local government theresa mchugh state budget director department of administrative services budget...

Local Government

Theresa McHugh

State Budget Director

Department of Administrative Services

Budget and Management Division

503-378-4691

A copy of this presentation can be found at: http://www.bam.das.state.or.us/

1990’s: State enjoyed huge economic growth and diversification

• Total gross state product increased by 98% from 1991-2001.

• High-tech industry growth.

• Population growth – 11th fastest growing state.

• Personal income grew at annual rate of 5.6%, exceeding the nation.

• Exports increased by a compound annual rate of 5.8%.

• State General Fund grew from $4,628.1 million in 1989-91 to $10,121.8 million in 1999-2001 – dollars primarily went to K-12, Oregon Health Plan, and Public Safety.

• Kicker returned for personal income tax filers 7 times, totaling over $1.5 billion; for corporate tax filers 5 times, totaling over $400 million.

Decennial Population Growth (in percent): 1990 – 2000

CLATSOP

WASHINGTON

MULTNOMAH

COLUMBIA

DOUGLAS

LANE

LINCOLN

POLK

YAMHILL

TILLAMOOK

MARION

COOS

DESCHUTES

MALHEURHARNEYLAKEKLAMATHJACKSONJOSEPHINE

CURRY

HOOD RIVER

BENTON LINN

JEFFERSON

CROOK

WALLOWAUMATILLAMORROW

GILLIAM

WASCO

SHERMAN

WHEELER

GRANT

BAKER

UNION

> 20 %

Source: U.S. Census Bureau, 1990 and 2000 Censuses

CLACKAMAS

Office of Economic Analysis

Population Change

10 – 20 % Less than 10 %

Oregon: 20.4%

Poverty Rate, 1999

CLATSOP

WASHINGTON

MULTNOMAH

COLUMBIA

DOUGLAS

LANE

LINCOLN

POLK

YAMHILL

TILLAMOOK

MARION

COOS

DESCHUTES

MALHEURHARNEYLAKEKLAMATHJACKSONJOSEPHINE

CURRY

HOOD RIVER

BENTON LINN

JEFFERSON

CROOK

WALLOWAUMATILLAMORROW

GILLIAM

WASCO

SHERMAN

WHEELER

GRANT

BAKER

UNION

> 15 %

Source: U.S. Census Bureau, Census 2000

CLACKAMAS


% of personsunder poverty

10 – 15 % Less than 10 %

Oregon: 11.6%

Unemployment Rate by Region, October 2003(Not seasonally adjusted; Portland PMSA includes Vancouver, WA)

Source: Oregon Employment Department, November 2003 Office of Economic Analysis

7.5%

6.7%

6.9%

6.7%

7.0% 5.9%

Oregon: 6.9% (seasonally adjusted: 7.6%)

Covered Employment by SIC Division, 2002(top three for each region are highlighted)

Employment Distribution

Oregon Portland PMSA

Willamette Valley

Coast Southern Central Eastern

Nat. Resources & Mining

3.0% 1.6% 4.4% 4.4% 3.4% 4.7% 7.7%

Construction

5.0% 5.1% 4.5% 4.1% 4.6% 5.7% 3.8%

Manufacturing 12.8% 13.3% 13.3% 10.0% 12.1% 11.2% 12.9%

Trade, Transp. & Utilities 19.9% 20.7% 17.1% 18.5% 22.0% 19.2% 20.6%

Information

2.3% 2.6% 2.0% 1.5% 1.9% 1.8% 1.2%

Financial Activities 5.4% 6.7% 4.1% 3.1% 3.9% 4.4% 2.9%

Prof. & Business Services

11.0% 13.4% 8.9% 5.7% 7.8% 7.6% 5.1%

Edu. & Health Services

11.4% 11.2% 12.3% 9.5% 13.3% 11.2% 9.3%

Leisure & Hospitality

9.5% 8.8% 8.6% 17.5% 10.7% 12.8% 8.1%

Other Services 3.7% 3.8% 3.7% 3.6% 3.7% 3.1% 3.0%

Government 16.1% 12.6% 21.0% 22.0% 16.5% 18.5% 25.3%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Source: Oregon Employment Department Office of Economic Analysis

2003-05 All Funds Expenditures

Human Resources$9,456.7

24.9%

Other Education$2,111.3

5.6%

Administration$5,378.6

14.2%

Consumer and Business Services

$783.72.1%

Transportation$2,169.4

5.6%

Legislative Branch$61.60.2%

Miscellaneous$96.40.3%

Natural Resources$1,322.5

3.5%

Economic Development

$4,790.712.6%

Public Safety/ Judicial$2,481.4

6.5%

Higher Education$4,151.910.8%

State School Fund$5,206.513.7%

Total: $ 38,010.7 Million

All Funds Expenditures


7.6%

Natural Resources$673.44.7%

Miscellaneous$274.81.9%Administration

$1,247.7 8.7%

Economic Development*

$3,199.522.3%

Public Safety/ Judicial$407.92.8%

Human Resources$3,563.524.7%


State School Fund$1,176.1

8.2%


Other Education$641.24.5%

Administration$3,551.512.0%Transportation

$2,059.17.0%


4.0%


$3,451.911.7% Public Safety/

Judicial$2,135.8

7.2%



5.9%

Higher Education$2,712.5

9.2%


Miscellaneous$146.20.5%


Consumer and Business Services,

$511.51.7%


Miscellaneous$225.90.7%Administration

$4,033.511.8%


$812.92.5%


5.3%


3.8%


$4,102.412.0%

Public Safety/ Judicial$2,324.0

6.8%



5.6%



Administration$5,084.815.1%Consumer and

Business Services$850.62.2%


5.2%Natural Resources

$1,474.93.8%


$5,719.314.8% Public Safety/

Judicial$2,782.3

7.2%



4.9%




2001-03 Close of SessionTotal: $34,077.0 Million

2001-03 FinalTotal: $37,836.3 Million

1989-91 Legislatively AdoptedTotal: $ 14,360.4 Million

1999-2001 Legislatively AdoptedTotal: $29,576.8 Million

*Includes Consumer and Business Services

General Fund Forecast Comparison Fiscal Years, in Millions

3,000

4,000

5,000

6,000

7,000

8,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

September 2003 Forecast Actual Revenues 2001 COS Forecast

Lottery Resources Available to the State


$ 0

$100

$200

$300

$400

$500

$600

$700

$800

85-87 87-89 89-91 91-93 93-95 95-97 97-99 99-01 01-03Proj.

03-05Proj.

05-07Proj.

07-09Proj.

(Millions)

Resources Available for Allocation

Parks and Natural Resource

Fund (15%) & Gambling

Addiction (1%)

Education Endowment

Fund (15-18%)

Debt Service

Note: Resources do not include Video Lottery proceeds dedicated to the Counties. Beginning balance is included. 2003-09 debt service figures do not reflect any Education Endowment Fund or reserve earnings designated for debt service on education bonds .

2001-03

• Close of Session forecast projects $12.1 billion General Fund/Lottery Funds ($11.45 GF/$0.65 LF). Legislature approves expenditures of $12 billion. Preliminary 2003-05 forecast is approximately $13 billion (GF plus Lottery).

• Quarterly General Fund forecasts demonstrate effects of recession:

2001-03 2003-05

September 2001 11,159.4 12,313.0

December 2001 10,747.5 11,944.8

March 2002 10,604.0 11,973.9

June 2002 10,098.2 11,528.3

September 2002 9,718.6 11,392.5

December 2002 9,585.6 10,880.5

• Five special sessions plus a rebalance during the 2003 regular session to rebalance the budget using one-time resources, program reductions, and additional revenues.

1989-91 General & Lottery Fund ExpendituresTotal: $4,804.6 Million

Public Safety/Judicia

l$631.013%

All Other$898.919% Other

Education$308.7

6%

State School Fund

$1,176.125%

Higher Education

$693.314%


23%

1999-2001 General & Lottery Fund ExpendituresTotal: $10,613.2 Million

Public Safety/Judicial

$1,557.815%

All Other$606.5

6%

Other Education

$832.68%

State School Fund

$4,567.542%

Higher Education

$761.27%


22%

2001-03 Legislatively Approved General Fund & Lottery Funds Budget - End of Biennium

Total: $10,426.7

Higher Education$761.2

7%


24%


40%

Other Education$730.4

7%

All Other$618.4

6%


$1,635.516%

2001-03 Legislatively Approved General Fund & Lottery Funds Budget - Close of Session

Total: $11,973.9

Higher Education$814.3

7%


41%


$1,761.715%

Other Education$835.2

7%

All Other$899.6

8%


22%

Approved General Fund & Lottery Funds

2 of 2

2003-05

• Governor Kulongoski prepares his recommended budget based on December forecast of $11.4 billion.

• By May, the forecast for 2003-05 has dropped by over an additional $1 billion.

• Legislature balances budget using a combination of one-time resources, program reductions, and revenue increases, including temporary increases to personal and corporate income tax.

• Final Legislatively Approved Budget is $11.5 billion General Fund/Lottery Funds, with an ending balance of approximately $100 million.

• Legislature approves a potential disappropriation and potential increased spending on K-12.

Human Services$2,480.621.5%

Higher Education

$687.16.0%


$1,665.414.5%

All Other$608.65.3%

Other Education*

$859.07.5%

State School Fund

$5,189.345.2%

2003-05 Legislatively Adopted General Fund and Lottery Funds Budget

*Includes Oregon Health Sciences University

All Other $455.64.0%

Personal Income Tax

$8,779.876.1%

Legislative Actions $971.48.4%

Tobacco Taxes $112.11.0%

Corporate Income Tax

$410.43.6%

Lottery $673.95.8%Insurance

$127.51.1%

ExpendituresTotal: $11,490.0 Million

RevenuesTotal: $11,530.7 Million

General Fund and Lottery Funds by Program Area

$-

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

$7,000,000,000

Educa

tion

Human

Res

ourc

es

Public

Saf

ety

Econ

Develo

pmen

t

Natur

al R

esou

rces

Trans

porta

tion

Consu

mer

Ser

vices

Admini

strat

ion

Legi

slativ

e Bra

nch

Judic

ial B

ranc

h

Misc

ellan

eous

1989-91 LAB

2001-03 LAB

2003-05 GBB

2003-05 LAB

* Excludes additional PERS savings of $191.5 million that is used to balance the Governor’s Revised Budget and includes new discretionary resources.

State School Fund Level

Special Payments

75.3%

Services and Supplies

4.7%

Capital Outlay0.3%

Personal Services17.8%

Debt Service1.9%

Special Payments

70.6%


7.6%

Capital Outlay0.6%


Debt Service2.0%

Special Payments

56.6%


9.3%Capital Outlay1.9%


Debt Service0.4%

2003-05Total: $11,490.0 Million

1989-91 Total: $4,804.6 Million

General Fund and Lottery FundsExpenditures by Category

2001-03Total: $11,973.9 Million

Expenditures by Category

Debt Service1.9%

Capital Outlay0.3%

Personal Services Direct Service Staff

12.6%


4.7%

Personal Services All Other

5.2%

Special Payments75.3%

2003-05Total: $11,490.0 million

2003-05 Full-Time Equivalent Positions

Judicial Branch1,895.8

4.1%

Legislative Branch394.50.8%

Administration2,819.76.0%


1,558.53.3%

Transportation4,601.79.8%

Natural Resources4,163.1

8.8%


1,851.93.9%

Public Safety7,810.216.6%

Human Resources9,280.619.7%

Education12,691.327.0%

Total: 47,067.3

Full-Time Equivalent Positions




Judicial Branch1,451.83.3%

Natural Resources2,490.15.6%

Economic Development*

2,671.06.0%








1,880.74.1%




1,627.23.5%





Legislative Branch417.60.9%Administration

2,735.65.8%


1,589.33.4%




1,939.54.1%





Legislative Branch416.80.9%Administration

2,741.65.8%


1,586.93.5%




1,919.74.1%




1989-91 Legislatively AdoptedTotal: 44,474.8

1999-2001 Legislatively AdoptedTotal: 45,779.4

2001-03 Close of SessionTotal: 47,211.7

2001-03 FinalTotal: 47,069.8

*Includes Consumer and Business Services

What has caused the General Fund expenditure growth since 1989?

• Primary– Population– Initiatives– Policy decisions

• Secondary– Inflation– Lawsuits

State and Local Resources for K-12 School Funding

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1989-91

1991-93

1993-95

1995-97

1997-99

1999-01

2001-03

2003-05

2003-05 O

ld Proporti

ons

State

Local

Bil

lio

ns

of

Do

lla

rs

K-12 Funding

• 2003-05 budget provides $5.21 billion.

– $67 million of this is dependent on an increase in Lottery resources as a result of House Bill 3159 Lottery expansion and on administrative actions yet to be determined.

• An additional $100 million may be available in the second year of the biennium if the General Fund/Lottery Funds revenue forecast goes up.

– First $100 million of General Fund excess goes to statewide ending balance. State School Fund then receives half of any excess over that.

– All Lottery excess over the $67 million already anticipated in expansion goes to the State School Fund.

– Total of these two potential sources is capped at $100 million.

K-12 School Funding

School Funding 2001-02 2002-03 2003-04 2004-05

State Funding $2,537.8 $2,144.9 $2,590.9 $2,615.6

Accrual Allowed $211.0

Local Property Tax $1,039.7 $1,082.1 $1,109.1 $1,159.2

TOTAL $3,577.5 $3,438.0 $3,700.0 $3,774.8

Potential Disappropriation --

HB 5077 Section 89 ($284.6)

Potential Allotment Reduction ($33.0)

TOTAL $3,577.5 $3,438.0 $3,700.0 $3,457.2

Numbers of Students 526,758 529,919 533,628 536,830

20%

25%

30%

35%

40%

45%

50%

1989-91 1991-93 1993-95 1995-97 1997-99 1999-2001

2001-03COS

2001-03Final

2003-05

School Funding as Proportion of General/Lottery/Other State Resources

Note: “Other State Resources” includes education Lottery bonds, MUPL, and Education Stability Find.

Post-Secondary Education FundingPercent of General Fund and Lottery Funds

1983-85 through 2003-05

12.8% 12.9%

15.3%

13.1%

11.7%

9.7%

6.4% 6.3%

7.0% 6.9%7.4%

6.0%

3.3% 3.2% 3.3%

2.3%

3.6%3.9% 4.1% 4.2% 4.0% 4.0% 3.7% 3.6%

0.6% 0.6% 0.6% 0.8%0.5% 0.4% 0.4% 0.3% 0.4% 0.4% 0.4% 0.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1983-85Adopted

1985-87Adopted

1987-89Adopted

1989-91Adopted

1991-93Adopted

1993-95Adopted

1995-97Adopted

1997-99Adopted

1999-01Adopted

2001-03Adopted

2001-03Approved --5th Special

Sess ion

2003-05Adopated

Higher Education Community Colleges Student Assistance Commission

Community College DistrictsProperty Tax Imposed Per Student FTE

$1,281

$1,798

$971

$1,155

$1,467

$376

$992

$862

$685

$779

$1,554

$750

$1,423

$1,119

$1,534

$783

$580

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Blu

e M

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in

Ce

ntra

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Ch

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ta

Cla

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ma

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Cla

tso

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lum

bia

Go

rge

Kla

ma

th

La

ne

Lin

n-B

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ton

Mt. H

oo

d

Ore

go

n C

oa

st

Po

rtlan

d

Ro

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e

So

uth

we

ste

rn

Tilla

mo

ok B

ay

Tre

asu

re V

alle

y

Um

pq

ua

0

1000

2000

3000

4000

5000

6000

Jan-

95

Jul-9

5

Jan-

96

Jul-9

6

Jan-

97

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Add

ition

al In

mat

es

Direct Impact

Indirect Impact

Historical October 2003 Forecast

Office of Economic Analysis, October 2003

Estimated Impact of Measure 11 on Oregon's Prison System

Department of State Police2003-05 Governor’s Balanced Budget

Sworn Positions

665

547 540 547 537 512 517

427 440 450

542461

329 329

115

122 120 120 115112 116

121 122 122

128

119

107 119

77

78 105 122 134121

145

125 129 126

126

116

113123

80

86105

102 108139

118

148 144 156

129

111

8686

0

100

200

300

400

500

600

700

800

900

1,000

1979-81 1981-83 1983-85 1985-87 1987-89 1989-91 1991-93 1993-95 1995-97 1997-99 1999-01 2001-03COS

2003-05GBB

2003-05LAB

Patrol Services Fish and Wildlife Criminal Investigation Other

937

833870

891 894 884 896

821 835854

925

807

635657

Policy Decisions

• Oregon Health Plan (OHP) The Office of Medical Assistance Programs budget has increased significantly since 1989-91. The General Fund and tobacco funded portion has increased from approximately $201 million to $1.21 billion.

OMAP (OHP Included) Growth by Fund

$-

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

$3,000,000,000

$3,500,000,000

1989-91 1991-93 1993-95 1995-97 1997-99 1999-01 2001-03 2003-05LAB

Co

st

TF GF + TTX +TS

(General Fund,Tobacco Tax,

Tobacco Settlement)(Total Funds)

Potential 2003-05 Disappropriation Methodology

1. Revenue Impact of House Bill 2152 Repeal $765.7 million

2. Implement Section 89, House Bill 5077, DisappropriationEducation ($298.9) millionHuman Services ($187.6) millionPublic Safety ($58.1) million

Net Reduction ($544.6) million

Remaining Shortfall $221.1 million

3. If Pro-rata Reductionsa. Use Ending Balance $135.9 millionb. Pro-rata Reduction

Education $51.9 millionHuman Services $20.6 millionPublic Safety $10.4 millionAll Other $2.3 million

Net Reduction $85.2 million

Remaining Shortfall $0.0 million

Additional Reductions: $14.3 Other Funds to K-12 Education., $23 Tobacco Tax Funds to the Oregon Health Plan.

Ballot Measure 30 Reductions to be Implemented

• Department of Human Services:• Eliminate new program that would provide prescription drug benefits to disabled

seniors with incomes below 135 percent of the Federal Poverty Level - $7.1 million.

• Eliminate Children's Health Insurance Program (CHIP) expansion from 185 percent of the Federal Poverty Level to 200 percent - $1.0 million.

• Eliminate Oregon Health Plan Standard program effective August 1, 2004 - $36.7 million.

• Eliminate about 67 percent of that increased funding for acute psychiatric care hospitals - $12.0 million.

• Cut funding for Oregon Children’s Plan - $1.0 million. • Eliminate staff to monitor juvenile diabetes in Oregon and educate physicians -

$0.1 million. • Cut development of a comprehensive standards on how to provide emergency

medical care to children - $0.1 million.• Cut Emergency Assistance program - $2.8 million.• Cut program that provides childcare to parents are attaining a degree or

advanced certification - $0.9 million.• Reduce System of Care Flex Funds are used in the child welfare system - $2.2

million.

Ballot Measure 30 Reductions to be Implemented

• State Commission on Children and Families: Reduce Healthy Start, Crisis Relief

Nurseries and state administration - $4.8 million.

• Department of Higher Education: Increase tuition and reduce academic programs - $7.5

million.

• Department of Community Colleges and Workforce Development: Reduce second

year funding distributed among Oregon’s 17 community college districts - $6.8 million.

• K-12 State School Fund: Cut second year funding - $284.6 million.

• Department of Corrections: Reduce funding for Community Corrections, cut

administrative costs and delay opening of special unit at Coffee Creek - $24.6 million.

• Oregon Youth Authority: Postpone opening 50 close custody beds and budget savings -

$5.8 million.

• District Attorneys and Their Deputies: Cut salary supplements for deputy district

attorneys - $0.8 million.

• Judicial Department: Prioritize circuit court cases - $13.0 million.

• Public Defense Services Commission: Reduce demand for public defense services -

$9.9 million.

Priority Programs to be Preserved (with no Special Session Actions)

• State Police Forensic Services

• Health Benefits for Pregnant Women

• Health Benefits for Children

• Health Benefits for Seniors and Disabled Adults

• Prescription Drugs for Seniors and Disabled Adults

• Gambling Addiction Treatment

• Community Corrections Model

• Maintaining Regional Youth Correctional Facilities

Governor’s Recommended Budget

• Must be balanced to current revenue forecast – start with the question how much money is available under current law?

• Must fulfill all legally required expenditures first – e.g., debt service on outstanding issuances.

• Allocate remainder based on priorities and evaluation of minimum dollar amount needed to meet expected performance level.

• Governor must identify separately from the balanced budget any priorities for increased expenditure and identify the proposed revenue source.

• Governor must identify the lowest priority items that could be reduced if resources go down or the legislature chooses other priorities.

Budget FrameworkPrinciples that Transcend Administrations

• Start with mandatory items.

• Implement core missions:

– Focus on the essentials.

– Emphasize programs with widely-distributed benefits.

• Target investment where it will provide the most impact in the long run:

– Focus on prevention.

• K-12 Education must be the top priority.

• Reduce overhead costs.

2005-07

• Budget instructions to agencies by February 2004 must incorporate:

– Information on Governor’s priorities and expectations.

– Appropriate modified zero-based directions.

– Expected deliverables on performance measures and outcomes.

– Specific data requests.

• Forecast for 2005-07 indicates General Fund growth of 10.8% over 2003-05.

• Identification of absolute expenditure requirements – e.g., debt service.

Other Issues

• General Risk

• Reserves/Other Fund Balances

• PERS/Labor

• Kicker

• Additional Lawsuits

• Bond Rating

• Annual Sessions

• Accountability/ oversight vs. Reduced Administration

• Regulatory Reform

• Economic Recovery

• Pent-up Budget Demand

• Potential Initiatives

• One-time Revenues

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