Current Fiscal Situation

Transcription

1 Follow the Money Federation of Tax Administrators June 15, 2005 Scott Pattison Executive Director National Association of State Budget Officers 444 North Capitol Street, NW, Suite 642 Washington, DC (202) Current Fiscal Situation 1

2 The Current Fiscal Situation Gradual recovery after three very difficult fiscal years for almost all states Most states reporting improvement in revenues over projected State budgets face expenditure pressure in FY 06 and beyond Significant Improvement Budget Cuts Made After the Budget Passed, Fiscal 1986-Fiscal 2004 ($ millions) $15,000 $13,500 $12,000 $10,500 $9,000 $7,500 $6,000 $4,500 $3,000 $1,500 $ Recession ends Recession ends Number of states (right) Amount of reduction (left) Source: NASBO, Fiscal Survey of States 2

3 State Expenditures: Sluggish Recovery General Fund Expenditure Growth (%) % Actual Inflation Adjusted Source: NASBO Fiscal Survey of States State Expenditures: Sluggish Recovery Total State Spending By Fund Source, Fiscal ($ millions) 1,200,000 1,000,000 Bonds 800,000 $ 600,000 Other State Funds 400,000 Federal Funds 200,000 General Fund Source: NASBO, State Expenditure Report 3

4 State Expenditures: Sluggish Recovery Composition of Total State Spending By Function, Fiscal ($ millions) 1,200,000 1,000, ,000 $ 600,000 All Other Transportation 400,000 Corrections Medicaid Public Assistance 200,000 Higher Education E & S Education Source: NASBO, State Expenditure Report Spending Pressure Remains High, May 2005 Costs rising for Medicaid Delaware Public colleges facing shortfall Louisiana Retirement fund short Mississippi 4

5 State Rating and Outlook Changes Outlook & Review Changes Rating Changes 5 0 Neg P Pos Neg P Pos Neg P Pos Neg P Pos Neg P Pos Source: Moody s Investors Service State Debt Has Soared Total Net Tax-Supported Debt in the 50 States ($ Millions) $400 $350 $300 $250 $200 $150 $100 $50 $ Source: Moody s Investors Service 5

6 Spending Pressures Competing Fiscal Pressures Medicaid and Health Care K-12 Increases Demographic Changes Infrastructure 6

7 Future Federal Funds Will Be Limited On-Budget Deficit, Federal Fiscal Years 2003 (Actual)-2015 ($ Billions) $ Source: Congressional Budget Office State General Funds Today General Fund Spending, Fiscal 2003 All Other 26.1% Transportation 0.6% Elementary & Secondary Education 35.5% Corrections 7.0% Medicaid 16.5% Higher Education 12.1% Public Assistance 2.2% Source: NASBO 2003 State Expenditure Report 7

8 State General Funds: Medicaid has Doubled Just Since 1987 General Fund Spending, Fiscal 1987 All Other 30.4% Elementary & Secondary Education 34.2% Transportation 1.4% Corrections 5.0% Medicaid 8.1% Public Assistance 5.3% Higher Education 15.5% Source: NASBO 2003 State Expenditure Report Balancing the budget on less than 100% Total State Expenditures All Other 32.2% Elementary & Secondary Education 21.7% Higher Education 10.8% Transportation 8.2% Corrections 3.5% Public Assistance 2.2% Medicaid 21.4% Source: NASBO 2003 State Expenditure Report 8

9 What s in all other? All Other 32.2% Public health Parks and recreation State police Employer contributions to pensions and benefits Information Technology Care for mentally ill and disabled Environmental Housing General aid to local government Medicaid A Budget Driver 9

10 I am a liberal Democrat, but we can t sustain the current Medicaid program. It s fiscal madness. It doesn t guarantee good care, and it s a budget buster. -- John Hurson, President, NCSL and Delegate, Maryland Medicaid Spending General Fund Growth Rate Compared to Annual Percentage Medicaid Growth Rate (Excluding Federal Share) % est rec. prelim. General Fund Medicaid Source: NASBO, Fiscal Survey of States 10

11 Medicaid Enrollment Percent Change in U.S. Medicaid Enrollment, FY FY % 10.00% 8.00% 6.00% 4.00% 10.2% 7.1% 5.1% 3.4% 3.7% 8.3% 9.8% 5.9% 4.3% 2.00% 2.0% 0.00% -2.00% -4.00% % -2.4% -3.3% Source: Vernon Smith, Health Management Associates 70% of Medicaid Spending on Benefits in 2005 is for Elderly and Disabled Elderly = 9% Disabled = 16% 25% 70% Elderly = 25% Adults = 27% Disabled = 45% Children = 48% Adults = 12% Children = 18% Enrollees Expenditures 2005 U.S. Total = 58.5 million U.S. Total = $288 billion in 2005 Source: Vernon Smith, Health Management Associates 11

12 Outlook Strengths Employment/Consumer spending good, sustainable Revenue growth strong Credit ratings improving State liquidity good 12

13 Risks Decreased federal funding Energy prices/inflation OPEB Possible housing bubble Health care costs Competing Fiscal Pressures Medicaid and Health Care K-12 Increases Demographic Changes Infrastructure 13

14 The Next Ten Years Cyclical Revenue Less Federal Monies Tough Competition for State General Funds Budget Drivers K-12 Medicaid and Health Care 14