middle management scott pattison executive director nasbo april 15, 2015
TRANSCRIPT
Middle Management
Scott PattisonExecutive DirectorNASBO
April 15, 2015
Budgeting tips
Contingencies
Make your case
12 month process
Relationships
2
3
State Budget Cycle
▫Income Volatility▫Sales▫Gaming becoming limited
Revenue Issues
www.nasbo.org
5
Current Economic and Fiscal Situation
www.nasbo.org
6
State Fiscal Overview
Fiscal 2015 marks the 5th consecutive annual increase in general fund spending and revenues
Signs of fiscal distress have subsided and the fiscal environment for most states indicates continued stability and slow growth
Some states are facing difficult budget environments due to various issues (oil)
Fiscal improvements over the last several years have not returned states to normal patterns of growth
www.nasbo.org
7
Trends
▫State Employee Pay▫Transportation▫Levels of Taxation▫Limiting Growth (Prisons)▫Higher Education
www.nasbo.org
8
Oil Prices Falling
▫$50ish a barrel▫Lower gas prices = increased revenue (sales)▫Hard to predict▫Most states benefit, but not all
www.nasbo.org
9
Governors’ Proposed Budgets for Fiscal 2016
Moderate increases in spending, modest revenue growth, and healthy reserves
Emphasis on being sustainable and structurally balanced
Much of additional spending directed towards core services such as education and healthcare
Various tax proposals either increasing or decreasing revenue▫ Middle class tax cuts, lower CIT, property tax relief, expanding
sales tax base, closing loopholes, examining incentives, higher cigarette taxes
www.nasbo.org
10
Current Fiscal Situation:Indicators
www.nasbo.org
11
Slow Budget Growth Continues
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-8
-6
-4
-2
0
2
4
6
8
10
12
General Fund Expenditure Growth (%)
%
*Average
*37-year historical average annual rate of growth is 5.5 percent *Fiscal 2015 numbers are enacted Source: NASBO Fall 2014 Fiscal Survey of States
www.nasbo.org
12
GF Spending Still Below Pre-Recession Peak Adjusted for Inflation
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015$500
$550
$600
$650
$700
$750
$800
$655
$687
$661
$623$645
$667
$695
$729$752
$771
General Fund Spending: FY 2007-FY 2015
*
Source: NASBO Fall 2014 Fiscal Survey of States; Fiscal 2015 numbers are enacted*Aggregate spending levels would need to be at $771 billion to remain equivalent with real 2008 spending levels.
www.nasbo.org
13
States Restoring Some Cuts Made During Recession
K-12
Higher Ed
Public Ass
ist.
Medica
id
Correcti
ons
Transp
ortatio
n
All Other
-2
0
2
4
6
8
10
12 $11.1
$4.4
-$0.6
$8.5
$1.0 $1.3
$5.8
Fiscal 2015 Enacted General Fund Spending Changes by Category ($ in Bil -lions)
($ in
Bill
ions
)
Source: NASBO Fall 2014 Fiscal Survey
www.nasbo.org
State Revenue Grows in 3rd Quarter of 2014 after Declining in 2nd Quarter
Series1
-20
-15
-10
-5
0
5
10
15
Year-Over-Year Real Change inQuarterly State Tax Revenue
%
14
Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau
*3rd quarter of 2014 is based on 45 early reporting states
www.nasbo.org
15
GF Revenue Also Below Pre-Recession Peak Adjusted for Inflation
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015$500
$550
$600
$650
$700
$750
$800
$655$680
$626$610
$650
$669
$716$726
$748$763
General Fund Revenue: FY 2007-FY 2015
Source: NASBO Fall 2014 Fiscal Survey of States; Fiscal 2015 numbers are enacted*Aggregate revenue levels would need to be $763 billon to remain equivalent with real 2008 revenue levels.
www.nasbo.org
16
States Enact $2.3B in Net Tax and Fee Cuts for FY15
19791981
19831985
19871989
19911993
19951997
19992001
20032005
20072009
20112013
2015
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
Enacted State Revenue Changes, Fiscal 1979 to Fiscal 2015
($ In
Bill
ions
)
Fiscal Year
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17
States Reserves Haven’t Reached Peak Levels
FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 150.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
11.5%
10.1%
8.6%
5.7%5.2%
7.1%
8.4%
10.5%
8.9%
7.3%
Balances as a Percent of Expenditures
Balances as a Percent of Expenditures
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18
Minimal Midyear Budget Cuts So Far in Fiscal 2015
Source: NASBO Fall 2014 Fiscal Survey *Fiscal 2015 midyear cuts are ongoing
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$0
$5
$10
$15
$20
$25
$30
$35
$40
0
10
20
30
40
50
20
28
35
22
9 813
72 3 1
16
37 37
18
5 2 4
13
41 39
23
811
8 7
Enacted Budget Cuts Made After the Budget Passed ($ In Millions)
Number of states Amount of reduction
$ In
Mill
ions
Num
ber o
f Sta
tes
Recession ends
Recession ends
Recession ends
Spanish American War 1898
$16.5 million
World War I 1919
▫Infrastructure funding burden: 3.5% of
GDP
▫We spend: 1%
▫New money muni debt: 42% below
peak
Debt
www.nasbo.org
21
Management Points from Budget Folks
Forces Affecting State Budgets
22
Economics
Politics
State Laws (constitutional and statutory) Balanced Budget Requirements
Federal Policy
23
Trend Continues:Focus on Outcomes
Focus on results and outcomes
Spend funds for effective programs
Improve management
13 14 15 16 17 18 19 202
3
4
5
6
7
8
9
Avg. state tax growth since 1986
24
Structural Imbalances Will Persist
CMS state Medicaid spending forecast
Moody’s Analytics state tax revenue forecast
Sources: Moody’s Analytics, CMS, Census Bureau
%
Year ago % change, calendar year
Contingencies Prudent use of debt Rainy day funds One time only Use of performance information Avoiding bad practices in good
times
25
Financial Management Practices
Ask performance questions
Ask for outcome data
Use performance information to justify changes to programs: Make your case!
Encourage your employees to think about goals and outcomes
26
What Can Be Done?
Cybersecurity Open government Systems need replacing Cloud Good things can come from IT – better
customer service, increased efficiencies
27
IT issues
www.nasbo.org
28
Background on State Spending Trends
www.nasbo.org
29
Spending by Funding Source(Percentage)
General Funds40.5%
Federal Funds30.3%
Other State Funds27.1%
Bonds2.1%
Total State Expenditures by Funding Source, Estimated Fiscal 2014
Source: NASBO State Expenditure Report
www.nasbo.org
30
Total State Expenditures by FunctionEstimated Fiscal 2014
Elementary & Secondary Edu-
cation19.5%
Higher Education10.1%
Public Assistance1.4%
All Other32.4%
Corrections3.1%
Transportation7.7%
Medicaid25.8%
Source: NASBO State Expenditure Report
www.nasbo.org
31
General Fund Expenditures by FunctionEstimated Fiscal 2014
Elementary & Secondary Ed-
ucation35.0%
Higher Education9.4%
Public Assistance1.4%
All Other27.4%
Corrections6.8%
Transportation0.9%
Medicaid19.1%
Source: NASBO State Expenditure Report
www.nasbo.org
32
Federal Funds Expenditures by FunctionEstimated Fiscal 2014
K-129.9%
Higher Education3.7%
Public Assistance2.6%
All Other25.0%
Corrections0.1%
Transportation7.7%
Medicaid51.0%
Source: NASBO State Expenditure Report
www.nasbo.org
33
Revenue Sources in the General Fund (Percentage)
Sales 31%
Personal Income 42%
Corporate Income 6%
Gaming 1%
Other Taxes & Fees 20%
Estimated Fiscal 2014
Source: NASBO State Expenditure Report
