Transcript The William P. Hobby Policy Conference

900 Lydia Street - Austin, Texas 78702
Phone (512) 320-0222 – fax (512) 320-0227 www.cppp.org
State Budget Overview for the
2005 Legislative Session
January 5, 2005
Eva De Luna Castro, Budget Analyst
([email protected])
PRESENTATION OUTLINE:
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What happened last time?
Current state budget picture
Budget needs for 2006-07
Revenue system: current
sources; options for 2006-07
The “Balancing” of the 2004-05 State Budget
Cuts to 2003 Budget: $1.4 billion
Cost shifting: $1.0 billion
“Smoke and mirrors”: $1.2 billion
Rainy Day Fund: $1.3 billion
Estimated
General
Revenue
shortfall of
$15.6 billion
for 2004-05
Federal Fiscal Relief: $1.4 billion
Revenue Measures: $1.8 billion
Cuts to 2004-05 Budget:
$7.5 billion
Where Budget Cuts Were Made
•Health Care (not just Medicaid
and CHIP, but also teachers’
and state employees’ health
coverage)
•K-12 textbook funding; grant
programs such as kindergarten
and pre-K expansion grants;
Tele-communications Infrastr.
Fund (now funds Technology
Allotment)
•Layoffs of state employees
•More details available in
CPPP’s July 2004 report, at
http://www.cppp.org/products/report
s/budget-impact04/index.html
State vs. Federal Funds, Current
Budget
STATE GOVERNMENT ALL-FUNDS SPENDING
Billion $
2004-2005 total: $118.2 billion
$40
$30
$23.7
Federal
State*
$7.0
$20
$0.3
$27.3
$10
$16.0
$7.0
$0.3
$7.3
$7.7
Business &
Econ. Dev.
Public Safety &
Crim. Justice
$15.4
$Health &
Human Svcs
K-12 Education
Higher
Education
$1.0
$5.2
All Other
*"State" is General Revenue, General Revenue-dedicated, and Other Funds.
Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.
State Budget Isn’t Alone on 2005 Agenda
•General Appropriations Act has to be passed by legislators to
keep state services going in 2006-2007 (budget starts September
1, 2005)
•School Finance: equity and adequacy issues; legislators may
wait for results of appeal (of State District Judge Dietz’s ruling)
before acting. Or they may try to cut local property taxes by
enacting or expanding state taxes (franchise tax, new business
activity tax, tobacco tax, sales taxes)
•Higher Ed: Texas Grants and other financial aid; Top 10% Law
•Workers Comp reform: increasing return-to-work rates, creating
physicial networks, controlling costs, limiting use of workers’ comp
•Other: insurance (homeowners and health); utility regulation;
Texas Enterprise Fund; asbestos lawsuits; capital punishment;
incarceration policies; same-sex marriage and abortion issues;
Source: Texas Legislative Budget Board, Fiscal Size Up 2004-05.
water policy; tollways
•See House Research Organization Report, Topics for 79th
Where 80 Percent of General Revenue
Goes
2004-2005
Percent
GR Budget
of All GR
Texas Education Agency
$20.6 billion
35%
Health and Human Services Commission
$9.4 billion
16
Department of Criminal Justice
$4.6 billion
8
Teacher Retirement System
$3.8 billion
6
Dept. of Aging and Disability Services
$3.5 billion
6
Dept. of State Health Services
$1.6 billion
3
Employees Retirement System
$1.4 billion
2
Higher Education Coordinating Board
$667 million
1.1
University of Texas at Austin
$483 million
0.8
Family & Protective Services
$478 million
0.8
Source: Legislative Budget Board, Fiscal Size Up 2004-05, and budget requests for
2006-07.
State Government Spending
as a Percent of Gross State Product
8.0%
Percent of GSP
7.0%
6.0%
All-Funds Spending
5.0%
4.0%
3.0%
General Revenue Only
2.0%
1991
1993
1995
1997
1999
2001
2003
2005
Sources: Legislative Budget Board; Comptroller of Public Accounts; US Bureau of Economic Analysis
What Texas State Government Pays For
Highways 7%
Education 37%
Medicaid and
public welfare 22%
Hospitals - 5%
Health3%
Police &
Corrections
5%
Insurance Trust
(Pensions, UI) 12%
Other/
inallocable - 5%
Gov.
Admin.
Natural Resources
2%
& Parks 1%
Debt Svc. 1%
Source: U.S. Bureau of the Census, State Government Finances
series. Data for 2002 for Texas, total expenditures (including trust) of
$70.3 billion.
What Texas Local Government Pays For
Streets & Fire - 2%
Hwys. 3%
Education 44%
Sewerage & Solid
Waste 3%
Natural
Resources &
Parks 3%
Police &
Corrections - 6%
Hospitals 5%
Health - 2%
Insurance
Trust - 1%
Other/
inallocable - 8%
Housing & Comm.
Dev. - 2%
Gov. Admin. - 4%
Utilities - 12%
Debt Svc. - 5%
Source: U.S. Bureau of the Census, Government Finances series.
Data for 2002 for Texas, total expenditures (including trust) of $77.1
billion.
Texas Per Capita State/Local Spending, Fiscal 2002
(Total: $5,975 per capita; 41 % is state, 59 % is local)
$-
$300
$600
$900
$1,200
$1,500
50-State
Ranking:
13th
K-12 Education
$686
Medicaid and Welfare
$1,475
$574
Higher Education
46th
26th
Highways & Streets
$346
39th
Hospitals
$341
15th
$202
Prisons
$171
Police/State Troopers
Public Health
Parks/Recreation
$124
$94
13th
35th
41st
23rd
Judicial/Legal
$75
36th
Housing & Comm Dev
$72
33rd
Natural Resources
$46
Source: U.S. Bureau of the Census, State & Local Government Finances,
Fiscal 2002.
43rd
Indicators of Texas’ Need
for Public Social Services
Texas
US
Average
Texas
rank
% of Population under 18, 2002
28.0 %
25.3 %
3rd
Child Poverty Rate, 2003
22.8 %
17.7 %
8th
Elderly Poverty Rate, 2003
13.0 %
9.8 %
7th
% of Under-65 Population with No
Health Insurance, 2003
26.9 %
17.6 %
1st
% of Residents Aged 25 or over with
at least a High School Diploma,
2003
77.8 %
83.6 %
49th
% of Residents Aged 25 or over with
at least a Bachelor’s Degree, 2003
24.5 %
26.5 %
27th
Source: U.S. Bureau of the Census, March CPS and American
Community Survey
Need Indicators for Tarrant County
Texas
Tarrant County
% of Population under 18, 2003
28.8 %
28.8 %
Child Poverty Rate, 2003
22.5 %
14.8 %
Elderly Poverty Rate, 2003
13.0 %
9.0 %
Overall Poverty Rate, 2003
16.3 %
11.4 %
Residents on Food Stamps, 2003
8.7 %
4.8 %
Residents receiving cash welfare, 2003
1.7 %
1.4 %
% of Residents Aged 25 or over with at
least a High School Diploma, 2003
77.8 %
83.7 %
% of Residents Aged 25 or over with at
least a Bachelor’s Degree, 2003
24.5 %
27.5 %
Sources: U.S. Bureau of the Census, American Community Survey; Texas
Dept. of Human Services, Annual Report for 2003.
2006-07: Another Tough Budget to
WriteBiennial General Revenue
%
State Budget, 2004-05
$58.9 billion
Across-the-board 5% cut to
baseline
(if no exceptions were made)
($2.9 billion)
-5%
$1 billion
1.8%
K-12: Exceptional Items
$1.3 billion
2.2
HHSC: Baseline Increase
$397 million
0.7
HHSC: Current Svcs Exceptional
Items
$2.7 billion
4.6
CHIP/Medicaid Shortfall for 2005
$320 million
0.5
Aging & Disability: Baseline Increase
$232 million
0.4
Aging & Disability: Exceptional Items
$1.1 billion
1.8
Family & Protective Services
(without CPS reform)
$200 million
0.3
Dept. of State Health Services
$163 million
0.3
Major Requests for More GR:
K-12 (TEA): Baseline Increase
2006-07: Another Tough Budget to
Write
Biennial General
Revenue
%
Department of Criminal Justice
(avoids layoffs of 1,450 prison guards
and
350 other state prison staff)
$303 million
0.5
Teacher Retirement System
(mostly to restore teacher health
benefits)
$1.4 billion
2.3
Employees Retirement System
(mostly state employee health care)
$566 million
0.9
Higher Education Coordinating Board
(about half is for financial aid—Texas
Grants
and B on Time—to offset tuition
increases)
$597 million
1.0
$10.3 billion
17.5 %
New GR needed so far:
K-12 (TEA) Major Exceptional Items
•Textbooks: $387 million
•Guaranteed Yield Increase: $301 million; Existing Debt
Allotment: $180 million; Instructional Facilities Allotment:
$150 million
•Student Success Initiative (to prevent “social
promotion”): $251 million
•Restorations of programs cut in 2003, such as Pre-K/
Kindergarten Grants ($7 million), High School
Completion ($3.5 million), Texas Advanced Placement
($1.4 million), Technology Allotment ($12 million)
•GR match needed for Adult Ed/Literacy: $13.6 million
HHSC Major Exceptional Items
•Maintaining Medicaid Caseload Growth: $1.3 billion in GR
•Maintaining Medicaid Cost Trends: $1.2 billion
•Decline in match rates for Medicaid and CHIP: $111 million
•Restoring Medicaid rates: $177 million
•Restoring 5% cuts to GR: $26 million
•Maintaining CHIP caseload growth: $65 million; Cost trends and
rate restorations: $20 million; benefit restorations $53 million
•Restoring Medicaid services for adults, Graduate Medical Ed: $102
million
•Partially restoring services for Medically Needy: $35 million
•Keeping HHS waiting lists from growing: $47 million; reducing
waiting lists over next decade: $255 million
•Rate increases for Medicaid and CHIP providers: $264 million
DADS Major Exceptional Items
•Restoring entitlement growth in long-term care programs:
$154 million in GR
•Restore 5% GR cuts: $20 million
•Decline in Medicaid match rate: $17 million
•Guardianship program (being transferred from Family &
Protective Services): $12 million
•Restore long-term care rates to fiscal 2003 levels: $54
million
•Long-Term Care Provider Rate increases: $531 million
•Rate increase for direct care staff (nurses in State
Schools, community care attendants & direct care aides):
$240 million
Family & Protective Services: Major Exceptional
Items
•$12 million in GR to restore foster care/adoption rates to fiscal 2005
levels; $39 million for foster care/adoption caseload growth
•Restoring 5% cuts to GR: $9 million (prevention programs)
•$28 million to restore lost Medicaid funding (Targeted Case
Management)
•Adult Protective Services reform: $9 million
•Keeping CPS caseloads from worsening: $26 million
•Restore prevention program cuts: $19 million
•Further restoration/adjustments to foster care rates: $28 million
•Enhanced permanency for children: $28 million
•HHSC report on CPS reform, including recommended funding
changes, was due by December 31, 2004; revised budget likely to
be submitted based on these recommendations
State Health Services: Major Exceptional Items
•$107 million in GR to restore 5% cuts to GR: major programs include
child immunizations; HIV/Sexually Transmitted Disease & Hepatitis C
Prevention; TB, Hansen’s, & Refugee Health; Kidney Health; Children
with Special Health Care Needs; Mental Health Services for Adults &
Children; Northstar Behavioral Health; Women & Children’s Health
Programs; Family Planning; Substance Abuse Prevention,
Intervention, & Treatment; County Indigent Health Care; State
Hospitals; Radiation Control; Food (Meat) & Drug Safety
•Medicaid match rates and loss of one-time funding: $8 million
•Texas HIV Medication program: $5.7 million
•General Revenue restoration for Substance Abuse programs: $10
million
•State facilities/infrastructure: $29 million
•Salary upgrades for nurses/LVNs: $10.5 million
Other Pricetags
Biennial GR
State Budget, 2004-05
Replacing Robin Hood
“Buying down” local school
property taxes by 10 cents per
$100 taxable value
Eliminate waiting list (30,000)
for working-poor child care
Reaching the national
average in state/local
spending from taxes

%
$58.9 billion
At least $2.3 billion
4%
$2 billion
3.4%
$73 million
0.1%
$16 billion
27%
Outcome Depends on Available
Revenue
•Comptroller will give legislators the official revenue
estimate no later than January 2005
•Good news: revenues for 2004 show higher-thanexpected annual growth, at 6.4%, much better than
fiscal 2003. Rainy Day Fund balance is back up to $878
million (Sept. 2004).
•Bad news: health care costs—one-third of state
budget—expected to continue rising at double-digit rates
•Long-term structural inadequacies of state/local tax
system are putting too much pressure on property taxes
•Heavy reliance on sales taxes also makes Texas tax
system very regressive (taking more from families with
the lowest incomes)
State/Local Taxes: Lower than a Decade Ago
Texas state & major local taxes as a share of personal income
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
1990
1992
1994
1996
1998
2000
2002
2004
Tax Effort Would be Even Lower if Not For
Local Decisions to Fund Basic Services
5.4%
5.0%
4.6%
4.2%
State taxes as % of Personal Income
Local taxes as % of Personal Income
3.8%
1990
1992
1994
1996
1998
2000
2002
From a Taxpayer’s Point of View
Major State and Local Taxes in Texas, 2004
School Property
28%
Other State
Taxes
21%
Property
Tax 47%
Sales Tax
32%
State Sales
25%
Local Sales
7%
City Property
7%
County Property
7%
Special District
Property
5%
Source: Comptroller of Public Accounts, Annual Property Tax Report; Cash
Report.
From the State’s Point of View: All
Revenue
State Revenue Sources, 2004
(Total: $62.1 billion)
Taxes
45%
Federal Funds
35%
Lottery
3%
Other
6%
Interest/
Investment Income
2%
Licenses, Fees,
Permits, Fines,
Penalties
9%
From the State’s Point of View: Taxes Only
State Tax Collections, 2004
(Total: $27.9 billion)
Motor Vehicle Sales
and Rental
10%
Motor Fuels
10%
Franchise
7%
Insurance
4%
Sales
55%
Sin (Cigarette,
Tobacco,
Alcohol)
4%
Gas/Oil Production
3%
Other
6%
Revenue Options Likely to be
Considered
•Cigarette tax: $1/pack increase raises $1.7 billion
biennially
•Video Lottery Terminals: $1.1 billion biennially.
“Crack cocaine” of gambling.
•Business activity tax: broader base than franchise
tax (only applies to corporations)
•Sales tax rate increase — but this is extremely
regressive, and TX already has one of the highest
rates
•Sales tax base expansion (to services not covered
Texas State and Local Taxes as a Percent of Household
Income, by Quintile*
15.0%
11.9%
12.0%
9.0%
5.8%
6.0%
4.6%
4.1%
3.3%
3.0%
0.0%
Under $26,816
$26,816 to
$52,844
$52,844 to
$81,990
$81,990 to
$126,345
Over $126,345
Household Income
* Each bar represents approximately 1.6 million households.
Source: Comptroller of Public Accounts, Tax Exemptions and Tax Incidence