State Budgets
Capital Campus Pennsylvania
Mercatus Center
George Mason University Harrisburg, PA
January 26, 2009
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
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Recent State Fiscal Situation
Flat spending/declining revenue Shortfalls in the billions Across the board budget cuts, layoffs Credit crisis impacting short- and longterm borrowing Most states in recession All states at some risk
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Flat and Declining Expenditure Growth
Annual Percentage Budget Increases, Fiscal 1980 to Fiscal 2009
20
Percentage Budget Increase
15
10
5
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
-5
Fiscal Year
*31-year historical average rate of growth is 6.3 percent ***Fiscal 09 numbers are appropriated
**Fiscal 08 numbers are preliminary actual Source: NASBO December 2008 Fiscal Survey of States
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State Tax Revenue Growth by Source
Source: Fiscal Studies Program, Rockefeller Institute of Government
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Budget Cuts
Source: December 2008 Fiscal Survey of States
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Balances Declining
*31-year historical average is 5.7%
Source: NASBO December 2008 Fiscal Survey of States
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Limited Tools to deal with Critical Budgetary Issues
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FY 2009-2010 Budgetary Issues
Recession:
Revenue and spending declining States recover slower because of the “lag”
Concerns over High Expenditure Areas:
K-12 Medicaid & Health Care Costs
Other High Cost Needs:
Infrastructure/Transportation Corrections Higher Education
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68% of Medicaid Spending on Benefits in 2007 is for Elderly and Disabled
= 9% Disabled = 17%
Elderly Adults = 26% Disabled = 46%
26%
Elderly = 22%
68%
Children = 48% Adults = 13% Children = 19%
Enrollees
2007 U.S. Total = 62.2 million
Source: Vernon Smith, Health Management Associates
Expenditures
U.S. Total = $305 billion in 2007
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Financial Management
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Volatile Financial Management
Spending fluctuations Higher education cycle Budget cuts
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Financial Management Practices
Adding flexibility to the process Contingencies Prudent use of debt Rainy day funds One time only Use of performance information
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What Can Be Done?
Ask performance questions Ask for outcome data
Use performance information to justify changes to programs
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Financial Management and Performance
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Use of Performance Information
Focus on results and outcomes Accountability Spend funds for effective programs Efficiency
Improve management
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What Should Be Done?
Ask performance questions Use performance information to make the case Ask for outcome data Use performance information to justify changes to programs Ideas are already there -- Encourage state employees to think about goals and outcomes
18
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Fiscal Outlook
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State Fiscal Outlook
Much will depend on the national economy Expect significant drops in revenue and spending States will face dramatic budget cuts States will look for creative financing and revenue opportunities to meet these spending demands Recovery for states at best in FY „11
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Silver Lining?
Efficiencies Priorities Public-private partnerships Outsourcing Necessary reforms
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www.nasbo.org
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