Transcript Slide 1

2012-14 State Funding Issues
Virginia School Board Association
James J. Regimbal Jr.
Fiscal Analytics, Ltd
January 30, 2012
Can Other Revenue Sources*
Continue to Increasingly Pay State Costs?
Change in State Operating Appropriations ($ Mil.)
$30,000
NGF
$25,000
$20,000
$15,000
GF
$10,000
$5,000
$0
2001
2002
2003
2004
2005
2006
2007
* Federal funding, higher education tuition & fees, fees for services
2008
2009
2010
2011
2012
2013
(i)
2014
(i)
2
State Aid is Falling For Localities
State Categorical Aid As % of Total Local Operating Expenditures
36.0%
35.0%
34.0%
33.0%
32.0%
31.0%
30.0%
29.0%
28.0%
27.0%
26.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: APA Comparative Reports on Local Revenues and Expenditures, Fiscal Years 2000-2010
3
State Local Aid Programs Continuing to Decline
Major State GF Aid for Locally-Administered Programs
FY 2009
FY 2010
FY 2011 FY 2012 (i) FY 2013 (i) FY 2014 (i)
$5,607.6
$4,769.8
$4,713.3
$4,912.8
$5,132.3
$5,175.7
Health and Human Services
$888.4
$878.7
$816.8
$850.5
$844.9
$810.9
Public Safety
$734.3
$556.8
$686.0
$667.7
$679.2
$679.9
$197.3
$180.8
$178.7
$172.4
$172.4
$172.4
Constitutional Officers
$155.3
$142.2
$144.2
$143.8
$143.8
$143.8
Car Tax
$950.0
$950.0
$950.0
$950.0
$950.0
$950.0
Aid-to-Locality Reduction
($50.0)
($50.0)
($60.0)
($60.0)
($50.0)
($45.0)
$8,285.6
$7,247.5
$7,250.3
$7,503.8
$7,700.2
$7,715.3
$15,943.0
$14,787.2
$15,457.4
$16,556.9
$17,178.4
$17,365.2
52.0%
49.0%
46.9%
45.3%
44.8%
44.4%
GF Direct Aid to K-12
HB 599 (Aid-to-Police)
Total Local GF Aid
Total GF Appropriations
% Local GF Aid
4
While Local Revenues Continue to Suffer
Total Local General Fund Revenues
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
est. est.
Fiscal Year
Source: 1990-2010, Auditor of Public Accounts
FY 11 & 12 estimates from VML/VACO Fiscal Survey
5
Proposed Change in FY 2013 State GF Appropriations
Legislative and Executive Dept's
Judicial Dept.
Compensation Board
Treasury Board GF Debt Service
Other Admin., Finance (w/o debt), & Tech
Rainy Day Fund
Car Tax Reimbursement
Commerce and Trade
Agr., Nat. Res.
K-12 Direct Aid (incl. teacher retire)
Higher & Other Education
DMAS (Medicaid)
Other HHS
Public Safety (incl. Veterans /HS)
Transportation *
Central Appr.
Capital
Total GF Expenditures
FY 2013
$95.7
$417.4
$608.1
$624.0
$198.0
$132.7
$950.0
$195.1
$186.5
$5,132.3
$1,781.8
$3,634.0
$1,430.9
$1,706.7
$45.0
$40.2
$0.0
Change From FY 12
$0.1
$9.3
$9.6
$51.8
-$7.1
$132.7
$0.0
$26.5
$51.8
$219.5
$107.2
$240.1
$12.8
$46.7
-$91.2
-$21.5
-$8.9
$17,178.4
$779.3
* Does not include $53 million in GF sales tax transferred to highway maintenance as NGF
6
Little New K-12 GF Spending in
Introduced Budget Above FY 2012 Base*
FY 2013 FY 2014
Update Teacher Retirement Contribution Rates
All Other Spending Proposals**
Net New K-12 Spending Above Chapter 890 Base
$170.9
$171.5
$9.6
$52.1
$180.5
$223.6
* FY 12 “Base” funding annualizes part-year and removes one-time funding, such as $87.7 mil. appropriated for supplemental support.
** Does not include $28 mil. per year in Executive Amendments, primarily K-3 class size and early reading initiative funding.
7
Proposed 2012-14 K-12 Policy Changes
Add to List of Recent SOQ Reductions*
• Eliminate Non-personal Inflation Update – ($109.0)
Did not fund inflation in 2010-12 biennium either.
• Modify Federal Revenue Deduction Calculation for Federal
Stimulus Funding – ($108.1)
• Eliminate Support Cost-of-Competing Adjustment – ($65.0)
• VPI: Use Kindergarten as a Proxy for 4 Year-olds – ($26.7)
*
Recent previous biennia reductions included: a funding cap on support positions, eliminating recognition of other SOQ support costs,
increasing the federal deduct from 29% to 38% for support costs, changing funding assumptions for health care premiums, eliminating
enrollment loss and support for construction, etc. (for further details see: http://hac.virginia.gov/committee/files/2010/11-1610/Public_Education_Update.pdf
8
Reasons the State Is Restoring Little to
Core K-12 Program Funding
1.
2.
3.
4.
5.
6.
Revenues not growing as fast as usual coming out of a recession (under
5% revenue growth expected in 2012-14). Tax changes reducing
revenues. Concern over potential impact of federal deficit reductions.
Rainy Day Fund must be restored – Half of any GF revenue growth above
prior 6-yr. avg. (2% now) goes to RDF.
VRS contribution rates for teachers and state employees will be
significantly increased.
Medicaid spending continues to grow faster than state revenues. 2014
impact of federal health care big unknown, but law as written would add
up to 425,000 new Medicaid recipients.
Use of one-time revenues/savings/debt in recession have to be replaced
with ongoing revenues just to keep current spending.
Increasing efforts to use general funds for transportation.
9
Revenues Not Rebounding as Fast
Growth in General Fund Tax Revenues
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
10
General Fund Tax Changes Have More Than
Neutralized 2004 Tax Increase
Enacted/Amended
2012-14 ($ Mil.)
Age Subtraction (net of means testing)
1994/2004
($555)
Subtraction for UI/Military/Gov't Empl
1999
($73)
Historic Rehab Tax Credit
1999
($92)
Coalfield Employment Tax Credits
2000
($89)
2000, 2004, and 2007
($377)
Land Preservation Tax Credit
2003
($275)
2004 Tax Reforms*
2004
$1,780
Elim. 2.5% Sales Tax on Food
2004
($437)
Shift Insurance Premiums and Recordation
from GF to Transportation
2009
($340)
Estate Tax Repeal
2009
($280)
1999-2011
($182)
2012 (Proposed)
($110)
Low Income Tax Relief
Other Tax Changes since 1999
Phase-in of 0.5% Sales Tax to Transportation
Total
($1,030)
* Includes cigarette tax increase dedicated to Health Care Fund
Sources: Senate Finance Committee Retreat, Revenue Outlook, Nov. 18 , 2010
Summary of Amendments to the 2010-2012 Budget, Money Committee Staff. May 2010
11
Retirement Rates Set to Rise
FY 2012-14
2011 & 2012
VRS Board
6/25/2011- 3/25/2012VRS Board
Cert. Rates FY 2011 3/24/2012 6/24/2012 Cert. Rates *
State
Teachers
FY 2012-14
Introduced
Rates**
8.46%
2.13%
2.08%
6.58%
13.07%
8.76%
12.91%
3.93%
6.33%
6.33%
16.77%
11.66%
* Assumes phase-in of 7.5% to 7% investment return, 2.5% COLA, and 30 year amortization
** Reflects 8.0% investment return
Notes: Employer rates only and do not include 5% member contribution.
Over the last 10 years ending June 30, 2011 VRS annual average total fund investment return has been 5.7%.
12
Health Care Has Trumped Education
2006-08 Budget Compared to 2012-14 Introduced Budget
(Change in Appropriated GF Mil. $)
$3,000.0
$2,500.0
$2,423.5
$2,000.0
$1,500.0
$1,000.0
$529.0
$500.0
$47.3
$0.0
($2.5)
($500.0)
($371.1)
($1,000.0)
($1,110.6)
($1,500.0)
Medicaid Debt Service Corrections
K-12
Higher Ed
CSA
13
K-12 and Medicaid Funding are Converging
(% of Total GF Spending)
40.0%
35.0%
K-12
30.0%
25.0%
20.0%
Medicaid (DMAS)
15.0%
10.0%
5.0%
0.0%
2009
2010
2011
2012
2013
2014
14
Non-Recurring Recession Revenues No
Longer Available
• State Appropriated Federal Stimulus Funding - $2.8 billion
• Reduced VRS state employee and teacher retirement/OPEB
benefit contributions - $850 mil.
• Rainy Day Fund Withdrawals- $783 mil.
• Replaced Capital Outlay Cash With Debt - $350 mil.
• Accelerated Sales Tax for Dealers - $227 mil.
• Captured NGF balances and interest earnings - $113 mil.
• Tax Amnesty - $102 mil.
• Eliminated Sales Tax Dealer Discount for Electronic Filers $98 mil.
15
GF Debt Service ($ Mil.)
$700
$658
$624
$593
$600
$542
$500
$479
$434
$387
$400
$321
$300
$284
$222
$185
$200
$234
$247
$223
$236
$200
$167
$126
$91
$100
$138
$105
$65
$28
$43
$0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Senate Finance Committee Retreat, Nov. 2011
16
Governor’s Proposal Would Divert Significant
General Funds to Transportation
(HB 1248/SB 639)
• Phase-in of additional 0.25% sales tax to transportation
- $53 million in FY 13 to $300+ million by FY 20.
• Dedicates one percent of general fund if growth is
above five percent – potentially over $170 million/yr.
• Increases dedication of GF surplus from 67% to 75%
(FY 2011 surplus yielded $67 mil.).
• Creates transportation improvement districts whereby
projects are partially funded using growth in state
general funds from that district.
17
Conclusion
• School division budgets will remain very tight for foreseeable
future.
– Localities already spend $3.2 billion per year above their
required local effort.
• Governor provided very little new net funding for K-12
beyond increases for teacher retirement.
Local share for teacher retirement also increasing –
straining school division budgets.
• Incentive and categorical funds, including executive
amendments, were fully re-benchmarked (except Pre-K).
A positive response to the JLARC 3rd grade reading
study?
18
State Per Pupil Funding Projections
$5,400
$5,274
$5,200
$5,000
$5,000
$4,800
$4,719
$4,730
2013
2014
$4,569
$4,600
$4,513
$4,400
$4,200
$4,000
2009
2010
2011
2012
Fiscal Year
Includes GF, lottery profits, miscellaneous NGF, and state appropriated federal stimulus funds
19