The Current State of the States: Is there Light at the End of the Tunnel? NASACT Economic Summit Charleston, WV August 11, 2010 Brian Sigritz Director of State Fiscal Studies 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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The Current State of the States: Is there Light at the End of the Tunnel? NASACT Economic Summit Charleston, WV August 11, 2010 Brian Sigritz Director.
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The Current State of the States: Is there Light at the End of the Tunnel?
NASACT Economic Summit
Charleston, WV
August 11, 2010
Brian SigritzDirector of State Fiscal Studies
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
NASBO 3
Recent State Fiscal Situation
The “Great Recession” has been an extremely difficult fiscal period for states
$300 million in shortfalls
Fiscal 2010 revenue projections: As of May, 46 states lower than projected, 2 on target, 2 higher
Some improvement in fiscal 2011, although still below pre-recession levels
NASBO 4
NASBO
National Recovery Impacted by States and Locals
“With economic conditions far from normal, state budgets will probably remain under substantial pressure for awhile, leaving governors and legislatures a difficult juggling act as they try to maintain essential services while meeting their budgetary obligations.”
- Federal Reserve Chairman Ben Bernanke, 8/2/10
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NASBO 6
Source: Federal Reserve Bank of Philadelphia State Coincident Index (June 2010)
3-Month Index: Increases in 47 states, decreases in 3
NASBO 7
This downturn vs. Post ‘01
Last Time: Housing sector relatively strong in ’01 Primarily income tax decline
This Time: Broad economic decline; Longer recession Localities will be hit this downturn
17 states reduced local aid in ‘09; 20 in ’10
NASBO
Negative Spending Two Years in a Row, Slight Increase in 2011
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-6
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-2
0
2
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6
8
10
12
%
General Fund Expenditure Growth (%)
*33-year historical average rate of growth is 5.6 percent *Fiscal ‘11 numbers are proposed Source: NASBO June 2010 Fiscal Survey of States
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The New Normal?
NASBO
Proposed FY 2011 Spending is $52 billion less than FY 2008
InBillions
* FY 2007, 2008, and 2009 are actual. FY 2010 is estimated and FY 2011 is proposed.
NOTE: Data for State Fiscal Years, for total Medicaid spending, including state, ,local and federal funds.
SOURCE: Historic Medicaid Growth Rates from KCMU Analysis of CMS Form 64 Data, FY 8, 2009 and 2010 based on KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management 200Associates, 2009.
Low Enrollment Growth & Medicare Part D 2006-
2007
Economic Downturn 2008-2010
Adopted
NASBO
Medicaid Cost Containment
About three-quarters of states are planning to contain Medicaid costs in proposed fiscal 2011 budgets
The most common strategy for both fiscal 2010 and fiscal 2011 would be to reduce or freeze provider payments
Other strategies include limiting benefits, limiting prescription drugs, eliminating benefits, and expanding managed care
States are also raising provider taxes or fees to generate additional resources for Medicaid