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State Budgets Capital Campus Pennsylvania Mercatus Center George Mason University Harrisburg, PA January 26, 2009 Scott Pattison Executive Director National Association of State Budget Officers 444 North Capitol Street, NW, Suite 642 • Washington, DC 20001 • (202) 624-5382 • www.nasbo.org
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State Budgets

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Page 1: State Budgets

State Budgets

Capital Campus PennsylvaniaMercatus Center

George Mason UniversityHarrisburg, PA

January 26, 2009

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

Page 2: State Budgets

NASBO 2

Current Fiscal Situation

Page 3: State Budgets

NASBO 3

Recent State Fiscal Situation

Flat spending/declining revenue Shortfalls in the billions Across the board budget cuts, layoffs Credit crisis impacting short- and long-

term borrowing Most states in recession All states at some risk

Page 4: State Budgets

NASBO 4

Flat and Declining Expenditure Growth

*31-year historical average rate of growth is 6.3 percent **Fiscal 08 numbers are preliminary actual

***Fiscal 09 numbers are appropriated Source: NASBO December 2008 Fiscal Survey of States

Page 5: State Budgets

NASBO

State Tax Revenue Growth by Source

Source: Fiscal Studies Program, Rockefeller Institute of Government

Page 6: State Budgets

NASBO 6

Budget Cuts

Source: December 2008 Fiscal Survey of States

Page 7: State Budgets

NASBO 7

Balances Declining

*31-year historical average is 5.7% Source: NASBO December 2008 Fiscal Survey of States

Page 8: State Budgets

NASBO 8

Limited Tools to deal with Critical Budgetary Issues

Page 9: State Budgets

NASBO 9

FY 2009-2010Budgetary Issues

Recession: Revenue and spending declining States recover slower because of the “lag”

Concerns over High Expenditure Areas: K-12 Medicaid & Health Care Costs

Other High Cost Needs: Infrastructure/Transportation Corrections Higher Education

Page 10: State Budgets

NASBO 10

Page 11: State Budgets

NASBO 11

Enrollees Expenditures

68% of Medicaid Spending on Benefits in 2007 is for Elderly and Disabled

Children = 19%

Elderly = 22%

Disabled = 46%

Adults = 13%Children = 48%

Elderly = 9%

Disabled = 17%

Adults = 26%

2007 U.S. Total = 62.2 million U.S. Total = $305 billion in 2007

26% 68%

Source: Vernon Smith, Health Management Associates

Page 12: State Budgets

NASBO 12

Financial Management

Page 13: State Budgets

NASBO 13

Volatile Financial Management

Spending fluctuations Higher education cycle Budget cuts

Page 14: State Budgets

NASBO 14

Financial Management Practices

Adding flexibility to the process Contingencies Prudent use of debt Rainy day funds One time only Use of performance information

Page 15: State Budgets

NASBO 15

What Can Be Done?

Ask performance questions

Ask for outcome data

Use performance information to justify changes to programs

Page 16: State Budgets

NASBO 16

Financial Management and Performance

Page 17: State Budgets

NASBO 17

Use of Performance Information

Focus on results and outcomes

Accountability

Spend funds for effective programs

Efficiency

Improve management

Page 18: State Budgets

NASBO 18

What Should Be Done?

Ask performance questions Use performance information to make the

case Ask for outcome data Use performance information to justify

changes to programs Ideas are already there -- Encourage state

employees to think about goals and outcomes

Page 19: State Budgets

NASBO 19

Fiscal Outlook

Page 20: State Budgets

NASBO 20

State Fiscal Outlook

Much will depend on the national economy

Expect significant drops in revenue and spending

States will face dramatic budget cuts

States will look for creative financing and revenue opportunities to meet these spending demands

Recovery for states at best in FY ‘11

Page 21: State Budgets

NASBO 21

Silver Lining?

Efficiencies Priorities Public-private partnerships Outsourcing Necessary reforms

Page 22: State Budgets

NASBO 22

www.nasbo.org