State Fiscal Outlook: Minnesota and the Nation ONE MINNESOTA January 25, 2012 Scott Pattison...

State Fiscal Outlook: Minnesota and the Nation

ONE MINNESOTA

January 25, 2012

Scott PattisonExecutive Director

National Association of State Budget Officers

444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org

NASBO 2

Current Fiscal Situation:

Overview

NASBO 3

State Fiscal Outlook

Revenue improvement Still not yet pre-recession Spending pressures Health care reform Limited federal funds

NASBO 4

State and Local Employment Continues to Decline

State and local employment has declined 665,000 from the start of the recession through December

State employment declined 132,000 from Aug. 2008-Dec. 2011 Local employment declined 533,000 from Sept. 2008-Dec. 2011

State governments have eliminated 17,000 positions since September

States have also taken other personnel actions such as furloughs, early retirement, salary reduction, etc.

Source: Bureau of Labor Statistics

NASBO 5

Current Fiscal Situation:

Indicators

NASBO

State Budgets

-8

-6

-4

-2

0

2

4

6

8

10

12

%

General Fund Expenditure Growth (%)

*34-year historical average rate of growth is 5.6 percent *Fiscal ‘12 numbers are appropriated Source: NASBO Fall 2011 Fiscal Survey of States

* Average

NASBO

FY 2012 Spending Remains $20 Billion Below FY 2008

($ in

bil

lion

s)

* FY 2007 – 2010 are actual, FY 2011 is preliminary actual and FY 2012 is enacted.

NASBO

Medicaid Continues to Drive General Fund Spending Growth

8

Data is based on comparative levels of enacted spending in FY 2011 and FY 2012Source: NASBO Fall 2011 Fiscal Survey of States

In B

illion

s

Changes in General Fund Spending by Category Between FY 2011 and FY 2012

NASBO

State Revenue Continues to Grow in 3rd Quarter, but at Slower Rate

-20

-15

-10

-5

0

5

10

15

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011%

Year-Over-Year Real Change inQuarterly State Tax Revenue

Source: Fiscal Studies Program, Rockefeller Institute of Government; U.S. Census Bureau

NASBO

* FY 2007- -2010 are actual. FY 2011 is preliminary actual and FY 2012 is enacted.

($ in

bil

lion

s)

Revenue Remains Below Pre-Recession Levels

NASBO 11

Minnesota GF Revenue:1997-2011

Source: NASBO State Expenditure Report

(estimated)

NASBO

Balances as a Percentage of Expenditures

* FY 2006 – FY 2010 are actual, FY 2011 is preliminary actual and FY 2012 is enacted.

(per

cen

tage

s)Total Balance Levels Remain Low for Most States

NASBO 13

Balances inMN and Selected States

Source: NASBO Dec. 2011 Fiscal Survey of States

NASBO

Budget Cuts Made After the Budget Passed ($ millions)

*FY 2012 mid-year budget cuts are ongoing Source: NASBO Fall 2011 Fiscal Survey

Mid-Year Budget Cuts Decline

NASBO 15

Current Fiscal Situation:

Economic Overview

NASBO 16

Unemployment Ratein MN and Selected States

Source: U. S. Department of Labor, Bureau of Labor Statistics

NASBO

National Unemployment Rate Compared to MN

17

%

Source: U.S. Department of Labor, Bureau of Labor Statistics

NASBO

Who gets out first? Historical Boost to State Earnings and Employment due to Oil & Natural Gas

18

Source: Federal Reserve Bank of Kansas City, Economic Review, Fourth Quarter 2009

NASBO 19

Background on State Spending Trends

NASBO 20

Spending by Funding Source(Percentage)

General Funds37.7%

Federal Funds34.1%

Other State Funds25.8% Bonds

2.5%

Total State Expenditures By Funding Source, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 21

MN Spending by Funding Source (Percentage)

Source: NASBO 2010 State Expenditure Report

NASBO 22

Total State Expenditures

K-1220.1%

Higher Education10.1%

Medicaid23.6%

Public Assistance1.6%

Corrections3.1%

Transportation7.6%

All Other33.9%

Total Expenditures by Function, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 23

General Fund: Medicaid & Education 64%

Elementary & Secondary Education

35.0%

Higher Education11.5%

Medicaid17.4%

Public Assistance1.8%

Corrections7.4%

Transportation0.5%

All Other26.5%

General Fund Expenditures by Function, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 24

MN General Fund: Medicaid & Education Over 73%

K-1237%

Higher Education17.5%

Medicaid19.2%

Public Assistance1.1%

Corrections2.9%

Transportation0.4%

All Other22.0%

General Fund Expenditures by Function, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 25

MN General Fund Spending Growth over 10 years

Sources: NASBO 2002 and 2010 State Expenditure Reports

NASBO 26

State Spending from Federal Funds

Elementary & Secondary Education

12.7%

Higher Education3.9%

Medicaid43.5%

Public Assistance2.6%

Corrections0.2%

Transportation7.2%

All Other29.8%

Federal Funds Spending, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 27

MN State Spending from Federal Funds

K-1212.4%

Higher Education

0.6%

Medicaid51.2%

Public Assistance3.1%

Corrections0.1%

Transportation5.1%

All Other27.5%

Federal Funds Spending, Estimated Fiscal 2011

Source: NASBO 2010 State Expenditure Report

NASBO 28

Focus on Outcomes

Focus on results and outcomes

Spend funds for effective programs

Improve management

NASBO 29

Outlook

NASBO 30

State Fiscal Outlook

State budgets dependent on economy

Health care reform, federal government will have an impact

Tough competition for general funds and limited federal funds

Dealing with long-term liabilities

NASBO 31

www.nasbo.org

Scott Pattison

(202) 624-8804

spattison@nasbo.org