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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. Current Fiscal Situation. Recent State Fiscal Trends.

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State Fiscal Outlook for 2008

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  1. 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

  2. Current Fiscal Situation

  3. 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

  4. 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.

  5. 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.

  6. 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

  7. Balances Declining but Remain Healthy *30-year historical average is 5.7% Source: NASBO December 2007 Fiscal Survey of States

  8. Some States Likely will Face Mid-Year Fiscal ’08 Budget Cuts Source: December 2007 Fiscal Survey of States

  9. State Tax Revenue Growth Source: Fiscal Studies Program, Rockefeller Institute of Government

  10. Trends

  11. Long Term Spending Pressures • Medicaid and Health Care • K-12 • Higher Education • Demographic Changes • Infrastructure • Pensions

  12. 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

  13. FY 2008 Budgetary Issues • Medicaid • Economic Woes • Housing Downturn Impacting Revenue • Health Care • SCHIP, Universal Health Care • Infrastructure/Transportation • Property Tax Relief

  14. Other FY 2008 Issues • Transparency/Accountability • School Funding • Pre-K expansion • Examining Higher Ed Spending • Search for Alternative Revenue Sources • Gaming • Leases/Privatization

  15. Background on State Spending Trends

  16. Long Term:State Expenditures Increasing *2007 numbers are estimates Source: NASBO State Expenditure Report

  17. Less Discretion - General Fund Spending Source: NASBO 2006 State Expenditure Report

  18. Spending by Funding Source: General Funds Decreasing Source: NASBO, 2000 and 2006 State Expenditure Reports

  19. Total Expenditures Percentage Growth in Spending Categories Over 10 Years Sources: NASBO 1997 and 2006 State Expenditure Reports

  20. General Fund Percentage Growth in Spending Categories Over 10 Years Sources: NASBO 1997 and 2006 State Expenditure Reports

  21. Medicaid

  22. Medicaid Spending *2010 percentage projected by Health Management Associates Source: NASBO State Expenditure Report

  23. Medicaid Growth Rates *2007 numbers are estimated Source: NASBO 2006 State Expenditure Report

  24. 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

  25. Federal Funds to States: Medicaid Consuming Larger Share Source: NASBO, 1990, 1995, 2000 and 2006 State Expenditure Reports

  26. Outlook

  27. 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

  28. www.nasbo.org

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