State Fiscal Outlook: Minnesota and the Nation One Minnesota January 9, 2013 Scott Pattison Executive Director National Association of State Budget Officers 444 North Capitol Street, NW,
Download ReportTranscript State Fiscal Outlook: Minnesota and the Nation One Minnesota January 9, 2013 Scott Pattison Executive Director National Association of State Budget Officers 444 North Capitol Street, NW,
State Fiscal Outlook: Minnesota and the Nation One Minnesota January 9, 2013 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: Overview NASBO 2 State Fiscal Overview The “Great Recession” was an extremely difficult fiscal period for states in all regions Fiscal 2013 projections show aggregate expenditures and revenues continue to improve For many states, general fund revenues and expenditures still below fiscal 2008 States recovering, but not recovered; resources remain tight Federal uncertainty in a number of areas NASBO Federal spending expected to decline 3 Federal Overhang… Sequestration Cuts now scheduled for March 1, 2013 Debt Ceiling will need to be raised in February or March Many program authorizations set to expire “Grand bargain” Tax Reform? NASBO 4 Current Fiscal Situation: Indicators NASBO 5 3 Years of Slow GF Growth Following 2 Years of Declines General Fund Expenditure Growth (%) 12 10 8 6 * Average 4 % 2 0 -2 -4 -6 -8 *35-year historical average rate of growth is 5.6 percent Source: NASBO Fall 2012 Fiscal Survey of States NASBO *Fiscal ‘13 numbers are appropriated FY 2013 Appropriated Spending Still $5.9 Billion Below FY 2008 Source: NASBO Fall 2012 Fiscal Survey of States NASBO 7 State Revenue Continues to Grow in 3rd Quarter, but at Slower Rate Year-Over-Year Real Change in Quarterly State Tax Revenue 15 10 5 0 % -5 1999 2000 2001 2002 2003 2004 2005 2006 -10 -15 -20 Total Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau NASBO 2007 2008 2009 2010 2011 2012 FY 2013 General Fund Revenue is Expected to Surpass FY 2008 by $13B Source: NASBO Fall 2012 Fiscal Survey of States NASBO 9 Minnesota GF Revenue: 1997-2012 (estimated) Source: NASBO State Expenditure Report NASBO 10 States Enact $6.9 Billion in Additional Taxes and Fees Enacted State Revenue Changes, Fiscal 1979 to Fiscal 2013 $30 ($ In Billions) $25 $20 $15 $10 $5 $0 -$5 -$10 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Fiscal Year NASBO 11 States Continue To Rebuild Budgetary Reserves After Recession NASBO 12 Balances in MN and Selected States Source: NASBO Dec. 2011 Fiscal Survey of States NASBO 13 Minimal Midyear Budget Cuts in FY 2012, 8 States Cut $1.7 Billion Budget Cuts Made After the Budget Passed ($ millions) Source: NASBO Fall 2012 Fiscal Survey NASBO Strategies Used to Reduce or Eliminate Budget Gaps, FY 2013 Reduce Local Aid: 8 states Layoffs: 9 states Furloughs: 3 states Cuts to Employee Benefits: 9 states Across-the-Board Cuts: 13 states Targeted Cuts: 21 states Rainy Day Fund: 4 states Reorganize Agencies: 10 states Source: NASBO Fall 2012 Fiscal Survey of States NASBO Current Fiscal Situation: Economic Overview NASBO 16 Unemployment Rate in MN and Selected States Source: U. S. Department of Labor, Bureau of Labor Statistics NASBO 17 National Unemployment Rate Compared to MN % Source: U.S. Department of Labor, Bureau of Labor Statistics NASBO 18 Background on State Spending Trends NASBO 19 Spending by Funding Source (Percentage) Total State Expenditures By Funding Source, Estimated Fiscal 2012 Other State Funds 26.5% Bonds 2.5% Federal Funds 31.2% General Funds 39.8% Source: NASBO State Expenditure Report NASBO 20 MN Spending by Funding Source (Percentage) Source: NASBO State Expenditure Report NASBO 21 MN Total State Expenditures MN Total Expenditures by Function, Estimated Fiscal 2012 All Other 27.0% Transportation 10.7% Corrections 1.5% K-12 23.3% Public Assistance 1.3% Medicaid 26.7% Higher Education 9.4% Source: NASBO State Expenditure Report NASBO 22 Total Expenditures Percentage Growth in Spending Categories Over 10 Years Percentage Growth in Spending Categories Between Fiscal 2003 and Fiscal 2012 (Total Funds) 70 59.7 60 44.8 50 40 31.8 33.9 60.9 47.7 34.5 % 30 20 10 0 -10 Public Assist. -5 Higher Ed K-12 Corrections Transport. Total All Other Medicaid Sources: NASBO State Expenditure Reports NASBO 23 General Fund: Medicaid & Education 64.3% General Fund Expenditures by Function, Estimated Fiscal 2012 Transportation 0.5% All Other 26.6% Corrections 7.0% Public Assistance 1.5% Medicaid 19.6% Elementary & Secondary Education 34.7% Higher Education 10.0% Source: NASBO State Expenditure Report NASBO 24 MN General Fund: Medicaid & Education 76.4% General Fund Expenditures by Function, Estimated Fiscal 2012 Transportation Corrections 0.3% 2.5% Public Assistance 1.0% All Other 19.9% Medicaid 23.4% K-12 36.8% Higher Education 16.2% Source: NASBO State Expenditure Report NASBO 25 General Fund Percentage Growth in Spending Categories Over 10 Years Percentage Growth in Spending Categories Between Fiscal 2003 and Fiscal 2012 (General Funds) 60 53.2 45.8 50 40 30.6 31.5 34.4 30 % 20 8 10 11.7 0 -10 -20 Public Assist. -10.1 Higher Ed Transport. K-12 Corrections Total All Other Medicaid Sources: NASBO State Expenditure Reports NASBO 26 State Spending from Federal Funds Federal Funds Spending, Estimated Fiscal 2012 All Other 30.9% Transportation 8.0% Elementary & Secondary Education 10.9% Corrections 0.2% Public Assistance 2.6% Higher Education 3.5% Medicaid 43.9% Source: NASBO State Expenditure Report NASBO 27 MN State Spending from Federal Funds Federal Funds Spending, Estimated Fiscal 2012 All Other 32.3% Transportation 5.2% Corrections 0.1% K-12 10.1% Higher Education 0.1% Public Assistance 2.9% Medicaid 49.5% Source: NASBO State Expenditure Report NASBO 28 Promising Practices NASBO 29 Promising Financial Management Practices NASBO Use contingencies Prudent use of debt Rainy day funds and reserves One time only revenue for one time only! Use of performance information Avoiding bad practices in good times 30 Focus on Outcomes Focus on results and outcomes Spend funds for effective programs Improve management NASBO 31 Model: The “Drilling Rig” NASBO 32 Outlook NASBO 33 State Fiscal Outlook Austere state budgets for at least the next several years (Slow revenue growth, ARRA declines, economic uncertainty) Health care reform, federal government will have an impact Tough competition for general funds and limited federal funds Dealing with long-term liabilities States will continue to make painful choices NASBO 34 www.nasbo.org Scott Pattison (202) 624-8804 [email protected] NASBO 35