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State Budget Issues Across the Nation:How does North Carolina Compare?
North Carolina Office of State Budget and Management
Annual Conference
October 17, 2007
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
2NASBO
Current Fiscal Situation
3NASBO
Recent Trends
Slowing revenue FY 2008
Some states experiencing significant shortfalls
Continued movement toward increased government accountability and transparency
4NASBO
Recent Trends
Increased attention towards infrastructure and transportation
Focus on health care
Calls for increasing early education
5NASBO
Current Revenue and Budget Shortfalls
Virginia -- use of rainy day fund, spending cuts, and layoffs -- $641million shortfall
South Carolina -- $81 million shortfall at the end of FY 2007 -- declining revenue growth in FY 2008.
Maryland -- $1.7 billion shortfall – looking at changes in tax structure and gambling
Florida -- special session to deal with $1.5 billion shortfall
6NASBO
Expenditure Growth
General Fund Expenditure Growth (%)
-4
-2
0
2
4
6
8
10
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
**
2008
**
%
Actual Inflation Adjusted
*29-year historical average rate of growth is 6.5 percent **Fiscal 07 numbers are estimated; fiscal 08 reflect recommended budgets
Source: NASBO June 2007 Fiscal Survey of States
*
7NASBO
Expenditure Growth in NC and Selected States
All States General Fund Expenditure Growth Rate Compared to Selected States General Fund Growth Rate
-5
0
5
10
15
20
2007 (estimated) 2008 (recommended)
%
National North Carolina Virginia South Carolina Tennessee
Source: NASBO June 2007 Fiscal Survey of States
8NASBO
Balances Remain Healthy; Some Decline Likely for Fiscal 2008
Total Year-End Balances and Total Year-End Balances as a Percentage of Expenditures, Fiscal 1979-Fiscal 2008 (Recommended)
0
10
20
30
40
50
60
70
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007*
Total Balances as a Percentage of Expenditures Total Balance
*2007 figures are estimated; 2008 figures are recommended Source: NASBO June 2007 Fiscal Survey of States
9NASBO
Balances inNC and Selected States
Balances as a Percent of Expenditures
0
2
4
6
8
10
12
2007 (estimated) 2008 (recommended)
%
National North Carolina Virginia South Carolina Tennessee
Source: NASBO June 2007 Fiscal Survey of States
10NASBO
Budget Cuts have Declined Since Early 2000’s Downturn
Budget Cuts Made After the Budget Passed,Fiscal 1986-Fiscal 2007 ($ millions)
18
23
11 12
20
35
22
9 8
13
7
2 31
16
37
18
52 3
28
37
$0
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
$10,500
$12,000
$13,500
$15,000
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
10
20
30
40
Number of states (right) Amount of reduction (left)
Recession ends
Recession ends
Source: June 2007 Fiscal Survey of States
11NASBO
State Tax Revenue Growth
Year-Over-Year Real Change inQuarterly State Tax Revenue
-25
-20
-15
-10
-5
0
5
10
15
20
25
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
%
Total PIT
Source: Fiscal Studies Program, Rockefeller Institute of Government
12NASBO
State Tax Revenue Growth in NC and Selected States
Quarterly Tax Revenue by Major Tax for Selected States April-June, 2006 to 2007, Percent Change
-25
-20
-15
-10
-5
0
5
10
15
20
25
PIT CIT Sales Total
%
National North Carolina Virginia South Carolina Tennessee
Source: Fiscal Studies Program, Rockefeller Institute of Government
13NASBO
Background on State Spending
14NASBO
Spending by Funding Source: General Funds Decreasing
Total State Expenditures by Funding Source, Fiscal 2000 and Fiscal 2005
48.1 43.726 28.924 25.11.9 2.3
0
10
20
30
40
50
60
2000 2005
%
General Funds Federal Funds Other State Funds Bonds
Source: NASBO, 2000 and 2005 State Expenditure Reports
15NASBO
Education and Health Care: Now 65% of General Fund Spending
General Fund Spending, Fiscal 2005
All Other24.7%
Transportation0.4%
Corrections7.2%
Public Assistance2.3%
Medicaid17.9%
Higher Education11.7%
Elementary & Secondary Education
35.8%
Source: NASBO 2005 State Expenditure Report
16NASBO
NC Education and Health Care: 70% of General Fund Spending
General Fund Spending, Fiscal 2005
All Other23.8%
Transportation0.1%
Corrections6.0%
Public Assistance0.6%
Medicaid14.2%
Higher Education16.3%
Elementary & Secondary Education
39.1%
Source: NASBO 2005 State Expenditure Report
17NASBO
Total Spending by Function in Selected States
State Spending by Function as a Percent of Total State Expenditures, Fiscal 2005
0
5
10
15
20
25
30
35
40
45
K-12 Higher Ed. PublicAssist.
Medicaid Corrections Transport. All Other
%
National North Carolina Virginia South Carolina Tennessee
Source: NASBO FY 2005 State Expenditure Report
18NASBO
Spending Pressures
19NASBO
Competing Spending Pressures
Medicaid and Health Care
K-12 Increases Higher Education Demographic
Changes Infrastructure Pensions
20NASBO
Medicaid Spending
Total Medicaid Spending as Percentage of Total State Expenditures
0
5
10
15
20
25
30
1990 1995 2000 2005 2010*
%
Medicaid as % of Total State Expenditures
*2010 percentage projected by Health Management Associates Source: NASBO State Expenditure Report
21NASBO
Enrollees Expenditures
68% of Medicaid Spending on Benefits in 2007 is for Elderly and Disabled
Children = 19%
Elderly = 22%
Disabled = 46%
Adults = 13%Children = 48%
Elderly = 9%
Disabled = 17%
Adults = 26%
2007 U.S. Total = 62.2 million U.S. Total = $305 billion in 2007
26% 68%
Source: Vernon Smith, Health Management Associates
22NASBO
Outlook
23NASBO
State Fiscal Outlook
Revenue and spending growth likely to slow • Housing decline and a slowing
economy could be problematic States will face fiscal
challenges over next decade or more
States will look for creative financing opportunities to meet spending demands
24NASBO
www.nasbo.org
