State Budgets, Federal Deficit, Pensions and Jobs

Transcription

1 TOP 12 ISSUES WEBINAR SERIES State Budgets, Federal Deficit, Pensions and Jobs

2 Presenters Todd Haggerty NCSL Fiscal Affairs Policy Associate Jeff Hurley NCSL State Federal Relations Policy Specialist Ron Snell NCSL State Services Division Senior Fellow Luke Martel NCSL Fiscal Affairs Policy Specialist

3 Fiscal State of the States February 6, 2012 Todd Haggerty Fiscal Affairs Program

4 Overview State fiscal conditions gradually are improving Revenue performance is solid Expenditures are stable Few new budget gaps have opened in FY 2012 Year-end balances have stabilized

5 Overview (continued) States face ongoing budget challenges The total state budget gap: $527.7 billion (FY FY 2013 est.) State tax collections remain below pre-recession levels Officials are concerned about lackluster economic growth Questions exist about the impact of federal deficit reduction on state budgets

6 Revenue Outlook for the Remainder of Number of States/ /Jurisdictio ons FY Pessimistic Concerned Stable Optimistic 28 7

7 Year-Over-Year Changes in Real State Taxes & Local Taxes (Percent Change of Four Quarter Average)

8 Spending Overruns in FY 2012 Medicaid or other health care programs 6 states compared with 18 at this time last year Corrections or public safety programs (3 states) Social service programs (4 states) Kansas (TANF) Massachusetts (emergency homeless shelters)

9 Cumulative State Budget Gaps: FY 2002-FY 2014 (Est.)

10 AK Overall Fiscal Outlook for the WA Remainder of FY 2012 VT MT ND NH ME HI OR CA NV ID UT WY CO SD NE KS MN WI IA MO IL MI IN KY OH WV NY PA VA NC MA, RI CT NJ DE MD AZ NM OK AR MS TN AL GA SC Pessimistic, n = 0 TX LA Concerned, n = 21 Cautiously Optimistic, n = 23 FL Positive, n = 7 Puerto Rico Source:. Source: NCSL survey of state legislative fiscal offices, Fall 2011

11 Top Fiscal Issues for 2012 Sessions

12 Conclusion The worst may be behind most states: State revenues are growing State year-end balances are stabilizing The overall fiscal outlook is improving A number of significant uncertainties loom: Demands on state t budgets The strength and sustainability of economic recovery The impact of federal actions on state budgets

13 BCA, Budgets and Beyond Jeff Hurley - February 6, 2012

14 ABC's ofbca- How are states impacted? Over $492 billion worth of non-defense discretionary spending on the chopping block Education, public safety, energy, etc. Programs exempt in sequestration will not face reductions Increase borrowing and capital project costs? Cuts to defense spending

15 FY2012 Budget Keeping the streak alive - for the 15 th consecutive year, Congress failed to complete the appropriations process by the end of the fiscal year. "Minibus" and "Megabus" Budget Control Act caps FY 2012 spending at $6.8 billion less then FY 2011 spending levels. States should expect a 2.7 percent overall reduction in state-federal discretionary programs in FY 2012.

16 Federal (In)Action - #1 Short-term budget hiccups Payroll Tax Reduction for Individuals (expires 2/29/12) Emergency Unemployment Compensation Benefits (expires 2/29/12); 100 percent funding of Extended Benefits program (expires 2/29/12) A variety of tax extenders Optional State and Local Sales Tax Deductibility Expansion of the AMT Medicare provider reimbursement (expires 2/29/12)

17 Federal (In)Action - #2 Longer-term challenges Revisiting issues expiring 2/29/ /2003/2010 tax cuts Debt ceiling increase Completing FY13 appropriations Reauthorizations All could come together post 2012 election All or some could be punted into 2013

18 Sooo What does the fiscal future hold? Clarity 2.7 percent cut in FY percent reductions in FY 2013 Uncertainty What's in store FY 2013 and beyond? Unpredictability 10 percent reduction in defense? Future federal deficit reduction action? Pension funding, tax-exempt financing, etc.

19 State Retirement Legislation in 2010 and 2011 February 2012 Ron Snell

20 Overview In 2010 and 2011, state government responded to pension funding challenges with widespread, significant programs of change. In 2011, 32 states enacted significant changes in public pension plans. In 2010, 21 states enacted changes. In all, 41 states acted in (some in both years).

21 Major Pensions Legislation in : 2011: All Topics 41 States Represented

22 Increases in Employee Contributions, 2010 and states represented Future Members Only (5 states) At Least Some Current Members (21 states)

23 Higher Age and Service Requirements for Normal Retirement, for New Members, 2010 and States Represented

24 Some States Have Replaced DB Plans In 2010, Utah closed its DB plan for all state and local employees. As of July 1, 2011, Utah offers new employees the choice of a defined contribution plan or a hybrid plan that includes a DB plan and a mandatory 401(k). As of July 1, 2010, Michigan replaced its School Employees DB plan with a hybrid plan. Rhode Island will transfer all members of the state DB plans (except judges and public safety) to a hybrid plan in 2012.

25 Sources and Contact Information This report is based on NCSL's annual reports on state pensions and retirement legislation and The Widening Gap (Pew Center on the States, 2011). The 2010 NCSL legislative report is available at /d lt The 2011 legislative report is available at aspx?tabid=22763 For further information: Ron Snell -- org

26 Jobs, Jobs, Jobs Luke Martel, Fiscal Affairs Program, NCSL

27 What Can States Do To Create Jobs? Common State Strategies: Tax Cuts Tax Incentives Financial Assistance Direct Investment Relocation Assistance Workforce Development Infrastructure Spending

28 2011 Business Tax Changes Michigan enacted a major reform Eliminated MBT, replaced with 6% flat corporate income tax Only applies to C corporations Eliminated all credits and deductions, except small business credit Indiana Indiana (effective FY FY 2016) Cut corporate income tax rate by 25 percent over 4 years Arizona (effective FY FY 2018) Cut corporate income tax rate by 30% over 4 years North Dakota Reduced the corporate income tax rate by nearly 20%

29 2011 Business Tax Changes (Cont'd) North Carolina Allowed expiration of temporary corporate income tax surcharge adopted d in New Hampshire Modified its business profits tax Missouri (FY FY 2016) Phased-out the corporate franchise tax over three years Texas Extended the small business tax exemption

30 Job Creation Tax Credits New Credits Enacted in 2011 Arizona, Idaho & Wisconsin New Credits Enacted in 2010 Alabama, California, Connecticut, Florida, Illinois, Indiana, Maryland, Mississippi, Virginia At least 40 states currently have at least one type of job creation tax credit available.

31 Job Creation Tax Credits - Examples Arizona: : Businesses who invest at least $5 million and create at least 25 new jobs, that pay at least the county median wage and provide insurance, can deduct $3,000 per new employee. California: : Small businesses (20 or fewer employees) that show a net increase in full-time employees from the previous year can deduct up to $3,000 for each new employee hired. Illinois: : Small businesses (50 or fewer employees) can receive a $2,500 credit against withholding taxes if they create a new, full-time position filled by a state resident for at least a year that pays no less than $10 per hour.

32 Other Job Creation Initiatives Illinois Jobs Now $31 billion capital construction / economic recovery plan Bioscience i Connecticut $800+ million bioscience facility expansion & renovation plus academic program expansions. Iowa I-JOBS $875 million in infrastructure investments Regulatory Reforms Many states

33 Conclusion Approximate state investments in economic development activities: FY 2011: $8.9 billion FY 2012: $7.7 7 billion - 13% decrease from previous year Source: State Economic Development Expenditures Database, Center for Regional Economic Competitiveness Evaluation - Ask: Does this program give away more than we are getting in return? Questions?

34 Resources NCSL Fiscal Affairs Homepage: NCSL Labor and Employment Homepage: NCSL Economic o c Development e e and Trade Homepage:

35 Upcoming Webinars: Feb. 10 Feb.13 Feb. 17 Feb. 20 Feb. 24 Health Reform and Medicaid the States 800 Pound Gorilla Putting Election Laws to the Test Corrections, Juvenile Justice and Drugged Driving Transportation Funding, Natural Gas and Environmental Regulations Funding Education in a Climate of Cutting