Missouri Fiscal Update October 2013

1. Missouri Fiscal Update October 2013

2. MISSOURI FISCAL UPDATEOctober 2013 • Economic Data – Actual & Projected • State Revenue Update • State Spending Update • Current Status and Future Outlook

3. MISSOURI FISCAL UPDATE Economic Data – Actual & Projected

4. Personal Income jumped at the end of 2012 as investors closed out positions in an effort to avoid tax increases on capital gains. • Wage growth will slow somewhat thru mid-2013, but accelerate as the economic recovery strengthens in 2014.

5. US rate is expected to decline slowly but steadily through 2013. • In general, MO rate follows the national trend, but has remained below the national average since 2010.

6. Missouri Current Employment Source: US BLS

7. Inflation remains subdued. • Growth in “core” inflation, excludes food & energy, remains low.

8. Total Taxable Sales Source: DOR Quarterly Reports, Seasonally Adjusted by B&P

9. State Revenue Update • Recent general revenue collections • Historical comparisons

10. FY 2013 NET GENERAL REVENUE COLLECTIONS ($ in millions) Total $8,082.7

11. MO General Revenue Collections

12. General Revenue as % of Personal Income .

13. Figures in millions

14. State Spending Update • The official spending pie • Key Initiatives • Summary of Savings

15. FY 2014 General Revenue Operating Budget Total Appropriations $8.28 Billion

16. Summary of Savings Since FY 2009 • State reduced 4500 FTE. • Pension and Health Care reform. • Medicaid - trend held to 3.7%, inc PTD, less than 2% without PTD. • 11% reduction in leased space. • Energy usage down 22%.

17. Summary of Savings Since FY 2009 Continued • Travel mileage down 8%. • Debt Restructuring (PV savings $80M). • Similar saving strategies by higher education institutions, schools, and other local entities.

18. FY 2014 Budget – Key Initiatives • $100M increase for K-12 Classrooms. • $25M for higher ed performance funding. • $11.3M new initiative to train more health care professionals. • $10.2M increase for Partnership for Hope. • $10.1M investment to meet unmet mental health needs. • $14M increase for early childhood initiatives.

19. State Higher Education Funding Per FTE Student

20. FOUNDATION FORMULA FUNDING millions

21. MISSOURI FISCAL UPDATE Current Status and Future Outlook

22. CURRENT STATUS • The revised revenue forecast estimated 4.8% growth for GR for FY13; actual collections at 10%. - Individual income – 4.4% forecast, 11.7% actual - Sales tax – 2.2% forecast, 1.4% actual • Biggest growth - declarations and remittances. Investment income & federal tax changes. • Withholding up 3.5%, right on forecast.

23. CURRENT STATUS • FY 2014 Revenue through September – Up 2.7% • Individual Income Tax Collections – Up 3.8% - Largely in declaration and withholdings • Sales Tax Collections – Up 5.1% • Corporate – Up 28%

24. FUTURE OUTLOOK • Outlook is good. • Some caution for current year due to federal issues. Hopefully those issues will be short lived. • Also, some non-economic considerations – No tax amnesty, tobacco settlement payments, etc. • Underlying revenue situation looks good.

25. FUTURE OUTLOOK • Should see continued improvement in revenue situation going forward. • Pent up demand for core state programs – K-12, higher education, mental health, etc. • Savings achieved are ongoing – more efficient base for state, education, and others. • Resources available for targeted investments. Still well below pre-recession trajectory.