Transcript Slide 1

Intergovernmental
Dependency and
Transparency
Joe Kull
PwC
January, 2012
We have been doing so much
for so long
with so little,
that soon we’ll be able to do everything
with nothing
forever.
Budget Formulation, Budget Execution, and Financial
Management—Per the Constitution (1787)
“No Money shall be drawn from the Treasury, but in Consequence
of Appropriations made by Law;”
—Budget Formulation and Execution
“and a regular Statement and Account of the Receipts and
Expenditures of all public Money shall be published from time to
time.”
—Financial Management
(Article I, Section 9)
Analysis of Federal Liabilities, Intragovernmental Debt, and
Social Insurance Obligations
Source of Data: 2010 Financial Report of U.S. Government
$ Billions
2010
2009
Federal Liabilities:
Publicly-held Debt
Federal Employee & VA Benefits
Other
$9,060*
5,720
1,576
Intragovernmental Debt—Owed to Social Security,
Medicare/Other Trust Funds
Federal Social Insurance Obligations
Social Security
Medicare—Parts A, B & D
Other
Total Liabilities, Intragovernmental Debt & SI Obligations
Current-dollar GDP 3rd qtr 2010, 4th qtr 2009 (Source: BEA)
Liabilities and Obligations as % GDP
* 62% of 2010 GDP
**53% of 2009 GDP
$7,583**
5,284
1,257
4,577
4,391
7,947
22,813
97
7,677
38,107
94
$51,790
$64,393
$14,750 $14,119
351%
456%
Percentage Composition of Federal Government Outlays
100%
Payments to
Individuals
80%
$1,494 B
60%
All Other
40%
$501 B
Net Interest
$247 B
20%
National Defense
$528 B
Current $
1940
$9.5B
1971
$210.2B
2007
$2,770B
04
2007
Fiscal Year
00
96
92
88
84
80
76
72
68
64
60
56
52
48
44
40
0%
President proposes;
Congress disposes.
Both sign on.
State Fiscal Situation
• Largest revenue collapse on record
- ARRA replaced about $140B
• Recovery slow and lag times growing
- Shortfalls continue
- Using reserves, taxes hikes, federal funds
- Pressure from education, healthcare, OPEB
• States tend to lag national recovery
• Housing is key
The Cliff: Temporary Federal Aid to States
(FY ’11 totals include both ARRA & Education Jobs Funds)
In
Billion
s
Fiscal Year
Source: Recovery Act data come from GAO Report to Congress,
September 2010
Significant Lag
Housing leverage
• Link between housing, values, consumption and taxes
• Turnover
‘05: 1.3M new @ $290K = $370B
7.0M exisiting @ $269K = $1.9T
‘08: .3M new @ $244 = $70B
existing
= $890B
• Jobs: 2M on site lost since ‘06; 2:1 off/on site
Translates to ~ $2T and 6M jobs
• Unemployment/economic uncertainty, diminished
wealth, fallen values depress consumption, taxes
- Property taxes 4% below prior year
Spending Pressure
Medicaid and Health Care
K-12 and Higher Education
Demographic Changes
Corrections
Transportation
Infrastructure
Pensions
Key Dependency
Measurements
VA
2008
MA
2008
NV
2008
NC
2008
WV
2008
NY
2008
FL
2008
AL
2008
Direct Federal Revenues to
State (billions)
(VA & NY 2009)
$10.8
$10.5
$2.4
$15
$2.7
$48.9
$24.5
$8.7
Percentage of Total State
Revenues—All Sources
26.9%
23%
33%
31.8%
29%
30.6%
28%
31.4%
Direct Federal Grants to Local
governments (millions)
$1,075
$758
$475
$1,799
$232
$5,571
$4,033
$900
Federal Purchases from State
Businesses (billions)
$53.9
$13.3
$2.7
$5.8
$1.3
$13.7
$16.6
$10.4
Federal Payments to
Individuals-wages, pensions,
S.S., Medicare (billions)
$53.9
$36.2
$11.3
$47.6
$12.8
$102.4
$110.7
$33.3
Total Direct and Indirect
Federal Flows
(billions)
$119.7
$60.8
$16.9
$70.3
$17.1
$165
$155.8
$53.3
VA
2008
MA
2008
NV
2008
NC
2008
WV
200
8
NY
2008
FL
2008
AL
2008
$324.5
$312.5
$103.2
$329.4
$46.3
$964.8
$603.5
$137.1
Total Federal Flows
Gross State Product
36.9%
19.5%
16.4%
21.3%
36.9%
17.1%
25.8%
38.9%
Federal Leased/Owned
Buildings (millions sq/ft)
As of March 2010
50.4
6.9
2.4
4.3
4.0
23.3
14.0
3.9%
Federal Debt Securities Held
by State (billions)
$6.3
N/A
$6.9
N/A
$6.6
N/A
$40.1
-
Estimated 2009 Population
(millions)
7.8
6.6
2.6
9.4
1.8
19.5
18.5
4.7
Key
Measurements
Real GDP by State
Inflation Adjusted to 2000
(billions)
Key
Measurements
VA
2008
MA
2008
NV
2008
NC
2008
WV
2008
NY
2009
FL
2008
AL
2008
Military Facilities (9/30/08)
148
63
57
124
47
216
235
96
Military Facilities--Present
Replacement Value (9/30/08,
billions)
$37.6
$5.0
$10.6
$20.4
$1.1
$11.7
$23.4
$10.0
Military Facilities--Military
and Civilian Personnel
(9/30/08, thousands)
181.8
16.6
15.2
147.2
8.5
60.0
91.2
66.9
What are the Risks Associated with
Intergovernmental Financial Dependency
Disruptions to current direct and indirect intergovernmental revenue flows
Impact on investment income, asset values
Build-up of unfunded pensions, post employment benefits
Deferred infrastructure
Volatility
shifting role of federal gov’t
estimated that 1/3 of $1T in cuts would hit states
What can we do?
• Evaluate sustainability and dependency risks in your
environment
- States refusing federal funds, cutting services
- Watch the world, and the world economy
• Awareness that something has to give
- Don’t raise taxes, don’t cut benefits
- Infrastructure does not last forever
- Catastrophes, conflicts happen
- Spend your way out of debt
-
- Compromise by everybody winning
• Show up
• Provide simple, clear information-No MEGO stuff
-
“You
can always count on
Americans to do the right thingafter they’ve tried everything
else.”
PM Winston Churchill
Appendix
Report of the U.S. Government
http://www.fms.treas.gov/fr/index.html
The Federal Government's Long-Term Fiscal Outlook
www.gao.gov
Intergovernmental Financial Dependency and Related Risks—
Proposed Reporting By State and Local Governments
Available at no cost at—www.cbh.com/intergovernmentalreport