Transcript Presentation

STATE BUDGET UPDATE
More Big Challenges Ahead
January 2014
O FFICE
F
OF
INANCIAL
M
ANAGEMENT
Our economy is rebounding, but at very slow pace
2
State sales tax collections have still not reached
pre-recession levels
$$ in millions
Monthly retail sales tax
receipts seasonally
adjusted
Month of taxable activity
Washington State Economic and Revenue Forecast Council
Slow economic recovery is reflected in projected
revenue growth
Real per capita General Fund-State* revenue
(2009 dollars)
*Reflects General Fund and related funds for fiscal years 19952009; General Fund, new definition for fiscal years 201017
Washington State Economic and Revenue Forecast Council
4
Demand for services has significantly
outpaced revenue growth
Percent change since FY 2008
General FundState revenue*
K-12
enrollment
Statewide
population
TANF
caseload
Long-term
care
caseload
Medical assistance
caseload
*Adjusted for inflation
5
As population has continued to grow,
state workforce has shrunk
General Government employees per 1,000 population*
FY 2002
Current
State population
6,041,710
6,882,400*
State employees
63,975
59,439**
*As of April 1, 2013
**As of Sept. 30, 2013
*Based on actual state employee headcount. Does not include higher education.
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State budget stabilizes, but challenges loom
» For first time in 6 years, we are not talking about making
hundreds of millions of dollars in program cuts
» Revenue collections growing, but probably not fast enough to
keep pace with rising mandatory costs and ever-increasing
number of people the state serves
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What’s in the Governor’s proposed
2014 supplemental budget
Includes $149 million in GF-S “maintenance-level” spending to
cover mandatory cost increases and continue services at
current levels; and $103 million in net policy enhancements and
increases
Large portion of mandatory cost increases are driven by rising
school enrollment and program caseloads. For example:
» We expect 10,200 more K-12 students than initially projected and
900 more students than previously forecast who will qualify for
College Bound Scholarship program
» The state’s prison system — already at capacity —projected to
serve 336 more inmates than were forecast when the budget was
adopted
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What’s in the Governor’s proposed
2014 supplemental budget
Includes several other key items:
» $6.6 million to address prison capacity problem, most of which
will be used to open a medium-security unit at the Washington
State Penitentiary
» $8.2 million to begin complying with legal settlement requiring
the state to expand mental health services for children
» $10 million to fund a collectively bargained rate increase for
child care providers
» $13 million for critical IT upgrades, including funding to
continue building the state’s Business One-Stop portal
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What’s in the Governor’s proposed
2014 supplemental budget
Makes other important investments in education:
» $3 million for a new teacher mentoring program
» $300,000 to develop new career and technical education
curricula to provide students multiple paths to meet math and
science graduation requirements
» $250,000 for an early warning dropout prevention program
» $3.2 million in STEM education enhancements
Funds key state aerospace investments that helped secure
final assembly of Boeing’s next-generation 777X.
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What’s in the Governor’s proposed
2014 supplemental budget
A new strategy on high tech R&D investment:
» Extend by one year 2 tax preferences to encourage private
sector investment in high tech R&D, which reduces revenue by
$26 million this biennium and $32 million next biennium
» Develop strategies for future tax incentives and/or ways to
invest directly in building high tech workforce
Increase the B&O tax filing threshold:
» Increase filing threshold from $28,000 per year gross income to
$50,000, which reduces revenue by $3.4 million
» Means about 20,000 additional businesses will not have to file
B&O tax returns
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Taking the next step toward meeting
our basic education obligation
 New Supreme Court order says state took “meaningful
steps” in 2013 toward meeting education obligation
 But court also said we are still falling short; called for
“immediate, concrete action”
 Governor proposes another $200 million in K-12
investment this session, primarily targeting:
 Classroom supplies
 Curriculum reforms
 Voter mandated I-732 teacher COLAs
 Investments funded by closing tax breaks that are either
ineffective or are not as high a priority as basic education
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Looking ahead to the 2015-17 budget
March 26, 2016
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Finding a more sustainable approach
Last year, we solved the 2013–15 budget shortfall and made a
down payment on our basic education obligation by relying on
several one-time fixes, unspecified reductions and assumed
savings.
This approach is unsustainable. Barring an unforeseen
dramatic rise in economic activity and revenue
collections, we will face another sizable shortfall when
we begin work on the 2015–17 budget.
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What’s looming in the next budget
Besides addressing the normal increases in caseloads,
enrollments and other mandatory costs, the 2015–17 budget
will have to:
» Make another big investment — $1 billion to $2 billion — toward
meeting our basic education obligations
» Make additional investments in early learning and higher
education
» Fill holes left by one-time fixes in the 2013–15 budget
» Address a backlog of compensation issues for teachers and state
employees
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More than $5 billion needed over next 2 biennia
to meet statutory K-12 requirements
$1.89 billion
$1.59 billion
Estimated cost of continued
phasing in HB 2776
(McCleary)
$1.13 billion
$638 million
Projected cost of Initiative
732 (teacher COLAs)
30,000
more students
projected by 2019
FY 2016
FY 2017
FY 2018
FY 2019
Projected cost of enrollment
and other mandatory
increases
Washington ranks low in tax collections
State and local tax collections per $1,000 personal income
Fiscal Year 2011
Bureau of Economic Analysis and Census Bureau
U.S. Department of Commerce
U.S. Average = $108.31
Washington = $98.95
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Revenue collections are at historically low levels
when compared to overall economy
General Fund-State revenue as percentage of Washington personal income
› In 1990, GF-S revenue equaled about 7% of total
personal income.
Projected
› If the same were true today, we would have about
$15 billion in additional revenue for current biennium.
Washington State Economic and Revenue Forecast Council, September 2013 18
For more information, contact:
Office of
F inancial M anagement
www.ofm.wa.gov