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Missouri Budget Update June 2013 Missouri Division of Budget and Planning. MISSOURI BUDGET UPDATE June 2013. Economic Data – Actual & Projected State Revenue Update State Spending Update What’s Ahead for FY 2014 and FY 2015. MISSOURI BUDGET UPDATE. Economic Data – Actual & Projected. - PowerPoint PPT Presentation
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Missouri
Budget Update
June 2013
Missouri Division of Budget and Planning
MISSOURI BUDGET UPDATEJune 2013
Economic Data – Actual & Projected
State Revenue Update
State Spending Update
What’s Ahead for FY 2014 and FY 20152
MISSOURI BUDGET UPDATE
Economic Data – Actual & Projected
3
Personal Income jumped at the end of 2012 as investors closed out positions in an effort to avoid tax increases on capital gains.
Wage growth will slow somewhat thru mid-2013, but accelerate as the economic recovery strengthens in 2014.
2008q1
2008q3
2009q1
2009q3
2010q1
2010q3
2011q1
2011q3
2012q1
2012q3
2013q1
(10%)
(5%)
0%
5%
10%
Growth in MO Personal IncomeQ/(Q-4)
Personal Income
Wages & Salaries
4
5
2007q1
2007q3
2008q1
2008q3
2009q1
2009q3
2010q1
2010q3
2011q1
2011q3
2012q1
2012q3
2013q1
2013q3
4%
5%
6%
7%
8%
9%
10%
11%
US & MO Unemployment RatesSeasonally Adjusted Data
US MO
US rate is expected to decline slowly but steadily through 2013. In general, MO rate follows the national trend, but has remained below
the national average since 2010.
6
20
07
q1
20
07
q3
20
08
q1
20
08
q3
20
09
q1
20
09
q3
20
10
q1
20
10
q3
20
11
q1
20
11
q3
20
12
q1
20
12
q3
20
13
q1
20
13
q3
(2%)(1%)
0%1%2%3%4%5%6%
Inflation (CPI)Q/(Q-4) CPI
Inflation remains subdued.Growth in “core” inflation, excludes food & energy, remains low.
7
State Revenue Update
Recent general revenue collections
Historical comparisons
8
Total $7,691.7
FY 2013 NET GENERAL REVENUE COLLECTIONS($ in millions)
Individual In-come, $5,148.0
67%
Sales $1,888.0 25%
Corporate $345.0 5%
County Foreign $170.0
2%
All Other $140.7
2%
9F
Y 2006
FY
2007
FY
2008
FY
2009
FY
2010
FY
2011
FY
2012
6,600
7,000
7,400
7,800
8,200
8,600
9,000
9,400
Typical Growth Actual
$M
Typical Growth assumes an annual increase of 3.5%
MO General Revenue Collections
10
The Hancock Gap
FY
1995
FY
1996
FY
1997
FY
1998
FY
1999
FY
2001
FY
2002
FY
2003
FY
2004
FY
2005
FY
2006
FY
2007
FY
2008
FY
2009
FY
2010
FY
2011
FY
2012
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
TSR Collected TSR Adjusted Limit
Coll
ecti
on
s ($
M) $3.7B
11
General Revenue as % of Personal Income
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20123.0%
3.2%
3.4%
3.6%
3.8%
4.0%
4.2%4.1%
3.8%
3.6%
3.7%3.7%
3.9%3.9%
3.8%
3.3%
3.1%3.2% 3.2%
.
FY
2007
FY
2008
FY
2009
FY
2010
FY
2011
FY
2012
6,750
7,350
7,950
8,550
9,150
9,750
450
500
550
600
650
General Revenue Collections& Tax Credit Redemptions
Actual Revenues Tax Credit Redemptions
Net
GR
Tax C
redits
Figures in millions
12
REVENUE COLLECTIONSHOW ARE WE DOING?
The revised revenue forecast estimated 4.8% growth for GR for FY 2013; actual collections at 10% at end of May.
- Individual income – 4.4% forecast, 9% end of May
- Sales tax – 2.2% forecast, 1.5% end of May
Doing well, however, the biggest growth is in declarations and remittances. Could largely be tied to investment income & federal tax changes.
Unknown: HB 253 (more later)
13
14
State Spending Update
The official spending pie
Adding in tax credits
15
FY 2014 General Revenue Operating Budget Total Appropriations $8.28 Billion
Elementary and Sec-
ondary Ed-ucation$2.9B 35.0%
Higher Education$864M 10.4%
Judiciary, Elected Of-ficials, Gen-eral Assem-
bly$291M 3.5%
Corrections and Public
Safety$687M 8.3%
Human Services
$2.5B30.1%
What's Missing? Tax Credits.
16
Agency FY 13 Approp FY 12 Redm.Elementary and Secondary Education 2,917.5Social Services 1,499.4Higher Education 850.4
Total Tax Credits 629.5Corrections 602.5Mental Health 602.0
Non-Senior Tax Credits 511.9Employee Benefits 492.1Health 270.8Judiciary 170.8
LIHTC Redemptions 164.2Historic Redemptions 133.9
Senior Property 117.6Office of Administration 112.5Statewide Leasing & Property Mgmt 112.4Revenue 84.9Public Safety 62.9Elected Officials 49.6Public Debt 45.2Economic Development 36.6Public Defender 36.3All Other (Agric, Nat Res, etc) 67.9
Tax Credit Redemptions Compared to GR Approps (millions of $s)
$ 608.3M
$140.8M
17
Tax Credit Redemptions by Fiscal Year
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
350
400
450
500
550
600
650
398.7
365.2 356
408.3 406.1412.2
479.3504.5
584.7
522.9545.2
629.5
$M
MISSOURI BUDGET UPDATE
FY 2014 and FY 2015 BUDGET
What’s Ahead?
18
FY 2014 AND FY 2015
Base general revenue is doing well.
- Continued growth in economy will keep it on track.
General revenue growth for FY 2014 projected at 3.1%.
Higher than expected growth in FY 2013 will help get us there.
19
FY 2014 AND FY 2015 (HB 253)
HB 253 casts a huge shadow on FY14 and future years.
One provision alone could cost an estimated $1.2 billion in the year it happens – Federal Marketplace Fairness Act (FMFA).
- .5% rate reduction on individual income tax.
- For year of passage plus retro refunds for three years.
- At least $300M per year.
20
FY 2014 AND FY 2015 (HB 253)FMFA (continued)
Missouri tax cut automatic w/ congressional passage of FMFA.
Senate passed FMFA (69/27).
Fairness of taxes for bricks and mortar big issue.
The ½% rate reduction for income taxes would be retroactive to beginning of tax year = estimated $300 million cost.
Refunds for three years = estimated $900 million cost.
21
FY 2014 AND FY 2015 (HB 253)
Other Issues:
Eventual cost (not including FMFA) is $800 million.
Triggers are not a safeguard.
- FMFA cut not tied to growth.
- Business exemption ($260M) not tied to growth.
- Cuts tied to the income trigger would have happened in FY 2009, despite steep decline ($553M).
- Triggers don’t count refunds.
22
FY 2014 AND FY 2015 (other concerns)
Since Medicaid expansion on hold, won’t see anticipated savings.
- Over $40M in FY 2014.
- Over $100M in FY 2015.
No tax credit reform.
The TAFP budget assumes $316 million in lottery for FY2014, which would require about 8% growth.
23
SUMMARYPositive signs in the economy.
Current collections looking good.
HB 253 has huge negative implications for revenue that could happen immediately.
Without tax credit reform and Medicaid expansion, we will lose those savings.
Lottery will struggle to hit TAFP budget.
24