Archives for January 2017

State Budget Solvency

53rd Legislature, First Session

THE STATE BUDGET – CLOSING THE FY17 PROJECTED DEFICIT AND PASSING A BALANCED BUDGET FOR FY18

Based on the Consensus Revenue Estimating Group’s December 2016 revenue projection, total revenues in FY17 are estimated at $5.807 Billion. Current total appropriations for FY17 are $6.026 Billion. As a result, a projected deficit of $219.4 Million exists in the current fiscal year and needs to be addressed this session. If no action is taken and revenues materialize as forecast, reserves would be depleted by the end of this fiscal year to -1.1% or -$69Million. In addition, revenues for FY18 are projected to total $5.9 Billion, meaning that the Legislature must also address projected shortfalls for next fiscal year in comparison to current budgeted spending levels.

The Executive (the Governor) and the Legislature are proposing somewhat different plans to tackle our state’s budget challenges.

• The Executive proposes to:
  Sweep a significant amount of unused money throughout state government
• Adopt targeted tax reform measures
• Streamline state-funded health care coverage to reduce duplicative costs
• Reorganize and combine several agencies of state government
• Require state employees to contribute a small percentage more to their pensions
• Make additional base budget cuts in certain agencies
• Adopt several other government spending reforms.

According to the Executive, these changes would bring reserve levels to over 4% of recurring appropriations by the end of FY17 and to nearly 5% in FY18. The Executive’s budget proposal does not increase taxes.

The Legislative Finance Committee (LFC) proposes to balance FY17 by:

• Inact non-recurring sweeps of approximately $250M, which is short of the money needed to balance the budget and leave 4% in reserves.
  • This includes cuts of $22M in “Below the Line” funding
  • $17M cut in LEDA (Local Economic Development Act). For FY18
  • A “TBD” (to be determined) amount of $123M which will either come from cuts or tax increases to balance the FY18 budget.
  • No Medicaid funding increase is included unless a tax on healthcare services is enacted.

What we Support :

• Use the December 2016 revenue forecast as a guide for budgeting decisions. Next forecast due early February 2017
• Collaboratively address the FY17 deficit as early in the legislative session as possible, in order to maximize the amount of time for savings to materialize in the current fiscal year
• Aim for reserve levels of roughly 5%, which is less than the ideal figure of 10%, but more realistic given our current revenue climate
• The Executive Administration and Legislature working together to identify ways to improve efficiencies in the court system and to fund the critical needs of the Judiciary
• Preserve student-centered education reform initiatives, key public safety and child welfare programs and critical economic development incentives that are necessary to grow and diversify the state’s private sector
• Provide no targeted or across-the-board compensation increases for state employees
• Close the FY17 projected deficit and adjust spending levels appropriately for FY18 by adopting a number of approaches, including sweeping unused funds throughout government, enacting tax reform measures, closing tax loopholes that do not inhibit the state’s economic competitiveness, adopting significant spending reforms, reforming the pension contribution structure for state employees, reducing spending in government agencies and reorganizing government to be less costly and more efficient

What we Oppose:

• Use of the Permanent Fund for purposes not intended
• Reinstatement of the Gross Receipts Tax on food sales

NOTE: The Executive does not want any tax increases,period. The legislature is looking at a variety of tax increases. The Chamber will entertain a discussion regarding tax increases, only after all other options have been exhausted, including identifying greater efficiency in government, right-sizing government and closing tax loopholes.