCIO

January 16, 2008

Scott Pattison

Executive Director

National Association of State Budget Officers

444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org

recent state fiscal trends
Recent State Fiscal Trends
  • Slowing revenue in FY 2008
  • Some states experiencing significant shortfalls
  • Increased attention towards infrastructure and transportation
  • Health care
  • Property tax relief
examples current announced budget shortfalls
Examples: Current Announced Budget Shortfalls
  • Arizona, facing a shortfall of $870 million, is considering using the rainy day fund, bonding for school construction, and spending cuts.
  • California is facing a $14.5 billion shortfall for fiscal 2009. Gov. Schwarzenegger has ordered agencies to cut budgets by 10%.
  • Florida held a special session in October to address shortfall. Since then, revenue estimates have been lowered again.
  • Kentucky, facing a $289 million shortfall for fiscal 2008, has requested that state agencies cut budgets by 5%.
  • Nevada is facing a shortfall of $440 million for fiscal 2008. Gov. Gibbons has proposed 4.5% cuts.
  • Rhode Island is facing a possible $450 million fiscal 2009 shortfall. Gov. Carcieri announced plans to eliminate 1,200 positions.
examples states showing positive growth
Examples: States Showing Positive Growth
  • Arkansas’ revenue is 4.0% above projections so far in fiscal 2008.
  • Georgia’s November tax revenue increased 10.3% from fiscal 2007 levels.
  • Iowa increased its revenue estimates by $100 million in December.
  • Louisiana increased projections by $657 million for fiscal 2008 and $477 million for fiscal 2009.
  • Missouri’s revenue through November is 4.5% higher than expected.
  • North Carolina’s first quarter revenue exceed projections by $75 million.
slowing fiscal 08 expenditure growth but still overall growth
Slowing Fiscal ‘08 Expenditure Growth, but Still Overall Growth

*

*30-year historical average rate of growth is 6.4 percent **Fiscal 08 numbers are estimated

Source: NASBO December 2007 Fiscal Survey of States

balances declining but remain healthy
Balances Declining but Remain Healthy

*30-year historical average is 5.7% Source: NASBO December 2007 Fiscal Survey of States

some states likely will face mid year fiscal 08 budget cuts
Some States Likely will Face Mid-Year Fiscal ’08 Budget Cuts

Source: December 2007 Fiscal Survey of States

state tax revenue growth
State Tax Revenue Growth

Source: Fiscal Studies Program, Rockefeller Institute of Government

long term spending pressures
Long Term Spending Pressures
  • Medicaid and Health Care
  • K-12
  • Higher Education
  • Demographic Changes
  • Infrastructure
  • Pensions
spending pressures in the news
Spending Pressures in the News…

“state pension issue looms for legislature”

- Kentucky, The Courier-Journal, 1/1/08

“State’s Prison Budget Soars”

- California, Los Angeles Times, 12/26/07

“Petition to ask Michigan Voters to Pass Universal Health Care”

- Michigan, The Detroit Free Press, 12/19/07

“Corzine proposes preschool expansion”

- New Jersey, Philadelphia Inquirer, 12/14/07

fy 2008 budgetary issues
FY 2008 Budgetary Issues
  • Medicaid
  • Economic Woes
    • Housing Downturn Impacting Revenue
  • Health Care
    • SCHIP, Universal Health Care
  • Infrastructure/Transportation
  • Property Tax Relief
other fy 2008 issues
Other FY 2008 Issues
  • Transparency/Accountability
  • School Funding
    • Pre-K expansion
    • Examining Higher Ed Spending
  • Search for Alternative Revenue Sources
    • Gaming
    • Leases/Privatization
long term state expenditures increasing
Long Term:State Expenditures Increasing

*2007 numbers are estimates Source: NASBO State Expenditure Report

less discretion general fund spending
Less Discretion - General Fund Spending

Source: NASBO 2006 State Expenditure Report

spending by funding source general funds decreasing
Spending by Funding Source: General Funds Decreasing

Source: NASBO, 2000 and 2006 State Expenditure Reports

total expenditures percentage growth in spending categories over 10 years
Total Expenditures Percentage Growth in Spending Categories Over 10 Years

Sources: NASBO 1997 and 2006 State Expenditure Reports

general fund percentage growth in spending categories over 10 years
General Fund Percentage Growth in Spending Categories Over 10 Years

Sources: NASBO 1997 and 2006 State Expenditure Reports

medicaid spending
Medicaid Spending

*2010 percentage projected by Health Management Associates Source: NASBO State Expenditure Report

medicaid growth rates
Medicaid Growth Rates

*2007 numbers are estimated Source: NASBO 2006 State Expenditure Report

68 of medicaid spending on benefits in 2007 is for elderly and disabled
68% of Medicaid Spending on Benefits in 2007 is for Elderly and Disabled

Elderly = 9%

26%

Elderly = 22%

Disabled = 17%

68%

Adults = 26%

Disabled = 46%

Children = 48%

Adults = 13%

Children = 19%

U.S. Total = $305 billion in 2007

2007 U.S. Total = 62.2 million

Source: Vernon Smith, Health Management Associates

federal funds to states medicaid consuming larger share
Federal Funds to States: Medicaid Consuming Larger Share

Source: NASBO, 1990, 1995, 2000 and 2006 State Expenditure Reports

state fiscal outlook
State Fiscal Outlook
  • Revenue and spending growth likely to slow
    • Housing decline and a slowing economy could be problematic
    • National economic situation will determine extent of state revenue slowdown
  • States will face fiscal challenges over next several years
  • States will look for creative financing opportunities to meet spending demands