Quick Start Report Mid-Year Update

Transcription

1 Quick Start Report Mid-Year Update Brian M. Kolb Assembly Minority Leader James P. Hayes Ranking Minority Member Assembly Ways & Means Committee Rebecca P. D'Agati Minority Director Assembly Ways & Means Committee New York State Legislature Assembly Way s & Means Committee - Minority November 5, 2009

2 Assembly Ways and Means Committee Contributing Staff LAUREN O HARE, FIRST DEPUTY DIRECTOR EDWARD V. GOLDEN, DEPUTY DIRECTOR BRENDAN CRUMLISH, ECONOMIST BRIAN O CONOR, SR. FISCAL ANALYST MEAGHAN L.M. ROSSBACH, FISCAL ECONOMIST JOSHUA P. RISLER, SR. BUDGET ANALYST CHARLES VAAS, SR. BUDGET ANALYST PIETRA BAIO, BUDGET ANALYST n L.M. Horn Brendan Crumlish First Deputy Director Fiscal Economist Economist Assembly Ways & Means Committee - Minority 19th Floor, A.E.S.O.B. 80 South Swan Street, Albany, New York (518) , Fax (518)

3 Executive Summary In accord with Chapter 1 of the Laws of 2007, the Assembly Minority submits this assessment of New York State s current fiscal condition. This report contains our estimates of disbursements for public assistance, Medicaid and school aid, along with our estimates for tax receipts and lottery receipts. The Assembly Minority Ways and Means Committee estimates the public assistance rolls will closeout the current fiscal year with 537,707 cases, that total expenditures for public assistance in the state will be $2.36 billion and that the State share of those expenditures will be $902 million. We estimate the public assistance caseload for the State Fiscal Year will be 549,463, with total expenditures of $2.41 billion and a State share of $920 million. The estimates represent a 2.19 percent increase in caseload and a 2.0 percent increase in the State share expenditure. Tied to the downward moving economy, we estimate the Medicaid rolls will increase by 10.2 percent in the current fiscal year - resulting in a total enrollment of 4.3 million individuals. The Assembly Minority Ways and Means Committee expects the State share for the current fiscal year to be $14 billion. Our estimate is that enrollment for will rise 4.7 percent, for a total 4.5 million individuals with a State share of $16.5 billion and a local cap of $902.3 million. The Assembly Minority Ways and Means Committee is forecasting State school aid to increase by an estimated $453.5 million for the school year. This increase would bring total funding for annual state school aid to $22.04 billion. This estimate is based on May data provided by the State Education Department. Of the major expense driven aid categories, Special Education (High Cost & Private Excess Cost Aids) is expected to increase by the highest amount, $35.6 million. Traditionally Foundation Aid would generate the largest increase in school aid, however, Foundation Aid was frozen at the levels for and , in the Budget. The Division of the Budget s Mid-Year update projects that New York State is facing a $3.2 billion budget gap this year and a $6.8 billion gap next year. Our fiscal analysis suggests that the gap is likely to be $3.7 billion this year and $7.3 billion next year. In its annual budget request, the Division of Lottery has projected that traditional Lottery and video gaming sales will be $7.9 billion and aid to education will be $2.6 billion, for The Assembly Minority Ways and Means Committee is projecting for , lottery sales and aid to education to increase by $310 million and $121 million, respectively. As we continue to see declining tax revenue and increased State spending, it is now critically important that next year s Enacted Budget provide fiscally sound proposals, while not raising taxes or fees on our already overburdened taxpayers. The Assembly Minority Conference looks forward to working with the Executive and the other legislative conferences in an open and transparent process that provides New Yorkers with a responsible and on-time budget.

4 Background PUBLIC ASSISTANCE Public Assistance is composed of two main categories: Family Assistance (FA) and Safety Net Assistance. These programs are administered by the Office for Temporary and Disability Assistance (OTDA) and offer public assistance to low- and moderate-income families and individuals. Family Assistance is financed via federal Temporary Assistance for Needy Families (TANF) funds, State funds, and local assistance funds and provides cash assistance to eligible families and children. Safety Net Assistance (SNA) is financed solely by State and local funds. SNA primarily provides cash assistance to families that have exhausted their five-year time limit for TANF eligibility; to single adults and childless couples who were ineligible to receive TANF; and to aliens who are eligible for temporary assistance, but who are not eligible for federal reimbursement. Summary of Forecast, Methodology, and Risks Since Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act (PRWOR) in 1996, public assistance caseloads have steadily declined (see Figure 1). However, due to both the general downturn in economic conditions and individuals exhausting their unemployment benefits, the Assembly Minority Ways and Means Committee has projected increases in recipients and expenditures over the next two fiscal years. It is important to note that the Federal government has extended 350, , , , , ,000 50,000 NYS TA Recipients Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Figure 1 unemployment benefits from 26 weeks in 2008 to the current 79 weeks. This extension in unemployment benefits has resulted in a lag in welfare recipients and as a result caseloads are expected to increase significantly throughout As the New York economy begins to move into a growth period, as projected by the Division of Budget (DOB), in the second half of the SFY and unemployment levels begin to recede, these increases in public assistance should begin to subside and presumably resume their typically decreasing trends. In order to conduct our forecast, trends in public assistance were taken into account as well as data regarding Earned Income Tax Credit (EITC), unemployment rates, employment, and minimum wage for both New York City as well as the rest of the state. There are several risks associated with this forecast that could produce differing results, especially any other Federal extensions to the unemployment insurance program as well as any further degradation within the State and National economies. Family Assistance (NYC) For SFY , the FA caseload for NYC for March 2010, is projected at 155,399, an increase of 3.1 percent from the March 2009 caseload figure. For SFY , the FA Year 1

5 expenditure is projected at $790.8 million; the State s share is projected at $197.7 million. The Monthly Average Payment projection is $426. Using the above stated methodology, our forecast for SFY caseload, is 156,854. The FA expenditure is projected to be $802.1million; the State s share is projected at $200.5 million and the associated Monthly Average Payment projection is $427. Family Assistance in ROS For SFY , the FA caseload for the rest of the state (ROS) for March 2010, is projected at 102,800, which is an increase of 6.4 percent from the March 2009 caseload figure. The FA expenditure is projected at $324.2 million; the State s share is projected at $81 million. The Monthly Average Payment projection is $268. Using the above stated methodology, our forecast for SFY caseload, is 105,156. The FA expenditure is projected at $334.2 million; the State s share is projected at $83.5 million. The Monthly Average Payment projection is $269. Safety Net Assistance Families (NYC) - MOE For SFY , the SNA families caseload for NYC for March 2010, is projected at 88,121, an increase of 2.6 percent from the March 2009 caseload figure. For SFY , the expenditure is projected at $286.8 million; the State s share is projected at $143.4 million. The Monthly Average Payment projection is $271. The Assembly Minority estimates that Safety Net family caseload will not see as significant a growth with regards to caseload and expenditure when compared to Family Assistance. The forecast for SFY caseload, is 87,328. The SNA families expenditure is projected at $289.7 million; the State s share is projected at $144.9 million. The Monthly Average Payment projection is $275. Safety Net Assistance Families (ROS) MOE For SFY , the SNA families caseload for ROS for March 2010, is projected at 31,092, an increase of 7.4 percent from the March 2009 caseload figure. For SFY , the expenditure is projected at $77.1 million; the State s share is projected at $38.5 million. The Monthly Average Payment projection is $213. The forecast for SFY caseload is 33,209. The SNA families expenditures is projected at $83.7 million; the State s share is projected at $41.9 million. The Monthly Average Payment projection is $216. Safety Net Assistance Singles (NYC) Non-MOE For SFY , the SNA singles caseload for NYC for March 2010, is projected at 103,203, a decrease of 1.7 percent from the March 2009 caseload figure. Despite the projected decrease in caseload recipients from year to year, this area of safety net typically experiences reduced caseloads in the months from April through September. The projected SNA singles caseload closeout level for SFY for NYC is actually representing a 2.6 percent increase from its current July reporting levels. For SFY , the expenditure is projected at $643 2

6 million; the State s share is projected at $322 million. The Monthly Average Payment projection is $516. The forecast for SFY caseload is 103,915. The SNA singles expenditure is projected at $638 million; the State s share is projected at $319 million. The Monthly Average Payment projection is $524. Safety Net Assistance Singles (ROS) Non-MOE For SFY , the SNA singles caseload for ROS for March 2010, is projected at 57,091, an increase of 7.7 percent from the March 2009 caseload figure. For SFY , the expenditure is projected at $239.6 million; the State s share is projected at $119.8 million. The Monthly Average Payment projection is $360. The forecast for SFY caseload is 63,312. The SNA singles expenditure is projected at $261 million; the State s share is projected at $131 million. The Monthly Average Payment projection is $365. 3

7 Background: Over the past decade gross Medicaid spending has increased by 50 percent (see Figure 1). This has been the result of increased enrollment and utilization coupled with increased reimbursement for medical services. With increasing elderly population cost inflation, and other industry factors, these spending levels should continue to rise throughout the coming years. Summary of Methodology and Risks: The Assembly Minority uses a MEDICAID (Billions of Dollars) $50.00 $45.00 $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Figure 1 Medicaid All Funds Spending Year Gross Federal number of factors to project Medicaid closeout estimates for the current fiscal year and estimates of Medicaid spending for the state fiscal year. Over 20 different categories of Medicaid categories are taken into account, based upon information gathered from the Management Account Reporting Subsystem (MARS) data, from report numbers 39, 51, 72 and 73. Other information that is taken into account is the number of Medicaid beneficiaries, utilization rates, cost inflation as well as other factors. A historical trend analysis is applied and factors such as statutory changes, seasonal factors and recent events are taken into account. This includes actions taken in the Enacted Budget as well as the American Recovery and Reinvestment Act. Projections SFY : The forecast provided by the Assembly Minority Ways Means Committee is on a State funds basis for Medicaid spending. It is estimated that New York s spending on Medicaid for fiscal year will reach $18.4 billion, 2.6 percent above that spent in However, once we account for increased Federal Matching Assistance Percentage funds, the total of State Funds is expected to be spent drops to $14 billion. The Assembly Ways and Means Committee estimates the average number of Medicaid recipients will grow to 4.3 million individuals, an increase of 10.2 percent from the fiscal year. The State cap on local Medicaid costs and the takeover of the local Family Health Plus costs are projected to increase by $80 million in the fiscal year. The State will expend $653.9 million in the fiscal year in these two areas. Projections SFY : It is estimated that New York s spending on Medicaid for the fiscal year will reach $19.9 billion, 7.8 percent above that spent in However, once we account for increased Federal Matching Assistance Percentage funds, the total State Funds is expected to be spent drops to $16.5 billion. These numbers include the local takeover of Medicaid spending over the three percent cap and the takeover of local Family Health Plus costs. The State cap on local Medicaid costs and the takeover of the local Family Health Plus costs are projected to increase by $148.4 million in the fiscal year. The State will expend $902.3 million in the fiscal year on this local government relief. State Local 4

8 SCHOOL AID & LOTTERY REVENUE State School Aid Enacted Budget As a result of declining revenues in New York, the Governor proposed school aid cuts totaling $1.1 billion for the School Year. However, as a result of Federal economic stimulus funding from the American Recovery and Reinvestment of 2009, these proposed school aid cuts were spared within the Enacted Budget. The Enacted Budget education package provided $21.5 billion in State funded School Aid, an increase of $403.8 million, from Including the increased Federal funding, the total school aid package was $22.3 billion, an increase of $1.2 billion from (Figure 1). This major increase can be attributed to $817.3 million in increased Federal funding in formula Title 1A and Individuals with Disabilities under the Federal IDEA funding, contained in the American Recovery and Reinvestment Act of Other significant increases in State school aid included a $102.9 million increase in Transportation Aid, $204 million in Building Aid and $53.83 million in BOCES/Special Services Aid. Foundation Aid - $14.9 billion Formula Based School Aid Federal Title I - $450.8 million Figure 1 Source: SED Federal IDEA - $394 million Other Aid Categories - $1.45 billion UPK Aid - $450.8 million BOCES/Special Services Aid - $851.1 million Transportation Aid - $1.6 billion Building Aid - $2.3 billion Finally, in order to avert future budget shortfalls, the Enacted budget froze Foundation and Universal Prekindergarten (UPK) aid categories to the amount provided for in the school year for the next two years. State School Aid May Projection According to the State Education Department s (SED) official May update for State school aid, expense driven aid categories and Foundation Aid have increased by $65.8 million, since the budget was enacted in April. This increase is mainly due to school districts reporting higher claims to expense driven aid categories such as Transportation Aid and High Cost Excess Cost Aid. There has also been an increase in newly created Universal Prekindergarten programs. Although UPK Aid was frozen at Enacted budget levels, school districts that created a UPK program in the School Year will still be able to receive their full UPK apportionment in As a result, UPK aid has increased by $38.9 million. It should be noted that although the SED official May update has Foundation Aid increasing, school districts will continue to receive their School Year Foundation Aid 5

9 funding level. Figure 2 illustrates some of the major changes from the enactment of the budget to the May 15, 2009 database report. Aid Category May School Aid Increase Enacted May Budget Update Increase Foundation Aid $14,874,908,412 $14,875,266,517 $358,105 Universal Prekindergarten $375,223,014 $414,117,819 $38,894,805 Transportation Incl. Summer $1,638,502,458 $1,640,604,948 $2,102,490 BOCES + Special Services $917,932,173 $919,060,375 $1,128,202 High Cost Excess Cost $469,201,743 $492,169,125 $22,967,382 Private Excess Cost $300,182,552 $312,788,763 $12,606,211 Building + Bldg. Reorg. Incentive $2,268,703,403 $2,257,231,950 ($11,471,453) Figure 2 Source: SED Based on this data school aid on a year-to-year basis increasing by $411 million, slightly above the estimated increase at the time of enactment State School Aid Projection The Assembly Minority is forecasting State school aid to increase by an estimated $453.5 million for the School Year (see Figure 3). As stated earlier, Foundation Aid will be funded at the Enacted Budget level of $14.87 billion. $1,788,488,496 Five-Year School Aid Increase $1,861,362,816 $1,389,675,848 $411,093,175 $453,458, May Update , Projected Figure 3 Source: SED and Min. Ways and Means Staff The following aid categories are projected to have major increases: Building Aid, $212 million; Transportation Aid, $110.5 million; BOCES Aid, $66.4 million; High Cost Excess Cost Aid, $41 million; and Private Excess Cost Aid, $24.3 million. However, these expense driven aid categories are difficult to forecast because actual claim data from school districts is not available until November 15, See Figure 4 for a chart detailing these aid increases. 6

10 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $0 Building Aid Forecasted Year-to-Year Increase Transportation Aid Incl. Summer BOCES and Special Services Aid Figure 4: Source: SED and Min. Ways and Means Staff High Cost Excess Cost Aid Private Excess Cost Aid , May Update , Projected As mentioned earlier, the Assembly Minority has projected State school aid to increase by approximately $453.5 million for the School Year. This projection will bring State spending for schools to a total of $22.04 billion. Figure 5 represents a five-year overview of how total State aid has increased. Total School Aid $17,525,092,107 $19,313,580,603 $21,174,943,419 $21,586,036,594 $22,039,495, May Update Figure 5 Source: SED and Min. Ways and Means Staff , Projected Lottery Revenue and Aid to Education The New York State Lottery s purpose is to raise revenue for education. New York State Finance Law (Section 92-c) mandates that State Lottery revenue be used to support elementary, middle and secondary education in New York State. Lottery revenues are deposited directly into a Lottery Aid to Education Account, from which checks are written directly to school districts in the fall of each year. A share of the proceeds from the New York State Lottery is computed utilizing a formula based on each school district s property wealth per pupil. 7

11 Lottery Revenue and Aid to Education Projection According to the Division of Lottery s budget request, lottery sales and aid to education resulting from traditional lottery and video gaming totaled $7.66 billion and $2.54 billion, respectively for Fiscal Year Further, the Division has reported that lottery sales are currently 3.5 percent higher for FY than FY The Assembly Minority Ways and Means Committee is projecting for , lottery sales and aid to education to increase by $310 million and $121 million, respectively. See Figure 6 for a breakdown of lottery sales and aid to education. Fiscal Year New York Lottery Sales and Profits (in millions) Total Sales Education Funding Percent of Lottery Profit Going to Education $6,803 $2, % $7,175 $2, % $7,550 $2, % $7,660 $2, % Estimated $7,928 $2, % Projected $8,238 $2, % Figure 6 Source: Division of Lottery and Min. Ways and Means Staff Forecast Methodology State school aid databases that are used to project spending growth for the Executive and Enacted Budgets are compiled by SED and occur statutorily in May, November and February of each year. The Assembly Minority forecast model was trended forward primarily using the last five year average increases for each school aid category, except Foundation Aid, based on May data. As mentioned earlier, expense driven aids are difficult to accurately forecast without the November 15 th SED database update, which represents new State Aid claims by school districts. The lottery projection are calculated by taking a five-year average of sales and aid to education. This five-year average is only an estimated forecast and is difficult to project because there are many unpredictable factors that may affect sales from the lottery in any given year. Some factors include the State s economy, advertising and buyer demand of lottery tickets. 8

12 Revenue Outlook New York State revenue is experiencing deterioration as a result of economic conditions. In the wake of the banking sector collapse last fall, and the resulting global economic recession, one of the deepest and most far reaching since the Great Depression, New York finds itself in a precarious fiscal situation. Tax revenues are substantially down from estimates in this year s Enacted Budget and the tax and fee increases contained in said budget have yet to yield the results than were promised. While the First Quarter Update of this Fiscal Year showed significantly lower tax receipts than originally anticipated, the Mid-Year Update paints an even worse picture of New York s financial future. These conditions are resulting in a current year budget deficit, as well as a more substantial deficit in The Assembly Minority is slightly less optimistic about future revenues than the Division of Budget (DOB), with a current year budget deficit projection of $3.7 billion, compared to DOB s $3.2 billion deficit projection, and an out-year budget deficit projection of $7.3 billion, compared to DOB s $6.8 billion deficit projection. $8.00 $7.00 $6.00 Estimated Deficits (billions) $5.00 $4.00 $3.00 $2.00 $ DOB WAM The Governor has called a Special Session for November 10, 2009 to consider options to close the current-year shortfall. The Assembly Minority continues to believe that the budget deficit should not be closed by tax and fee increases. The numerous downward revisions to the anticipated receipts from new taxes and fees in this year s Enacted Budget surely proves that controlled spending, not tax increases, is the remedy for the State s budget affliction. Our forecast is driven by various National and State economic indicators. In developing this forecast, the Committee has utilized the Washington University Macro Model of the United States economy, developed and maintained by Macroeconomic Advisers, LLC, and reports on the U.S. economy prepared by Macroeconomic Advisers. 9

13 General Fund: Compared to the Governor General Fund revenue is estimated at $481 million less (or 1.3 percent) in , and $529 million less (or 1.3 percent) in , as compared to the Governor s Mid-Year forecast. Total General Fund revenue is projected at $36.7 billion for and $39.6 billion for The chart below entitled General Fund Tax Revenues shows that the Assembly Minority is less optimistic than the Governor in terms of Personal Income Taxes for both and Furthermore, the Assembly Minority is less optimistic than the Governor in terms of Business Taxes in Recent data has shown that the Income Tax surcharge in this year s budget delivered far less revenue than originally assumed. This results in a net decrease of $481 million below the Governor s projected Mid-Year tax revenue for , and $529 million below for General Fund Tax Revenues (millions) DOB Mid-Year Update Minority Ways & Means Monetary Percentage Personal Income Tax $22,831 $21,985 ($846) -3.8% Consumption & Use Tax $8,194 $8,395 $ % Business Taxes $5,321 $5,471 $ % Other Taxes $926 $940 $14 1.5% Total Taxes $37,272 $36,791 ($481) -1.3% DOB Mid-Year Update Minority Ways & Means Monetary Percentage Personal Income Tax $24,996 $24,746 ($250) -1.0% Consumption & Use Tax $8,554 $8,744 $ % Business Taxes $5,617 $5,114 ($503) -9.8% Other Taxes $934 $968 $34 3.5% Total Taxes $40,101 $39,572 ($529) -1.3% 10

14 All Funds: Compared to the Governor All Funds revenue is estimated at $304 million more (or 0.5 percent) in , and $133 million less (or 0.2 percent) in , as compared to the Governor s Mid-Year forecast. Total All Fund revenue is projected at $59.7 billion for and $63.2 billion for The chart below entitled All Funds Tax Revenue shows that the Assembly Minority is less optimistic than the Governor in terms of Personal Income Tax, but more optimistic with regard to Business Taxes and Consumption Taxes in In , the Assembly Minority is less optimistic than the Governor in terms of Personal Income Tax and Business Taxes, while more optimistic in terms of Consumption Taxes and Other Taxes. This results in a net increase of $290 million above the Governor s projected Mid-Year tax revenue for and a net decrease of $133 million below for All Funds Tax Revenues (millions) DOB Mid-Year Update Minority Ways & Means Monetary Percentage Personal Income Tax $35,030 $34,184 ($846) -2.5% Consumption & Use Tax $13,946 $14,480 $ % Business Taxes $7,563 $8,179 $ % Other Taxes $1,346 $1,346 $0 0.0% MTCD Payroll Tax $1,498 $1,498 $0 0.0% Total Taxes $59,383 $59,687 $ % DOB Mid-Year Update Minority Ways & Means Monetary Percentage Personal Income Tax $37,968 $37,718 ($250) -0.7% Consumption & Use Tax $14,631 $14,923 $ % Business Taxes $7,782 $7,679 ($103) -1.3% Other Taxes $1,397 $1,325 ($72) -5.4% MCTD Payroll Tax $1,568 $1,568 $0 0.0% Total Taxes $63,346 $63,213 ($133) -0.2% 11