State Budget: Priorities and Issues Ahead Methodist Healthcare Ministries of South Texas Mental Health Summit, June 25, 2012

Transcription

1 State Budget: Priorities and Issues Ahead Methodist Healthcare Ministries of South Texas Mental Health Summit, June 25, 2012 Eva DeLuna Castro, Budget Analyst

2 Outline Budget Overview Spending priorities; cuts to HHS, education Decisions made by the 2011 Legislature that are still unresolved (such as the Medicaid IOU ) revenue trends Budget Development Budget instructions vs. budget needs Making room for restorations/ improvements

3 The Texas State Budget for Biennial Total: $176 billion (6% below ; 15% below current services) Highways 8% Prisons 3% HHS 14% Federally funded = shown in white; other areas are General Revenue, GR-Dedicated, & Other State Funds. Higher Education 13% Other PreK-12, 16% Property tax cut 8% Other 7% Federal 31% HHS 18% PreK-12 6% Highway 3% Other federal 4% Source: Legislative Budget Board, HB 1 / HB 4/ SB 2, Dec Includes $2.3 billion delayed Foundation School Program payment.

4 Balancing the State Budget General Revenue Shortfall of $23 billion Cuts to Budget: Over $11 billion more than $5.3 b in cuts to PreK-12 (after using $3.2 billion in Rainy Day Fund for 2011, plus other 2011 revenue not in January estimate) Medicaid I.O.U : $5 billion* Accounting tricks: $3 billion Growth in GR-D Balances: $1.2 billion Revised estimate: $1.2 billion Nontax revenue: $800 million (net) Cuts to 2011 Budget: $1.3 billion (offset by $500 m more for schools) *Note: Medicaid IOU is currently estimated at $4 billion GR, after certification estimate contingent appropriations and other budget revisions.

5 All Funds Budget (Billions) budget (with FSP delay, Medicaid IOU) Current Services $0 $10 $20 $30 $40 $50 $60 Gen Govt Medicaid All other HHS Public Ed Higher Ed Public Safety/Prisons Business/Econ Dev All Other $ $ $ $ $ $ $ $

6 How the Legislature Reduced GR Spending for Medicaid/CHIP in by $6.8 billion Health care provider rate/fee cuts, $805 m Managed care expansion, $386 m Medicaid I.O.U., $4.8 billion Other benefit and spending cuts, $843 m

7 LBB on Medicaid supplemental need (as of January 2012) $30 $25 Cost containment (All Funds) Billion $ $20 $15 $10 $11 $12 $13 $15 $14 $8 Supplemental need ($3.9 b GR, $6 b F) Federal Funds $5 $7.5 $6.9 $7.0 $8.4 $10.1 $6.4 ARRA Federal $

8 Where Could Revenue Come from to Pay Medicaid IOU? Rainy Day Fund (Economic Stabilization): had $6.1 billion in it as of December 2011; Comptroller projects $7.3 billion balance by end of Unexpected tax revenue that state collects in : some additional revenue (beyond January 2011 estimate) was already used to shrink the Medicaid IOU and avoid other state spending cuts; further new money could fill budget holes or create larger ending balance

9 What Did the Budget Do to PreK-12 Education? Inflation-adjusted (2011 $) Spending Per Student $10,252 $10,272 $8,795 Local Federal State

10 $10 Billion Biennial Gap Between Tax Cut Cost & Revenue Raised in 2006 Session Billions $15 Cost of property tax cut Revenue from special session tax changes $14.2 $14.2 $14.2 $10 $5 $5.0 $4.2 $4.4 $

11 From a Taxpayer s Point of View Other State 20% School 26% State 25% Sales Taxes 32% Property Taxes 47% City 8% Local 7% Special Districts 6% County 8% Sources: Comptroller of Public Accounts, Annual Property Tax Report & Cash Report.

12 State Taxes/Revenue in Interest & Investment Income 1% Licenses, fees, fines, penalties 9% Other taxes 7% Biennial Total: $167 billion Lottery 2% Other nontax revenue 7% ARRA Federal 0.4% Motor Fuels Tax 4% Motor Vehicle Sales Tax 4% Franchise Tax 5% Regular Federal 32% HHS 19% Education 7% Highway 3% Other Fed 4% Sales Tax 27%

13 State General Revenue: Tax Forecasts as of Dec $42.5 $41.0 $ $26.9 $24.2 $26.5 Sales taxes All other taxes

14 How Conservative Was the January 2011 Forecast? General Revenue Tax Collections as Share of Personal Income 5.0% 4.5% Actual January 2011 Revenue Estimate 4.0% 3.5% 3.0% 2.5% 2.0% Recovering to 2009 levels would have generated $7.5 billion more in GR (enough to avoid Medicaid & school cuts); to 2003 levels, more than $13 billion

15 Before the 83 nd Session Starts Budget instructions to state agencies (June 2012) Agency requests go to LBB & Governor s Office (August) With some key exceptions: base = GR and GR-Dedicated Funds that agency spends in Also: 10% cut supplemental schedules Public hearings before LBB/Gov. (Sept./Oct., in 2010) Four-fifths vote to override Governor s Budget Proposal LBB Budget Proposal Comptroller s Revenue Estimate

16 Need for Public Services US Texas 50-state In 2010: Texas Average Rank Children (under 18) as a Percent of Total Population Percent of Residents with No Health Insurance 27.3 % 24.0 % 2 nd 23.7 % 15.5 % 1 st Child Poverty Rate 25.7 % 21.6 % 8 th Elderly Poverty Rate 10.7 % 9.0 % 8 th Share of Residents Aged 25 or over with at least a High School Diploma Share of Residents Aged 25 or over with at least a Bachelor s Degree 80.7% 85.6 % 50 th 25.9 % 28.2 % 30 th Source: U.S. Census Bureau, 2010 American Community Survey, 1-year estimates.

17 Except for federal Recovery Act Years, State Government Spending Peaked in mid-1990 s % of Gross State Product 8% 6% All Funds 4% 2% General Revenue 0% Source: Legislative Budget Board; Comptroller s Winter Forecast assumes payment of Medicaid I.O.U. and includes $2.3 billion for schools that gets paid in 2014.

18 15% More GR!!

19 Current Services Needs, Public PreK-12, $7 billion: $4 billion to restore formulas, $1.3 billion to restore grants; $2 billion for student enrollment growth Higher Ed: $490 million for enrollment growth at community colleges alone Health and Human Services: $3 to $4 billion, about half for enrollment growth, half for cost hikes State employee benefits: more GR needed for group health, pensions; another $500 million? Prisons: correctional managed health care Total: once again, could be about a $99 billion General Revenue budget

20 10% Cuts to General Revenue for Budget Requests: What s at Stake? Public safety/ criminal justice 10%: $710 million All other 10%: $580 million Bond debt service Retirement/ group insurance (incl. TRS) Other HHS 10%: $540 million Medicaid, CHIP, other exempt HHS Other education, mostly higher ed 10%: $1.5 billion Foundation School Program All other = general government, regulatory agencies, state courts, natural resources/ environmental protection, business and economic development, and the legislature.

21 Current Services Revenue Options Apply Sales Tax to Business Services Repeal outdated natural gas tax break $6 billion $2 billion Healthy Texas taxes $3.5 billion Hospital 3.4% quality assurance fee $4 billion TOTAL $15.5 billion