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State Fiscal Outlook

Explore the recent state fiscal situation with flat spending and declining revenue, leading to budget cuts and layoffs. Learn about the impact of the credit crisis and find out which states are doing relatively well. Discover the declining expenditure growth and increasing budget cuts. Find out how higher education fits into the overall state spending and gain insights into the state fiscal outlook with a focus on recovery opportunities.

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State Fiscal Outlook

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  1. State Fiscal Outlook New England Board of Higher Education Boston, MA December 5, 2008 Brian Sigritz Staff Associate National Association of State Budget Officers 444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org

  2. Recent State Fiscal Situation • Flat spending/declining revenue • Shortfalls in the billions • Across the board budget cuts, layoffs • Credit crisis impacting short- and long-term borrowing • Most states in recession • Some energy and agriculture states doing relatively well • All states at some risk

  3. Flat and Declining Expenditure Growth *31-year historical average rate of growth is 6.3 percent**Fiscal 08 numbers are preliminary actual ***Fiscal 09 numbers are appropriated Source: Preliminary NASBO December 2008 Fiscal Survey of States

  4. Revenue Growth: 2nd Quarter PIT Relatively Strong Source: Rockefeller Institute of Government; U.S. Census Bureau

  5. 3rd Quarter Revenue Trends • 42 states have reported 3rd quarter data • Overall revenue growth of 0.1% • -2.6% growth when adjusted for inflation • Sales tax collections declined 0.7%, corporate income declined 15.3%, and personal income grew at a weak 1.5% Source: Rockefeller Institute of Government

  6. Budget Cuts Increasing Source: Preliminary December 2008 Fiscal Survey of States

  7. Balances Declining *31-year historical average is 5.7% Source: Preliminary NASBO December 2008 Fiscal Survey of States

  8. Higher Education: 10.5% of Total State Spending Source: Preliminary NASBO 2007 State Expenditure Report

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

  10. State Fiscal Outlook • Much will depend on the national economy • Expect significant drops in revenue and spending • States will face dramatic budget cuts • States will look for creative financing and revenue opportunities to meet these spending demands • Opportunity for reform • Recovery for states at best in FY ‘11

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