Budget and Revenue Outlook

Transcription

1 Budget and Revenue Outlook Eva DeLuna Castro Dick Lavine Chandra Villanueva Friday, February 8, 2013 CPPP.org

2 Sponsored by Methodist Healthcare Ministries CPPP.org

3 Presentation Outline State Budget: General Revenue vs. All Funds; Spending Limits; What s Proposed vs. What s Needed State Revenue; State and Local Taxes; the Rainy Day Fund School Finance CPPP.org

4 General Revenue Funding Levels Biennial billion $ : $81.9; w/arra GR, $ , as of Dec. 2011: $ , with supplemental: $ : current services growth for cut budget, $97 $4.5 B Medicaid IOU; $630 m for school shortfall; $1.75 B to undo school deferral; $160 m for wildfires : current services AND undoing all 2011 cuts, $108

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6 Texas State Budget, General Revenue K-12 Education Higher Education Health & Human Svcs Public Safety/Crim. Justice Business/Econ. Developmt Other : $87 B 1% $0.5 B 4% 9% $4 B $8 B 32% $28 B 14% $12 b 40% $35 b (SB 1): $89 B 1% $0.8 B 4% 10% $4 B $9 B 32% $28 B 14% $12 B 39% $35 B Source: Legislative Budget Board includes supplemental appropriations.

7 Texas State Budget, All Funds K-12 Education Higher Education Health & Human Svcs Public Safety/Crim. Justice Business/Econ. Developmt Other : $190 B (SB 1): $187 B 12% $22 B 6% $12 B 6% $12 B 28% $52 b 6% $11 B 13% $25 B 5% $10 B 29% $54 B 36% $69 B 12% $23 b 38% $70 B 9% $17 B Source: Legislative Budget Board includes supplemental appropriations.

8 Art. III, 49A (GR, including GR-D balances) Also available: $11.8 billion in Economic Stabilization Fund If $6.8 billion were spent on supplemental 2013 needs, $94.6 billion in GR would remain, plus $11.8 billion ESF SB 1 as filed: $89.0 B in total GR; $5.7 B remaining. HB 1 as filed: $89.2 B in total GR; $5.5 B remaining. Source: Legislative Budget Board

9 Pay as You Go Loophole: GR-Dedicated Balances % indicates GR-D Balances as a share of GR-Related Certification Revenue Biennial billion $ $90 4.1% 3.7% 4.7% 6.2% 2.6% 3.8% $60 GR D Balances Used for Certification $30 GR Forecast $ Source: Legislative Budget Board

10 Welfare Spending Limit Art. III, 51-A Limits state-funded assistance grants to or on behalf of needy dependent children to 1% of biennial budget. Cap for would be $1.9 billion. SB 1 and HB 1 both propose $132.5 million in state-funded assistance grants for needy children (TANF) $1.7 billion below the cap. Debt Limit Art. III, 49 (J) Annual debt service payable from General Revenue cannot exceed 5% of the average annual unrestricted General Revenue for the previous three years. Bond Review Board: at the end of fiscal 2012, debt service for outstanding debt, plus authorized but unissued bonds, is 3.48% of GR; 1.34% for issued debt only. Source: Legislative Budget Board

11 Art. VIII, 22: Limit on Growth of Certain Appropriations

12 Impact of Cap on Use of GR Translates into additional $4.3 to $4.5 B in spending - $93.5 B total GR Biennial billion $ $100 $75 Additional Subject to the cap $3.9 B left $3.7 B left $50 Assumes $6.8 B in supplemental General Revenue spending in 2013 $25 $76.3 $84.4 $80.6 $80.7 $ GR GR SB 1 proposed HB 1 proposed

13 (Senate Bill 1 as filed, LBB) HB 1: Same proposal for Texas Education Agency, minus $98 million GR for assessment system $12,000 Educational revenue per student, 2013 $ $8,000 $4,000 $ State and federal revenue for TEA, except federal school lunch/breakfast, plus local property taxes. SB SB 1

14 (Senate Bill 1 as filed, LBB overview) HB 1: $56.2 billion in All Funds ($22.9 b in GR-R). $395 million more in GR, because Senate doesn t fund all caseload growth. Additional needed for medical inflation/utilization/acuity in Medicaid/CHIP: at least $2.4 billion in General Revenue. Not including this in the budget now will just create an IOU for the 2015 legislature.

15 Unmet HHS Needs in SB 1: $3.4 b GR

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17 Example of non-medicaid Unmet HHS Need Daily Caseload per type of CPS Worker Substitute Care Services Investigations Family-Based Safety Services SB SB 1 Source: Legislative Budget Board, Legislative Budget Estimates, Senate Version

18 Sources: Legislative Budget Board; TX Association of Community Colleges.

19 State Revenue; State and Local Taxes CPPP.org

20 Lottery Other nontax Taxes Federal

21 Other State Local sales Local Property Taxes School City State sales S p e ci a l Distr ict County Source: Texas Comptroller of Public Accounts. Source: Texas Comptroller of Public Accounts.

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23 Source: Texas Comptroller of Public Accounts.

24 Local Property Tax Exemptions Source: Texas Comptroller of Public Accounts.

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29 $1.6 $1.5 $1.2 $1.3 $1.9 $1.9 $2.0 $2.0 Franchise Tax vs. Margins Tax Margins tax (goes to Property Tax Relief Fund) Franchise tax $5 $4 $3 $2 $1 $ Source: Texas Comptroller of Public Accounts through 2015 are forecasts.

30 Margins Tax Revenue is Far Short of Original Forecast

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35 CPPP.org School Finance

36 Changing Student Demographics 60% of Texas students are economically disadvantaged - increased by 45.5% over the last 10 years (overall growth 21.5%) Number of Hispanic students increased by 50% over the last 10 years (51% of students are Hispanic) African American students increased by 8.7% and White students decreased by 10.2% over the last 10 years 17% of students have Limited English Proficiency Source: TEA Enrollment in Texas Public Schools

37 Spending Per Student,

38 Where Support for Schools Comes From ( School Year) Other Local, 4% Local Taxes, 41% State, 43% State Lottery, 2% Federal, 12% Source: Texas Education Agency, PEIMS Actual Financial Reports.

39 Methods of Finance: Foundation School Program Property Tax Relief Fund = 2006-created revenue from the Franchise Tax, Motor Vehicle Sales & Use Tax, and Tobacco Taxes Available School Fund Revenue: - Investment returns from Permanent School Fund - Transfers up to $300m from GLO - 25% of Motor Fuels Taxes Appropriated Receipts, 4.9% Available School Fund, 8.8% Lottery Proceeds, 5.7% Property Tax Relief Fund, 12.8% Foundation School Fund, 67.8% Not appropriated: Local Property Taxes (47% of FSP) Portion of ASF goes to the Instructional Materials Allotment General Revenue Source: LBB Issue Brief percentages based on budget

40 82nd Legislature Changed How Schools are Funded: $4 Billion Cut from Formula Funding Regular Program Adjustment Factor (RPAF) percentage applied to the Basic Allotment to reduce formula funding 92.39% in 2012 (7.61% cut = $2 billion reduction) 98% in 2013 (2% cut = $500 million reduction) set at 98% or a greater amount set by appropriation; expires at the end of the biennium Target Revenue (ASATR)Reduction Percentage Districts receive 92.35% of target revenue in 2013 (7.65% cut = $1.5 billion reduction) 2014 to 2017, the percentage is set by appropriation; target revenue expires in 2018 Legislative intent to increase the Basic Allotment while decreasing Target Revenue Source: Legislative Budget Board, Fiscal Size Up

41 $1.3 Billion Cut from School Grants: Disproportionate Impact on Economically Disadvantaged Students Program Appropriation* Appropriation* Percent Cut Pre-Kindergarten Early Head Start High School Completion/ Success $208.6 million ELIMINATED 100% 97.1 m ELIMINATED 100% Teen Parenting Program 20.0 m ELIMINATED 100% Early Childhood School Readiness 15.0 m 7.0 m 47% School Based Prevention Services 6.0 m ELIMINATED 100% Communities in Schools 41.9 m 29.3 m 70% Amachi mentoring for children of incarcerated parents 5.0 m 2.5 m 50% LEP Student Success Initiative 19.4 m ELIMINATED 100% * All Funds. Source: Legislative Budget Board.

42 Teachers and Staff Cut while Enrollment Grows From the to the School Year: 11,487 fewer teachers 14,896 fewer other staff 44,454 more students Student per teacher ratio increased 4.8% Student per other staff ratio increased 6.1% Source: Moak, Casey & Associates. Non-charter districts only.

43 Back to Court Source: Texas Tribune

44 School Finance System found Unconstitutional Lack of Meaningful Discretion districts are forced to tax at or near the max; de facto state property tax Inequitable school funding is not distributed in a fair way Inadequate if we want higher standards we need to pay for them Charters - Lifting the cap on charters and providing them access to facilities funding is policy decision, not court decision Next Steps: State will appeal the ruling Referred to the Appeals or State Supreme Court Special Session in 2014??

45 What s in the budget for education? Continues funding at the lower levels set for 2012 & 2013 Assumes $1.5 billion in property tax growth Assumes 40 successful tax ratification elections each year Undoes FSP deferral in a supplemental

46 The Legislature doesn t need to wait for a court order to fund schools 1. Bring the Regular Program Adjustment Factor up to 100% ($525 million per year) 2. Increase the Base Allotment while decreasing Targeting Revenue

47 How can we pay for schools? SB1 & HB1 as introduced leave $5.7 b (S) - $5.5 b (H) on the table. $11.8 billion in the Rainy Day Fund Texas needs a revenue system that can grow with its needs

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