Fiscal Overview 2005 Session Update

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Fiscal Overview2005 Session Update

• Legislative Joint Fiscal Office
• Vermont State Legislature
• Caucus Update
• December 4, 2004

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The Key Themes

• Budget Adjustment A large number of budget
  increases but revenue is there to fund them
  
• FY 2006 Budget Without the Medicaid issue
  revenue growth would make for a tight but doable
  budget
  
• Medicaid funding is the 800 pound gorilla
• However, other issues abound

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Our Starting Place The FY 2005 State Budget

• (in millions) Approp Net
• General Fund 956 956
• Transportation Fund 222 222
• Education Fund 1,144 894
• Special Funds Other 415 329
• State Fund Total (Net) 2,737 2,401
• Less property tax EF 650m
  1,751
  
• Federal Funds 1,098 1,098

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Revenue Estimates

• Revenue forecasts - twice a year - January
  July.
  
• The legislature and executive each makes an
  estimate. Then the Emergency Board (the Governor
  and the four legislative money committee chairs)
  adopts a consensus figure.
• The July forecast was up from the end of session
  leaving us with 25-27 million available for FY
  2005 Budget adjustment needs
  
• General Fund revenue through November (first five
  months of fiscal year) is exceeding targets by
  14 million which should mean a January upgrade.
  
• Transportation Fund not as strong

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VT GF Budget Growth FY 2002-2005

• Year to year spending growth averaged 3.5 over
  past four years
  
• FY 2002 3.2
• FY 2003 2.8
• FY 2004 2.7
• FY 2005 5.1 Total spending 956 M
• FY 2005 Budget growth 5 overall but more than
  half was corrections and mental health spending
  
• Corrections Spending 8.8 million 9.6
• Mental Health Spending 15.8 million 26
• Other GF budget growth average 2.3

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FY 2005 Budget Adjustment Pressures - Estimates
only - 34 m

• Medicaid - 15 20 million
• Corrections - 2.7 million
• Child Care/Substitute Care - 1.4 million
• Vermont State Hospital - 2.5 million
• Fish Wildlife / Forest Parks - 1.2 million
• One times
• Attendant care payroll processor - .7 million
• Vision upgrade 2.2 million
• Transportation Fund audit issue 4.8 million

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FY 2006 Budget Base Issues to be addressed

• Tobacco settlement payment is 5 million less
• JTOC spending is reduced by 1 million
• Education Fund Transfer 8-10 million
• Labor contract roll out and new 5.7 - 12
  million
  
• Mental Health 7.5 FMAP 8 - 9 million
• Corrections 8 9 million
• Federal cuts impact?
• Other Fee for space, vision charges, employee
  health care, ANR, public safety rest of
  government,

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Vermont Medicaid

• Health Access Trust Fund balance/ projected
  operating results
  
• 2004 25 million fund balance
• 2005 Operating deficit (40-45 million)
  
  
• Net deficit (15-20M)
• 2006 Operating deficit (60-70
  million)
  
• 2007 and beyond operating deficit grows at 18 -
  20 million a year
  
• PATH only, state dollars. Includes federal
  fiscal assistance does not include Medicare
  impact
  
• Medicaid 60 federal 40 state

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Education Fund

• Grand list growth exceeds expectations
• Good news Makes fund strong. Administration
  announced State tax rates will be 1.02 and 1.51
  below last years 1.05 and 1.54
  
• Concerns
• Is this a bubble ?
• Will higher spending by school districts or
  increased state spending create out year issues?
  

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Transportation Fund Highlights

• Direct Transportation Spending grew from 128M in
  FY00 to 174M in FY05. Including Fed funds, FY
  2005 spending will be 359 M
  
• Key expenditures in FY 2005
• Paving 33M (Current condition preservation 93
  M)
  
• State Bridges 29M (Current condition
  preservation 59M)
  
• Town Programs 54M, Roadway 80M, DMV 20M,
  Maint. 53M
  
• Indirect expenditures (JTOC) is an additional
  40M
  
• Major Project demand exceeds available funds. FY
  05 project funds over 56M. 517 in remaining
  costs in major active projects alone
  
• Infrastructure is aging Estimated cost to
  re-deck bridges over 30 years old exceeds 1.0
  billion

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The Capital Conundrum 12/03Illustration only
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Other Pressures

• Teachers/ employee retirement funding
• Retiree medical benefits new GASB rules
• Teachers up to 40 million a year
• State employees not estimated

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Vermont and National Context

• Vermont, like other states, is in a period of
  economic growth but will face ongoing budget
  pressures
  
• Risks include energy prices, global uncertainty,
  federal deficits, and the on-going war on
  terrorism
  
• Vermont begins FY 2005 with 8 total reserves
  One time money but ongoing problems.
  
• What have other states done?

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Net State Tax ChangesBy Year of Enactment,
1995-2004
For 2004, 47 states reporting (NCSL 10/04)
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Other State Responses to Budget Shortfalls in FY
2005 (NCSL 10/04)

• Tapping a variety of state funds (22 states)
• Cutting spending (15 states)
• Tapping rainy day funds (10 states)
• Reducing the workforce or taking other actions
  affecting state employees (8 states)
  
• Using tobacco settlement funds (7 states)

Note 45 states reporting
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For Further Information, Contact The Legislative
Joint Fiscal Office One Baldwin Street
Montpelier Vermont802-828-2295http//www.leg.st
ate.vt.us/jfo