the economy and budget: minnesota and the nation legislative conference january 12, 2011 scott...
TRANSCRIPT
The Economy and Budget: Minnesota and the Nation
Legislative Conference
January 12, 2011
Scott PattisonExecutive Director
National Association of State Budget Officers
444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org
NASBO
Rethinking State Government
“How much a state spends often matters less than how it spends.”
The Economist, January 23, 2010
Should certain parts of government continue to be funded - what’s the role of government?
Peter Drucker, 1995
2
NASBO
Rethinking State Government
“Containing growth in our health care costs… is something we absolutely need to do, because it is unsustainable at the rate that it’s been growing,’’ said Jay Gonzalez, Patrick’s budget chief. There are going to be some hard decisions.’’
“We now have to begin messing with Medicaid,’’ said [House Member Harriett] Stanley.
Boston Globe 1/3/11
3
NASBO 4
Current Fiscal Situation:
Overview
NASBO 5
Recent State Fiscal Situation
The “Great Recession” - Extremely difficult fiscal period for states States experienced significant shortfalls and large
revenue declines
Widespread budget cuts, layoffs/furloughs continue across the nation
ARRA funds ending
NASBO
MAJOR CHALLENGES TO STATE BUDGETS: Fiscal 2011 and 2012
Slow Revenue Growth Unlikely to return to 2008 levels until 2013 or 2014
Medicaid Enrollment Increase 8.5 percent growth in 2010, 6.1 percent growth estimate for 2011
Wind Down of Recovery Funds $151 billion in flexible funding ends in June 2011
Growing Long Term Liabilities The unfunded liability is at least $1 trillion
Health Care ReformUncertain costs
NASBO 7
Current Fiscal Situation:
Indicators
NASBO
Negative Spending Two Years in a Row, Increase in 2011
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
%
General Fund Expenditure Growth (%)
*33-year historical average rate of growth is 5.7 percent *Fiscal ‘11 numbers are enacted Source: NASBO Fall 2010 Fiscal Survey of States
* Average
The New Normal
Worst Case Scenario
NASBO
Balances as a Percentage of Expenditures
* FY 2008, and 2009 are actual. FY 2010 is preliminary actual and FY 2011 is enacted.
(per
cen
tage
s)State Balances Near Historic Lows for Many States
NASBO 10
Balances inMN and Selected States
Source: NASBO Dec. 2010 Fiscal Survey of States
NASBO
Tax and Fee Increases Continue
NASBO 12
State Tax Revenue Growth in MN and Selected States
Source: Fiscal Studies Program, Rockefeller Institute of Government
NASBO 13
Minnesota GF Revenue:1997-2010
Source: NASBO State Expenditure Report
(estimated)
NASBO
Budget Cuts Made After the Budget Passed
($ millions)
*FY 2011 mid-year budget cuts are ongoing
Mid-Year Budget Cuts Continue
NASBO 15
Current Fiscal Situation:
Economic Overview
NASBO 16
Unemployment Ratein MN and Selected States
Source: U. S. Department of Labor, Bureau of Labor Statistics
NASBO
National Unemployment Rate Compared to MN
17
%
Source: U.S. Department of Labor, Bureau of Labor Statistics
NASBO
Who gets out first? Historical Boost to State Earnings and Employment due to Oil & Natural Gas
18
Source: Federal Reserve Bank of Kansas City, Economic Review, Fourth Quarter 2009
NASBO 19
MN Recovery Act Spending through 12/07/10
Source: Recovery.gov
Funds Awarded* Funds Received*
* Funds awarded: the sum of funds awarded by a federal agency to a prime recipient; Funds received : the sum of funds received from a federal agency by a prime recipient
NASBO 20
The Cliff: Temporary Federal Aid to States (FY ’11 totals include both ARRA & Education Jobs Funds)
Source: Recovery Act data come from GAO Report to Congress, September 2010
In Billions
Fiscal Year
NASBO 21
Background on State Spending Trends
NASBO 22
Spending by Funding Source(Percentage)
General Funds38.1%
Federal Funds34.7%
Other State Funds24.5% Bonds
2.7%
Total State Expenditures By Funding Source, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 23
MN Spending by Funding Source (Percentage)
Source: NASBO 2009 State Expenditure Report
NASBO 24
Total Expenditures Percentage Growth in Spending Categories Over 10 Years
18.1
39.853.5 55 60
71.784.6
95.7
0
20
40
60
80
100
120
%
Percentage Growth in Spending CategoriesBetween Fiscal 2000 and Fiscal 2010 (Total Funds)
Public Assist. Corrections Higher Ed Transport. K-12 Total All Other Medicaid
Sources: NASBO 2001 and 2009 State Expenditure Reports
NASBO 25
General Fund: Medicaid & Education Over 63%
Elementary & Secondary Education
35.7%
Higher Education12.1%
Medicaid15.4%
Public Assistance1.9%
Corrections7.2%
Transportation0.8%
All Other27.0%
General Fund Expenditures by Function, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 26
MN General Fund: Medicaid & Education Over 70%
K-1234.4%
Higher Education18.0%
Medicaid18.1%
Public Assistance0.9%
Corrections2.7%
Transportation0.6%
All Other25.2%
General Fund Expenditures by Function, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 27
General Fund Percentage Growth in Spending Categories Over 10 Years
0.5
22.6
28.5
36.1 36.238.7 39.8 40.3
0
5
10
15
20
25
30
35
40
45
%
Percentage Growth in Spending CategoriesBetween Fiscal 2000 and Fiscal 2010 (General Funds)
Public Assist. Transport. Higher Ed Total K-12 Corrections Medicaid All Other
Sources: NASBO 2001 and 2009 State Expenditure Reports
NASBO 28
MN General Fund Spending Growth over 10 years
Sources: NASBO 2001 and 2009 State Expenditure Reports
NASBO
Percentage Change in Medicaid Spending and Enrollment
29
%
Source: Kaiser Commission on Medicaid and the Uninsured
Adopted
NASBO 30
State Spending from Federal Funds
Elementary & Secondary Education
13.1%
Higher Education3.3%
Medicaid39.5%
Public Assistance2.7%
Corrections0.4%
Transportation8.0%
All Other32.9%
Federal Funds Spending, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 31
MN State Spending from Federal Funds
K-1217.3%
Higher Education
0.4%
Medicaid37.4%
Public Assistance2.7%
Corrections0.4%
Transportation6.3%
All Other34.5%
Federal Funds Spending, Estimated Fiscal 2010
Source: NASBO 2009 State Expenditure Report
NASBO 32
Promising Practices
NASBO 33
Promising Financial Management Practices
Add flexibility to the process 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
NASBO 34
Focus on Outcomes
Focus on results and outcomes
Spend funds for effective programs
Improve management
NASBO 35
Model: The “Drilling Rig”
Cuts and Savings: $97 million GF-S$6 million HSA
Health CareSpending Plan: $4.2 billion GF-S and HSA
New revenue buys:Basic Health Plan coverage for 17,200 peopleDental care for adultsPartial restoration of cuts to community clinics$98 million for new, higher Medicaid payments to
care providers
Examples of what’s not purchased:Reduced Medicaid payments to teaching hospitals25 percent of state grants to community clinicsOptional Medicaid coverage for workers with disabilities
Key purchases with existing revenue:Medicaid health care for 891,000 vulnerable children and adultsAll current children’s health programsStatewide public health programs to protect all citizensPublic health programs to improve testing, surveillance and follow-up for childhood diseasesHealth insurance for 81,600 low-income people, which is 17,200 fewer than currently served
High
er Pr
ioritie
sLo
wer P
riorit
iesHi
gher
Prior
ities
Lowe
r Prio
rities
NASBO 36
What Can Be Done?
Ask performance questions
Ask for outcome data
Use performance information to justify changes to programs.
NASBO 37
Outlook
NASBO 38
Long Term Spending Pressures
Medicaid and Health Care
K-12 and Higher Education
Demographic Changes
Corrections Transportation Infrastructure Pensions
NASBO 39
State Fiscal Outlook
Austere state budgets for at least the next several years Slow revenue growth; ARRA declines
Health care reform will have an impact on state finances
Tough competition for general funds
Opportunity for reform, restructuring
