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State Fiscal Outlook
2012 NASACT Middle Management Conference
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 2
Current Economic and Fiscal Situation
NASBO
“New Normal”
Definition:“No two recessions are alike…the more recent recessions of 1990-1 and 2001 were characterized as jobless recoveries with sluggish or nonexistent job growth even as the GDP recovered.”
“The New Normal?”, Region Focus, Richmond Federal Reserve Newsletter, First Quarter, 2010
NASBO 4
Or… the New Norm
NASBO
Economy
Though modest improvement is likely, it appears that growth will continue to be restrained through 2012… Federal Reserve, EconSouth, Fourth Quarter 2011
Deleveraging: “The U.S. still has a few years to go and the EU could have a decade… We’re not in the endgame, we’re in the middle game” Kenneth Rogoff, co-author of This Time is Different, quoted
in the Financial Times, February 4, 2012
NASBO 6
The Forecast
NASBO
State Government Challenges
Tighter Resources Demographic Changes Debt State Revenue
Will future revenue reflect economy? Enough for infrastructure?
Federal Spending Decline Direct - Decreased Federal Funds and Contracts Indirect – Defense Cuts
7
NASBO
Who’s best positioned?
8
Source: Federal Reserve Bank of Kansas City, Economic Review, Fourth Quarter 2009
NASBO
State Debt Not the Problem
9
Debt-to-GDP: U.S. States Compared to Advanced G20 Nations – Moody’s Investor Services & International Monetary Fund
%
NASBO 10
Current Fiscal Situation:
Indicators
NASBO
Medicaid Continues to Drive General Fund Spending Growth
11
Data is based on comparative levels of enacted spending in FY 2011 and FY 2012Source: NASBO Fall 2011 Fiscal Survey of States
Changes in General Fund Spending by Category Between FY 2011 and FY 2012
NASBO
Budget Growth
-8
-6
-4
-2
0
2
4
6
8
10
12
%
General Fund Expenditure Growth (%)
*34-year historical average rate of growth is 5.6 percent *Fiscal ‘12 numbers are appropriated Source: NASBO Fall 2011 Fiscal Survey of States
* Average
NASBO
FY 2012 Spending Remains $20 Billion Below FY 2008
($ in
bil
lion
s)
* FY 2007 – 2010 are actual, FY 2011 is preliminary actual and FY 2012 is enacted.
NASBO
6 Quarters of Revenue Growth Following 5 Quarters of Declines
-20
-15
-10
-5
0
5
10
15
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011%
Year-Over-Year Real Change inQuarterly State Tax Revenue
Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau
NASBO
* FY 2007- -2010 are actual. FY 2011 is preliminary actual and FY 2012 is enacted.
($ in
bil
lion
s)
Revenue Remains Below Pre-Recession Levels
NASBO 16
State Balance Levels Recovering
$0
$10
$20
$30
$40
$50
$60
$70
$80
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Total Year-End Balances and Total Year-End Balances as a % of Expenditures, Fiscal 1979 - Fiscal 2012
Total Balances as a Percentage of Expenditures Total Balance
* Fiscal 2011 totals are preliminary actual nd fiscal 2012 are enacted **34-year historical average is 5.8%
Source: NASBO Fall 2011 Fiscal Survey
In Billions
NASBO
Balances as a Percentage of Expenditures
* FY 2006 – FY 2010 are actual, FY 2011 is preliminary actual and FY 2012 is enacted.
(per
cen
tage
s)Total Balance Levels Remain Low for Most States
NASBO
Budget Cuts Made After the Budget Passed
($ millions)
*FY 2012 mid-year budget cuts are ongoing Source: NASBO Fall 2011 Fiscal Survey
Mid-Year Budget Cuts
NASBO
Taxes
Source: NASBO Fall 2011 Fiscal Survey of States
NASBO 20
FY 11-12Background on State
Spending Trends
NASBO 21
Spending by Funding Source(High Percentage Federal)
General Funds37.7%
Federal Funds34.1%
Other State Funds25.8% Bonds
2.5%
Total State Expenditures By Funding Source, Estimated Fiscal 2011
Source: NASBO 2010 State Expenditure Report
NASBO 22
Total State Expenditures:Medicaid Grows Again
K-1220.1%
Higher Education10.1%
Medicaid23.6%
Public Assistance1.6%
Corrections3.1%
Transportation7.6%
All Other33.9%
Total Expenditures by Function, Estimated Fiscal 2011
Source: NASBO 2010 State Expenditure Report
NASBO 23
General Fund: Growing Medicaid & Education 64%
Elementary & Secondary Education
35.0%
Higher Education11.5%
Medicaid17.4%
Public Assistance1.8%
Corrections7.4%
Transportation0.5%
All Other26.5%
General Fund Expenditures by Function, Estimated Fiscal 2011
Source: NASBO 2010 State Expenditure Report
NASBO 24
Trend Continues:Focus on Outcomes
Focus on results and outcomes
Spend funds for effective programs
Improve management
NASBO 25
Outlook
NASBO 26
State Fiscal Outlook
Trends positive Back to pre-recession levels soonBut… Spending pressures will continue Federal funds will decline
