State Budget Update: November 2005
State budget conditions continue to improve, showing strong signs of recovery in nearly every state. Buoyed by robust revenue performance, states are collecting more revenue than they projected for nearly every major tax. In some cases, collections are significantly above forecasts.
The positive news about revenue performance is tempered by soaring spending demands—both in the short and long term. In the current fiscal year, Medicaid and corrections are leading the charge for more mid-year funding. A host of other categories, especially energy assistance programs, are needing additional funds, too. In the longer term, even more spending areas will stress state budgets. In addition to Medicaid and other health care programs, states expect growing demands from elementary-secondary (K-12) education, transportation, infrastructure and employee compensation, among others. These issues will dominate legislative discussions in 2006.
This report is based on information collected from legislative fiscal directors in November 2005. It covers the revenue and expenditure situation for the first four months of fiscal year (FY) 2006 for most states. It includes information on revenue performance, spending overruns, and the top fiscal issues anticipated for 2006 legislative sessions. It also includes a special focus on high energy costs and their effects on state budgets.
FY 2006 Revenue Performance
Virtually all state revenue sources were performing well as states entered the second quarter of FY 2006.
- Personal and corporate income tax collections were especially strong in most states, with various other taxes (e.g., severance, real estate, utility) also performing well.
- Five states also noted particularly high estate tax collections, a revenue source that can be especially difficult to predict.
- One notable area of concern is the sales tax. Seven states—Connecticut, Indiana, Massachusetts, Missouri, New Jersey, Ohio and Rhode Island—reported that sales tax collections were below forecast through the first quarter of the fiscal year. Some officials surmise that high motor fuel and home heating costs have dampened consumer spending on other goods and products, thereby reducing sales tax revenues. It is too early to know if this development is the beginning of a trend or if collections will recover in the coming months. Certainly, December sales tax collections will be watched closely in many states. In the meantime, it appears that strong collections from other taxes are covering the lower-than-expected sales tax collections.
- Of the 49 states reporting revenue performance information (Texas did not have information available), 42 reported that overall revenue collections were above forecasts. Six reported they were on target. Only Rhode Island reported that collections were below estimates. This continues the trend that began in 2003 and is a dramatic turnaround from three years ago when states were in a revenue trough. At that time, collections were above forecast in eight states and below in 33.
- Revenues are performing so well in most states that officials have started to boost their collection expectations. So far, 25 state have revised their forecasts, and in 24 the revision has been upward. Rhode Island is the only exception. Officials there recently reduced the forecast by 1.9 percent.
- Robust revenue collections and expectations that they will continue are leading officials to be positive about revenue performance for the remainder of the fiscal year. More than half the states expect revenues to be stable while 22 are optimistic.
- Officials in Rhode Island are concerned about the revenue outlook. In Louisiana, officials are pessimistic, not knowing the full brunt of recent hurricanes on longer-term revenue collections. Again, this is a marked turnaround from the low point in 2002, when 29 states were concerned about revenue performance and nine were pessimistic.
Table 1. Revenue Outlook for the Remainder of the Fiscal Year
|
|
Outlook as of
|
November 2002
(FY 2003)
|
November 2003
(FY 2004)
|
November 2004
(FY 2005)
|
November 2005
(FY 2006)
|
|
Optimistic
|
2
|
8
|
17
|
22
|
|
Stable
|
8
|
24
|
31
|
26
|
|
Concerned
|
29
|
15
|
2
|
1
|
|
Pessimistic
|
9
|
2
|
0
|
1
|
FY 2006 Spending Overruns
Spending overruns do not seem to be as widespread or significant as they were in recent years. By the end of the first quarter of FY 2006, 19 states reported overruns. At this time one year ago, 23 states reported overages.
- As in past years, Medicaid is the program most often over budget and was cited by 12 states.
- Corrections spending is outpacing appropriations in seven states.
- So far, six states report that energy costs and funding for home heating assistance are over budget. Many states expect that supplemental funding will be needed (see below).
- Three states report that education spending is over budget. Arizona and Washington are looking at overages in K-12 education generally, while Hawaii’s funding concerns focus on special education.
- A variety of other programs are over budget and include mental health services (Hawaii and Montana), child welfare (Maine), juvenile justice (Maryland) and natural resource programs (Vermont).
Top Fiscal Issues for 2006 Legislative Sessions
Legislative fiscal directors are well informed about the budget pressures facing state government. This year’s survey again asked these fiscal experts to identify the key budget issues their legislatures will address in the 2006 sessions.
- Medicaid and other health care concerns will dominate legislative discussions, as they did last year. At least 23 states will address these issues.
- Medicaid accounted for 12 percent of general fund budgets in FY 1995, but grew to nearly 17 percent by FY 2005. As the fastest growing category of state spending, Medicaid inevitably consumes lawmakers’ attention. Issues to be addressed include enrollment and utilization growth, rising medical inflation, the reduction in the Federal Medical Assistance Percentage (FMAP) in many states, waivers and the effects on state Medicaid budgets of federal Medicare Part D (prescription drug coverage).
- Some of the cost drivers behind Medicaid, like medical cost inflation, also will affect other state-provided health care programs. Lawmakers will examine state employee health insurance and coverage for state retirees.
- Fifteen states expect education to be a top fiscal priority in 2006 sessions. Most states expect to address K-12 funding issues, although some also will deal with higher education concerns. Dominant issues will include class size reductions, changing aid formulas, teacher salaries and enrollment increases. In Georgia, officials anticipate 10,000 new students from the hurricane-ravaged Gulf area. Kansas and New York will address court-ordered financing issues. Officials in Louisiana, Mississippi and Wyoming also will examine higher education issues. In Wyoming, lawmakers will consider whether to fund a $400 million scholarship program.
- Taxes will top discussions in 14 states. At least seven states specifically will explore property tax relief or reform. As real estate values have increased, property tax burdens have risen as well, placing pressure on state lawmakers to work with local officials to confront the problem. Several other states will consider tax reform, either for businesses specifically (Michigan and New Hampshire) or reform more generally (New Mexico and Utah). Because revenue collections are robust and elections occur next year, some states will be pressured to consider tax cuts. Nebraska is one of those states.
- General budget issues will be a high priority in 11 states. Several—like Alabama and Utah—remain concerned about the use of one-time revenues in past budgets and the lack of those resources for future budgets. Maryland will explore its structural deficit in light of scheduled payments for education funding enhancements. Some states, like Colorado, will consider restoring funding to a wide range of programs. A few states will consider the appropriate size of their reserves (Nebraska and Washington) or what to do with surplus revenues (Virginia and Wyoming).
- Ten states will consider funding for transportation and other infrastructure projects. Some states—such as Delaware and Florida—face deficits in their transportation funds that they need to address. California and Minnesota will deliberate bond issues to fund capital projects. In New Mexico, an oil and gas revenue windfall will mean that many more projects can be funded.
- Tax and expenditure limits will top discussions in six states. Two of the six—Colorado and Connecticut—already have limits in place. Colorado lawmakers will address the implementation of Referendum C, which altered some of the restrictions imposed by the Taxpayer Bill of Rights (TABOR). Connecticut policymakers will consider whether to relax the spending cap imposed there. At least four states will discuss new TABOR-like measures.
- Corrections funding will top agendas in five states. Issues include prison overcrowding, salaries for prison personnel and medical contracts for prisoner health care.
- Other topics that will dominate legislative agendas include pensions and retirement issues (Alaska, Washington and West Virginia), gambling expansion (Indiana and Rhode Island), hurricane recovery (Louisiana and Mississippi), a new gas pipeline (Alaska), housing (Hawaii) and new sports stadiums (Minnesota).
Special Focus on Energy Costs on State Budgets
Higher energy costs have made front page news for consumers, but many of the same expenses affect state and local governments as they pay to operate motor fleets, heat government buildings and provide energy assistance programs to low-income families. This year’s survey included a special focus on the effects of higher energy costs on state budgets. While the information does not lend itself easily to summarization, it is detailed in a table at the end of this report. Some highlights include:
- As many as 17 states expect to consider or make supplemental appropriations to address higher fuel and heating costs. Many states already note that state funds to augment the federal Low Income Heating and Energy Assistance Program (LIHEAP) have been diminished and will be insufficient to aid homeowners throughout the winter.
- At least six states expect agencies will need to absorb extra energy costs in their existing budgets.
- At least three states are focusing on conservation measures, although other states likely will consider them as well. Georgia’s governor has implemented a variety of programs including alternative work schedules and telecommuting for state employees. He has encouraged similar measures for local governments and businesses across the state. He also asked schools to take two "early snow days" in September to save more than 225,000 gallons of diesel fuel per day. Minnesota’s governor has directed state agencies to reduce fuel consumption wherever possible. Montana also is looking into conservation measures.
- Two states—Ohio and South Carolina—specifically noted that they will allow school districts the flexibility to use school bus acquisition funds for fuel expenses.
- Some states noted that higher energy costs will affect the budgets for transportation projects as the cost for certain oil-based products (like asphalt) rise.
Although most states are concerned about the effect of higher energy costs on their budgets, a few mentioned that additional revenues are accruing to state coffers from sales taxes on motor fuels or higher utility taxes. States that derive portions of their revenues from oil and gas severance taxes also are reporting revenue benefits from higher energy prices.
Tables
|
Table 2. FY 2006 General Fund Revenue Collections
(Compared with original estimate)
|
|
|
Through Period
|
Above
|
On Target
|
Below
|
|
|
State
|
September
|
October
|
$ in millions
|
%
|
|
$ in millions
|
%
|
Comment
|
|
Alabama
|
|
x
|
$18.0
|
1%
|
|
|
|
|
|
Alaska
|
|
x
|
$650.0
|
25%
|
|
|
|
Oil prices are up about 35%, but production is down 8%.
|
|
Arizona
|
x
|
|
$206.0
|
10.7%
|
|
|
|
Revenues are 10.7% above forecast; 20.4% above FY 2005 year-to-date.
|
|
Arkansas
|
|
x
|
$156.0
|
4.1%
|
|
|
|
|
|
California
|
|
x
|
$1,500.0
|
6%
|
|
|
|
The state is recording very strong corporate and personal income tax estimated payments.
|
|
Colorado
|
x
|
|
x
|
x
|
|
|
|
Revenues are tracking well. The general fund forecast is currently for 7.1% growth, up slightly since March.
|
|
Connecticut
|
x
|
|
$523.3
|
3.7%
|
|
|
|
Most of this net increase is attributable to a $424 million increase in personal income tax collections, which are up 7.3%.
|
|
Delaware
|
x
|
|
$9.0
|
0.4%
|
|
|
|
|
|
Florida
|
|
x
|
$586.2
|
7.8%
|
|
|
|
|
|
Georgia
|
|
x
|
$444.8
|
9.4%
|
|
|
|
|
|
Hawaii
|
x
|
|
$226.2
|
5.1%
|
|
|
|
|
|
Idaho
|
|
x
|
$40.0
|
9.8%
|
|
|
|
Officials reported a decrease in general fund revenues in FY 2006 compared with FY 2005 because of the sunsetting of a temporary sales tax. Ongoing baseline revenues are doing very well.
|
|
Illinois
|
|
x
|
$169.0
|
x
|
|
|
|
The commission’s revised forecast projects revenues coming in $169 million higher than budgeted for FY 2006.
|
|
Indiana
|
|
x
|
|
|
x
|
|
|
|
|
Iowa
|
|
x
|
$33.9
|
4.1%
|
|
|
|
This amount is compared to the revenue estimate made in April 2005.
|
|
Kansas
|
|
x
|
$98.6
|
6.4%
|
|
|
|
|
|
Kentucky
|
|
x
|
$50.0
|
2%
|
|
|
|
The original 5% projected year-over-year revenue growth was based on a January 2005 estimate and incorporated significant tax changes. Since that time, actual FY 2005 collections were almost 3% greater than projected in January, leading to a higher base going into FY 2006. Moreover, with continued strong collections and recognizing that some of the positives associated with the tax changes occur in the first half of FY 2006 while more of the negatives (reduced tax rates) will be felt in the second, it is not surprising that Kentucky has experienced significant growth in the general fund for the first four months of FY 2006. On an economic basis, Kentucky’s revenues for the first four months of FY 2006 are about $50 million or 2% above estimated amounts.
|
|
Louisiana
|
x
|
|
x
|
x
|
|
|
|
Louisiana reported strong sales tax collections and oil and gas tax royalties before hurricanes Katrina and Rita. Officials expect to know the effects of the hurricanes on revenues collections in January.
|
|
Maine
|
|
x
|
$61.0
|
8.3%
|
|
|
|
This variance reflects revenue estimates before the December 2005 revenue revisions, which are in process. It also includes a positive revenue variance of $19.3 million related to two major property tax reimbursement programs that reflect timing issues within the fiscal year. Adjusting for these timing issues, general fund revenue was above projections by $42.6 million (5.8%).
|
|
Maryland
|
x
|
|
$207.3
|
10%
|
|
|
|
Compared to the first quarter of FY 2005, ongoing revenues are up 11%.
|
|
Massachusetts
|
|
x
|
$223.0
|
4.2%
|
|
|
|
|
|
Michigan
|
|
x
|
$200.0
|
1%
|
|
|
|
September and October revenue collections accrue to FY 2005. Actual collections have exceeded the monthly estimates by approximately $200 million, and this is attributed to a large individual estate tax payment and increases in single business tax payments. This $200 million equals approximately 1% of total FY 2005 general fund and school aid fund revenues.
|
|
Minnesota
|
|
x
|
$282.0
|
8.9%
|
|
|
|
Of this amount, $117 million is a one-time increase in estate tax payments. Preliminary information for October indicates revenue was close to the forecast amount. A court ruling will require corporate tax refunds and decrease corporate collections by about $300 million so the net for the fiscal year will be about zero after all this is taken into account.
|
|
Mississippi
|
|
x
|
$19.4
|
1.6%
|
|
|
|
The FY 2006 revenue estimate was revised Nov. 8, 2005, in an effort to adjust to Hurricane Katrina, which caused damage to a significant part of the state.
|
|
Missouri
|
|
x
|
$63.0
|
2.9%
|
|
|
|
|
|
Montana
|
|
x
|
|
|
x
|
|
|
Collections appear to be above budget estimates but it is too early to project an amount or a percentage.
|
|
Nebraska
|
|
x
|
$93.4
|
9.8%
|
|
|
|
Year-to-date revenues are ahead of estimate and include large one-time revenues of more than $40 million in estate tax collections.
|
|
Nevada
|
x
|
|
x
|
x
|
|
|
|
|
|
New Hampshire
|
|
x
|
$26.9
|
6.1%
|
|
|
|
|
|
New Jersey
|
|
x
|
|
|
x
|
|
|
|
|
New Mexico
|
x
|
|
$163.7
|
23.2%
|
|
|
|
Income taxes and energy revenues came in much higher than expected.
|
|
New York
|
|
x
|
$831.0
|
0.8%
|
|
|
|
|
|
North Carolina
|
|
x
|
$70.0
|
1.3%
|
|
|
|
|
|
North Dakota
|
x
|
|
$29.0
|
13%
|
|
|
|
A portion of the revenue increase may be due to timing.
|
|
Ohio
|
|
x
|
$76.7
|
1.3%
|
|
|
|
Tax revenue is above estimate by $48.6 million (0.8%) and nontax revenue (earnings on investments, licenses and fees, and "other" revenue) is above estimate by $28.1 million (47.9%).
|
|
Oklahoma
|
x
|
|
$42.0
|
3.3%
|
|
|
|
|
|
Oregon
|
x
|
|
$94.0
|
7.4%
|
|
|
|
Above estimate refers to income tax collections only (92% of general fund revenue).
|
|
Pennsylvania
|
|
x
|
$104.4
|
1.4%
|
|
|
|
|
|
Rhode Island
|
|
x
|
|
|
|
$86.7
|
1.9%
|
The amount includes a $25 million accounting change that shifts general revenue to a dedicated account for purposes of special education funding at the local level.
|
|
South Carolina
|
|
x
|
$160.7
|
8%
|
|
|
|
|
|
South Dakota
|
|
x
|
$12.2
|
3.5%
|
|
|
|
Officials may be starting to see the effects of inflation with increases in sales and use tax revenues.
|
|
Tennessee
|
x
|
|
|
|
x
|
|
|
|
|
Texas (N/R)
|
|
|
|
|
|
|
|
A revenue update was scheduled for late November. Information from that update is not yet available.
|
|
Utah
|
x
|
|
$40.0
|
4%
|
|
|
|
|
|
Vermont
|
|
x
|
$18.0
|
5.2%
|
|
|
|
The revenue estimate was adopted in July. Much of the overage is being generated by estate and corporate income taxes, and may be one time in nature. Vermont is statutorily required to reallocate estate tax receipts above a certain rate to a higher education trust fund. Officials expect some of the current overage from that tax may be reallocated and not available to the general fund.
|
|
Virginia
|
|
x
|
$500.0
|
12.8%
|
|
|
|
|
|
Washington
|
x
|
|
$588.0
|
4.8%
|
|
|
|
The revenue forecasts in June and September were significantly higher than the original forecast. November is likely to be higher as well.
|
|
West Virginia
|
|
x
|
$67.4
|
6.5%
|
|
|
|
|
|
Wisconsin
|
|
x
|
|
|
x
|
|
|
|
|
Wyoming
|
x
|
|
|
|
x
|
|
|
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, November 2005.
|
|
Table 3. Performance of Major State Tax Categories, FY 2006
|
|
State
|
Notes
|
|
Alabama
|
Income and general sales taxes go to the Education Trust Fund, not the general fund. The major tax to the general fund is the insurance premium tax, with no payment made yet for this fiscal year (which started Oct. 1). Oil and gas severance tax collections are up 24% over last year at this time.
|
|
Alaska
|
All major tax categories are performing as expected.
|
|
Arizona
|
Revenues are well above forecast.
|
|
Arkansas
|
The personal income tax is 4% above forecast, the corporate income tax is 17% above, and gross receipts taxes are 2.1% above. All other categories are meeting forecast.
|
|
California
|
Personal income and corporate taxes are well above estimate. Sales taxes are moderately above.
|
|
Colorado
|
All major tax categories are performing as expected. Severance tax collections are high.
|
|
Connecticut
|
The sales and use tax is down $16.2 million (0.5%); the corporations tax is up $8.3 million (1.3%); the oil companies tax is up $60.1 million (45.4%); and the real estate conveyance tax is up $32.5 million (18.5%).
|
|
Delaware
|
All major tax categories are performing well.
|
|
Florida
|
General fund sales taxes are up $172.9 million (2.9%) over estimate and the corporate income tax is up $144.4 million (25.8%) over estimate. Collections of taxes related to real estate activity, a tax on the recordation of deeds and taxes on notes backed by real estate are running more than 35% ahead of estimate and have contributed approximately $282.6 million to the general revenue overage. Total collections of these sources are up $468 million, approximately 50% ahead of last year, but the general fund does not receive all of the collections.
|
|
Georgia
|
The personal income tax is up 9.5% and the corporate income tax is up 77.5%.
|
|
Hawaii
|
All tax categories are exceeding expectations.
|
|
Idaho
|
All major tax categories are performing above expectations.
|
|
Illinois
|
All of the economy-related sources such as income and sales taxes have performed above expectations. However, year-to-date growth should moderate over the remainder of the year because of last year’s tax amnesty on tax sheltered income, the strong second half of last year, and higher heating bills and fuel costs that should affect spending during the holiday season.
|
|
Indiana
|
Individual income and sales tax collections are slightly below target, but corporate income tax collections are above target with a net of $13.4 million (0.4%) above target.
|
|
Iowa
|
Through October, the personal income tax and the sales and use tax are performing slightly above expectations. The corporate tax is performing moderately above expectations and other tax receipts are significantly above projections, largely because of insurance premium tax changes currently being phased in. This will result in extra revenue in the first half of the fiscal year and reduced revenue in the second.
|
|
Kansas
|
The personal income tax is up 7.1%, the corporate income tax is up 47.2%, the sales tax is up 1.7%, the compensating use tax is up 10.6%, and the severance tax is up 10.7 %.
|
|
Kentucky
|
The sales tax is performing 1.5% above expectations. The personal income tax also is performing above expectations—estimates had suggested a decline in personal income tax collections because of tax law changes, but on a year-to-date basis this category is up by 3.5%. Corporate income tax collections are running ahead of estimates; but after the tax law changes adopted by the 2005 General Assembly moved some income tax collections from the personal side to the corporate side, it is difficult to know how much of the unanticipated collections will actually materialize until a complete tax cycle takes place. Coal severance taxes are also exceeding estimates.
|
|
Louisiana
|
Officials expect to have a clearer sense of tax performance (and the effects of the hurricanes on collections) in January.
|
|
Maine
|
The personal income tax, which includes timing issues related to property tax reimbursement programs, is $27.3 million (9.6%) over projections. Excluding timing issues, the personal income tax would be $80 million (2.8%) over projections. The corporate income tax is running ahead of budget by $17.3 million (50.3%). The estate tax is running ahead of budget by $30.4 million (681%). Maine received two unusually large estate tax payments that account for approximately $23 million of the $30 million overage. Fuel taxes recovered somewhat in October, but still remained under budget by about $0.6 million (0.9%).
|
|
Maryland
|
Virtually all revenues are performing well. Personal and corporate income taxes are especially perky.
|
|
Massachusetts
|
Relative to the year-to-date benchmark, personal income taxes are up $88 million, general sales taxes are down $12 million, and corporate income and business taxes are up $157 million.
|
|
Michigan
|
With the exception of the single business tax, which is above forecast, collections are on target.
|
|
Minnesota
|
Personal income tax collections are stable and corporate income taxes and general sales taxes are above estimate.
|
|
Mississippi
|
Sales taxes, individual income taxes and use taxes are over estimate while corporate income taxes, insurance premium taxes, and gaming are below estimate.
|
|
Missouri
|
All major tax categories except for the sales tax are performing well. Starting in FY 2006, 25% of the motor vehicle sales tax that was deposited into general revenue is now being deposited into the highway fund. This was reflected in estimates.
|
|
Montana
|
All major tax categories show strong growth.
|
|
Nebraska
|
Performance is related to the first four months of budgeted revenue: the sales tax is up $8.9 million (2%), the individual income is up $12 million (2.9%), the corporate income is up $26.4 million (53%), and miscellaneous taxes are up $46 million (71%). Collections also include large one-time estate tax payments of more than $40 million.
|
|
Nevada
|
Nevada’s two largest revenue sources are generating collections in excess of projections so far in FY 2006. Sales tax was estimated to increase by 6% in FY 2006 and for the first two months of the fiscal year collections have been 12.2% higher than the same period one year ago. Gaming percentage fees were also estimated to increase by 6% in FY 2006. For the first three months of the fiscal year gaming percentage fee revenues have increased by 11.3% compared to the same period one year ago.
|
|
New Hampshire
|
Business taxes are above plan by $32.4 million (47.8%), partially due to one-time audit settlements.
|
|
New Jersey
|
The income tax is slightly exceeding expectations and the corporation tax is exceeding expectations, but the sales tax is lagging. After only one quarter, none of these trends is considered significant.
|
|
New Mexico
|
Personal income and corporate income taxes are much higher than initially estimated for FY 2005 and are expected to continue strong. Severance taxes are expected to be much higher than historic levels and higher than FY 2005, but tapering off with declines in oil and gas prices after the winter.
|
|
New York
|
Personal income and corporate income taxes are up.
|
|
North Carolina
|
The personal income tax is on target with the estimate but clearly not robust. The general sales tax is growing about 8.3% through the first four months of the fiscal year compared to a projected 6.5% estimate. The corporate income tax is doing very well.
|
|
North Dakota
|
All major tax categories are exceeding estimates.
|
|
Ohio
|
The corporate franchise tax is above estimate by $48.5 million (year-to-date receipts of $47 million compared to an estimate of $1.5 million in refunds); the personal income tax is above estimate by $38.7 million or 1.5%; the sales tax on automobile purchases is above estimate by $13 million or 3.6%; and the estate tax is above estimate by $6 million or 68.4%. The nonauto sales tax is below estimate by $52.9 million or 2.4% and the cigarette tax is below estimate by $25.2 million or 7.1%.
|
|
Oklahoma
|
For the first quarter of the fiscal year, income tax collections are 12.3% above the estimate. Sales tax collections are 2% above the estimate and motor vehicle tax receipts are 6.8% above the estimate. Gross production receipts are 8% below the estimate, but that is expected to change as the winter progresses.
|
|
Oregon
|
The personal income tax was $58.6 million ( 4.9%) over the first quarter forecast (11.8% growth on a year-over-year basis) and corporate income tax was $35.8 million (43%) above forecast.
|
|
Pennsylvania
|
Corporate income taxes are $51 million (6.1%) above estimate, largely because of the Commonwealth’s share of the MCI-Worldcom settlement. Sales taxes are $4.6 million (0.2%) above estimate and personal income taxes are $57 million (2.2%) above estimate.
|
|
Rhode Island
|
All major categories are below estimates.
|
|
South Carolina
|
Growth rates through October are 7% for sales taxes. Personal and corporate income tax collections are each over by 9%.
|
|
South Dakota
|
All major tax categories are above estimate by $4.7 million (1.7%). Compared to the same time a year ago, tax revenues are up by $19.6 million (7.4%).
|
|
Tennessee
|
(N/R)
|
|
Texas
|
(N/R)
|
|
Utah
|
Al major categories are above estimate.
|
|
Vermont
|
Compared to four-month year-to-date targets, personal income tax is below target by 1.7%, sales and use tax is above target by 2.5%, corporate income is above by 50.4%, meals and rooms tax is below target by 1.9%; all other taxes including the estate tax are above target by 29.7%.
|
|
Virginia
|
Most above-forecast revenue comes from three sources: non-withholding, recordation taxes (paid at time of purchase or refinance), and corporate. Sales and withholding are trending as expected.
|
|
Washington
|
All taxes are growing, the real estate excise tax especially.
|
|
West Virginia
|
Personal income tax is $12.5 million above; corporate income tax is $23.8 million above; severance is $8 million above; and consumer sales is $13.1 million above.
|
|
Wisconsin
|
All major categories are on target.
|
|
Wyoming
|
All major categories are on target.
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, November 2005.
|
|
Table 4. Revised
Revenue Estimates for FY 2006
|
|
State
|
Revised
|
Date
|
Notes
|
|
|
No
|
Yes
|
|
|
|
Alabama
|
x
|
|
|
|
|
Alaska
|
x
|
|
|
A revision is expected Dec. 5. Revenues are expected to be higher, but the amount is unknown.
|
|
Arizona
|
x
|
|
|
|
|
Arkansas
|
|
x
|
July 27
|
The FY 2006 forecast was revised upward by 2.6% and revenues are currently coming in $57.6 million (4.4%) above that forecast.
|
|
California
|
|
x
|
November
|
The revenue forecast was revised upward by 3.6%.
|
|
Colorado
|
|
x
|
September
|
The revenue forecast was revised upward by 0.6% and revenues are on target with the revision.
|
|
Connecticut
|
x
|
|
|
|
|
Delaware
|
|
x
|
Sept. 16
|
The revenue forecast was revised upward by 0.4% and revenues are currently on target with the revised forecast.
|
|
Florida
|
x
|
|
|
Based on collections to date, the current year estimate will be revised upward by a significant amount.
|
|
Georgia
|
x
|
|
|
|
|
Hawaii
|
|
x
|
Sept. 2
|
The revenue forecast was revised upward by 6% and revenues are currently on target with the revised forecast.
|
|
Idaho
|
|
x
|
August
|
The revenue forecast was revised upward by 5.4% and revenues are currently $33 million (4.1%) above the revised forecast.
|
|
Illinois
|
|
x
|
Nov. 3
|
The revenue forecast was revised upward by 0.4% and revenues are currently $169 million above the revised forecast.
|
|
Indiana
|
x
|
|
|
|
|
Iowa
|
|
x
|
Oct. 14
|
The revenue forecast was revised upward by 0.7% and revenues are currently $10 million (0.9%) above the new forecast. Although revenues are performing higher than estimates, it is uncertain whether the current growth will be sustained throughout the year. There also is concern about energy costs, so the outlook is "stable" to "cautiously optimistic." The 0.7% growth rate is also lower than it might otherwise be because Iowa has reworked the way it figures how much is withheld for income taxes. Without the new withholding policies, the revenue growth estimate would be closer to 3% to 3.5% for FY 2006.
|
|
Kansas
|
|
x
|
Nov. 4
|
The revenue forecast was revised upward $221 million (4.5%) and revenues are currently on target with the revised forecast. Estimated tax receipts that were increased include individual income (4.7%), corporate income (23.8%) and severance (28.3%).
|
|
Kentucky
|
|
x
|
Oct. 15
|
The forecast was revised upward by 2%. It is too early to tell how collections are performing relative to the revised forecast.
|
|
Louisiana
|
|
x
|
Oct. 28
|
The revenue forecast was revised upward by $970 million (12.7%).
|
|
Maine
|
|
x
|
Nov. 21
|
The revenue forecast was revised upward by $112 million (4%).
|
|
Maryland
|
|
x
|
September
|
The revenue forecast was revised upward by 4.4% and revenues are currently $115.9 (5.3%) above the revised forecast. Personal income tax collections through September were above estimate by $48 million (4.2%). Corporate income taxes are up $37.5 million (32.2%). Sales taxes are running slightly below estimate by $5.2 million (1%).
|
|
Massachusetts
|
|
x
|
October
|
The revenue estimate recently was revised upward by 2.9%.
|
|
Michigan
|
x
|
|
|
|
|
Minnesota
|
|
x
|
Nov. 30
|
A new forecast shows that four major revenue sources have increased significantly form the February forecast and the 2005 end-of-session estimates. Corporate taxes are up $165 million (10.9%) and this is after factoring in a projected $232 million loss from a court ruling. Sales tax revenues are projected to be $173 million (1.9%) and individual income taxes are projected to be $188 million (1.4%) higher than in the February forecast. Other revenues are up $176 million (2.9%). Much of this amount ($117 million) is due to an increase in estate tax revenue, a one-time occurrence.
|
|
Mississippi
|
|
x
|
Nov. 8
|
The revenue estimate was revised upward to 3.6%.
|
|
Missouri
|
x
|
|
|
A revision is expected in December.
|
|
Montana
|
x
|
|
|
|
|
Nebraska
|
|
x
|
Oct. 28
|
The revenue forecast was revised upward by 5.1% and revenues are currently on target with the revised forecast.
|
|
Nevada
|
x
|
|
|
|
|
New Hampshire
|
x
|
|
|
|
|
New Jersey
|
x
|
|
|
|
|
New Mexico
|
|
x
|
Dec. 5
|
The revenue forecast was revised upward by 9.8%.
|
|
New York
|
|
x
|
Oct. 30
|
The revenue forecast was revised upward by 0.8% and revenues are currently on target with the revised forecast.
|
|
North Carolina
|
x
|
|
|
|
|
North Dakota
|
x
|
|
|
|
|
Ohio
|
x
|
|
|
|
|
Oklahoma
|
x
|
|
|
|
|
Oregon
|
|
x
|
Nov. 23
|
The estimate was revised upward to reflect recent collections trends.
|
|
Pennsylvania
|
x
|
|
|
|
|
Rhode Island
|
|
x
|
Nov. 10
|
The revenue forecast was revised downward by 1.9%.
|
|
South Carolina
|
|
x
|
Nov. 10
|
The revenue estimate was revised upward by 4.5%.
|
|
South Dakota
|
x
|
|
|
|
|
Tennessee
|
x
|
|
|
|
|
Texas
|
x
|
|
|
|
|
Utah
|
x
|
|
|
|
|
Vermont
|
x
|
|
|
The next revision will be in January.
|
|
Virginia
|
x
|
|
|
Virginia expects FY 2006 revenues to be adjusted upward on Dec. 16 by about $1.3 billion. The general fund revenue growth rate will increase from 1.3% to 4.8% (these numbers look low because some tax policies changed this year to pull numbers down). Based on economics alone, the projected growth rate for FY 2006 is 6.8%.
|
|
Washington
|
|
x
|
Nov. 17
|
The revenue estimate was revised upward by 1.2%.
|
|
West Virginia
|
|
x
|
September
|
The revenue forecast was revised upward by $30 million (1%) and revenues are currently on target with the revised forecast.
|
|
Wisconsin
|
x
|
|
|
|
|
Wyoming
|
|
x
|
October
|
The revenue forecast was revised upward by 12% and revenues are currently on target with the revised forecast.
|
|
Total
|
25
|
25
|
|
|
|
Source: NCSL survey of legislative fiscal offices, November 2005.
|
|
Table 5. Outlook for FY 2006 General Fund Revenues
|
|
|
State
|
Optimistic
|
Stable
|
Concerned
|
Pessimistic
|
|
Alabama
|
x
|
|
|
|
|
Alaska
|
x
|
|
|
|
|
Arizona
|
x
|
|
|
|
|
Arkansas
|
x
|
|
|
|
|
California
|
x
|
|
|
|
|
Colorado
|
|
x
|
|
|
|
Connecticut
|
x
|
|
|
|
|
Delaware
|
x
|
|
|
|
|
Florida
|
x
|
|
|
|
|
Georgia
|
x
|
|
|
|
|
Hawaii
|
|
x
|
|
|
|
Idaho
|
x
|
|
|
|
|
Illinois
|
|
x
|
|
|
|
Indiana
|
|
x
|
|
|
|
Iowa
|
|
x
|
|
|
|
Kansas
|
|
x
|
|
|
|
Kentucky
|
|
x
|
|
|
|
Louisiana
|
|
|
|
x
|
|
Maine
|
|
x
|
|
|
|
Maryland
|
x
|
|
|
|
|
Massachusetts
|
|
x
|
|
|
|
Michigan
|
|
x
|
|
|
|
Minnesota
|
|
x
|
|
|
|
Mississippi
|
|
x
|
|
|
|
Missouri
|
|
x
|
|
|
|
Montana
|
x
|
|
|
|
|
Nebraska
|
|
x
|
|
|
|
Nevada
|
|
x
|
|
|
|
New Hampshire
|
x
|
|
|
|
|
New Jersey
|
|
x
|
|
|
|
New Mexico
|
|
x
|
|
|
|
New York
|
x
|
|
|
|
|
North Carolina
|
|
x
|
|
|
|
North Dakota
|
|
x
|
|
|
|
Ohio
|
|
x
|
|
|
|
Oklahoma
|
x
|
|
|
|
|
Oregon
|
|
x
|
|
|
|
Pennsylvania
|
|
x
|
|
|
|
Rhode Island
|
|
|
x
|
|
|
South Carolina
|
x
|
|
|
|
|
South Dakota
|
x
|
|
|
|
|
Tennessee
|
|
x
|
|
|
|
Texas
|
|
x
|
|
|
|
Utah
|
x
|
|
|
|
|
Vermont
|
x
|
|
|
|
|
Virginia
|
x
|
|
|
|
|
Washington
|
x
|
|
|
|
|
West Virginia
|
|
x
|
|
|
|
Wisconsin
|
|
x
|
|
|
|
Wyoming
|
x
|
|
|
|
|
Totals
|
22
|
26
|
1
|
1
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, November 2005.
|
|
Table 6. FY 2006 Spending Overruns
|
|
State
|
Over
|
Comments
|
|
|
No
|
Yes
|
|
|
Alabama
|
x
|
|
|
|
Alaska
|
x
|
|
|
|
Arizona
|
|
x
|
K-12 education and Medicaid.
|
|
Arkansas
|
x
|
|
|
|
California
|
|
x
|
Department of Corrections.
|
|
Colorado
|
x
|
|
None currently. There is the potential for Medicaid to be over budget.
|
|
Connecticut
|
|
x
|
The state reports that $15.5 million of $38.8 million in total deficiencies is attributable to additional energy needs for state facilities and operations. Other deficiencies are relatively minor.
|
|
Delaware
|
|
x
|
Medicaid, but only slightly.
|
|
Florida
|
x
|
|
|
|
Georgia
|
x
|
|
|
|
Hawaii
|
|
x
|
Officials anticipate additional funding requests for electricity from all state agencies in the current fiscal year and possible requests in adult mental health and special education.
|
|
Idaho
|
|
x
|
Medicaid and corrections.
|
|
Illinois (N/R)
|
|
|
|
|
Indiana
|
x
|
|
|
|
Iowa
|
|
x
|
Medicaid. Officials anticipate a supplemental need of $39 million to $54 million.
|
|
Kansas
|
x
|
|
|
|
Kentucky
|
|
x
|
Medicaid, corrections and personnel health care costs.
|
|
Louisiana
|
x
|
|
There is no information yet on spending overruns; however, the Legislature reduced spending by $606 million from the FY 2006 budget during a special session in November.
|
|
Maine
|
|
x
|
The governor is reviewing supplemental budget requests. Most of the requests center on estimated shortfalls related to higher energy prices, but others are related to higher caseloads in such programs as general assistance and child welfare services. Maine will also need to address some adverse federal audit findings. The Medicaid program with its claims processing problems may be facing shortfalls, but sufficient data are not available at this time.
|
|
Maryland
|
|
x
|
The Department of Legislative Services projects general fund spending for FY 2006 to be over budget by $184 million. The largest area is Medicaid ($110 million) to pay previous years’ bills and to address unrealized cost containment, an underfunded base, and higher managed care organization rates. A $23 million deficiency for the Department of Human Resources may be needed to cover claims against federal grants that were denied. A new inmate medical contract will cost $22 million more than budgeted. Another $18 million is needed to address prior and current year per diem costs for juvenile services programs. A number of miscellaneous items make up the remaining projected shortfall.
|
|
Massachusetts
|
x
|
|
|
|
Michigan
|
x
|
|
|
|
Minnesota
|
x
|
|
|
|
Mississippi
|
x
|
|
|
|
Missouri
|
|
x
|
Medicaid.
|
|
Montana
|
|
x
|
Corrections populations are higher than anticipated and will likely result in a supplemental appropriation. The Montana State Hospital, which cares for the mentally ill, is experiencing a significant increase in population and will also likely require a supplemental appropriation.
|
|
Nebraska
|
x
|
|
It is too early to say. Likely candidates are motor fuels costs, natural gas and employee health insurance, but amounts are not likely to be disruptive, budget-wise.
|
|
Nevada
|
x
|
|
|
|
New Hampshire
|
|
x
|
Higher energy costs throughout the entire state government.
|
|
New Jersey
|
x
|
|
|
|
New Mexico
|
|
x
|
Corrections.
|
|
New York
|
|
x
|
Medicare Part D ($72 million), Medicaid ($117 million), and energy costs ($86 million).
|
|
North Carolina
|
x
|
|
|
|
North Dakota
|
x
|
|
|
|
Ohio
|
x
|
|
|
|
Oklahoma
|
x
|
|
|
|
Oregon
|
|
x
|
Department of Human Services—Medicaid. Although the agency has not yet submitted a formal budget rebalance to the Legislative Emergency Board, it appears that substantial cost increases over the adopted budget are due to caseload changes and other factors.
|
|
Pennsylvania
|
x
|
|
|
|
Rhode Island
|
x
|
|
|
|
South Carolina
|
x
|
|
|
|
South Dakota
|
x
|
|
|
|
Tennessee
|
x
|
|
|
|
Texas
|
x
|
|
|
|
Utah
|
|
x
|
Medicaid is expected to require $11 million in supplemental funding for FY 2006.
|
|
Vermont
|
|
x
|
Vermont’s fuel assistance program is usually funded primarily with federal dollars, but the program is requiring a significant infusion of state funds to meet its need. Currently, Medicaid and corrections are running higher than expected. The special funds that support natural resource programs (forest and parks, and fish and wildlife) are not performing well and are likely to require general fund help.
|
|
Virginia
|
x
|
|
|
|
Washington
|
|
x
|
Public school spending is up due to migration and higher inflation. State medical assistance costs are rising as the federal government further tightens its requirements.
|
|
West Virginia
|
x
|
|
|
|
Wisconsin
|
x
|
|
|
|
Wyoming
|
x
|
|
|
|
Totals
|
30
|
19
|
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, November 2005.
|
Table 7. Summary of Top Fiscal Issues to be Addressed in 2006 Legislative Sessions
|
|
Issue
|
State
|
|
Health or Medicaid
(23 states)
|
Alabama, Connecticut, Delaware, Florida, Georgia (two issues), Hawaii, Idaho, Iowa, Kentucky (two issues), Louisiana, Maine, Massachusetts, Missouri, New Hampshire, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Utah, Vermont, West Virginia and Wisconsin.
|
|
Education
(15 states)
|
California, Florida, Georgia, Hawaii, Iowa, Kansas, Louisiana, Mississippi, New Jersey, New York, North Carolina, Oklahoma, Utah, Washington and Wyoming (two issues).
|
|
Taxes
(14 states)
|
Idaho, Indiana, Maryland, Michigan, Mississippi, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Pennsylvania, South Carolina, Utah and West Virginia.
|
|
Budget
(11 states)
|
Alabama, Colorado, Iowa, Maryland (two issues), Massachusetts, Nebraska (two issues), Rhode Island, Vermont, Virginia, Washington and Wyoming.
|
|
Infrastructure/ Transportation
(10 states)
|
California, Colorado, Delaware, Florida, Indiana, Minnesota, New Jersey, New Mexico, Vermont and Virginia.
|
|
Tax or Expenditure Limits
(6 states)
|
Colorado, Connecticut, Pennsylvania, Rhode Island, South Carolina and Wisconsin.
|
|
Corrections
(5 states)
|
Alabama, Delaware, Idaho, Kentucky and Oklahoma.
|
|
Pensions and Retirement
(3 states)
|
Alaska, Washington and West Virginia.
|
|
Energy costs
(2 states)
|
Maine and New Hampshire.
|
|
Gambling
(2 states)
|
Indiana and Rhode Island.
|
|
Hurricanes
(2 states)
|
Louisiana and Mississippi.
|
|
Employee Compensation
(2 states)
|
New Mexico and North Carolina.
|
|
Other
(7 states)
|
Alaska (two issues), Connecticut, Hawaii, Maine, Massachusetts, Minnesota and Virginia.
|
|
No response: Arizona, Illinois, Ohio, South Dakota and Tennessee.
|
|
No session: Arkansas, Montana, Nevada, North Dakota, Oregon and Texas.
|
|
Table 8. Top Three Fiscal Issues to Be Addressed in 2006 Legislative Session
(from the perspectives of legislative fiscal directors)
|
|
State
|
Issue
|
Comment
|
Issue
|
Comment
|
Issue
|
Comment
|
|
Alabama
|
Budget
|
Replacement of $295 million of one-time money used in the FY 2006 general fund budget.
|
Health/ Medicaid
|
Medicaid. The program currently is anticipated to need an additional $90 million in state funds for FY 2007 to maintain the program at FY 2006 levels.
|
Corrections
|
Critical issues are overcrowding of state prisons (resulting in a backlog in county jails of state inmates awaiting transfer), deferred capital outlay needs of state correctional institutions, inmate health care (cost and quality of care), and need for additional drug treatment and alternatives to incarceration in state institutions.
|
|
Alaska
|
Gas Pipeline
|
Huge fiscal implications for the next 20 years.
|
Local Government
|
Elimination of revenue sharing, combined with high oil prices, large increase in pension costs and often small tax bases, has put pressure on local governments and school districts.
|
Pensions/ Retirement
|
Retirement costs. State and local governments will need to determine how to respond to benefit costs that will increase 5 percentage points annually for the next several years.
|
|
Arizona (N/R)
|
|
|
|
|
|
|
|
Arkansas (N/S)
|
|
|
|
|
|
|
|
California
|
Education
|
Education funding has been a contentious issue in the state.
|
Infrastructure/ Transportation
|
There is some bipartisan interest in major bond sales for infrastructure.
|
|
|
|
Colorado
|
Tax or Expenditure Limit (TEL)
|
Implementation of Referendum C, which altered some of the restrictions imposed by the Taxpayer Bill of Rights (TABOR), passed in the November 2005 election.
|
Budget
|
Restoration of funding in the big three agencies: K-12 education, Higher Education and health care.
|
Infrastructure/ Transportation
|
Dealing with funding for state infrastructure, including roads and capital.
|
|
Connecticut
|
Tax or Expenditure Limit (TEL)
|
Despite approximately $500 million in surpluses projected in FY 2006 and FY 2007, the spending cap will deter spending above allowable levels (unless the executive and the legislature agree to exceed the cap).
|
Campaign Finance
|
Efforts began during the 2005 session and are continuing during a 2005 special session concerning public financing of campaigns, but the issue may not be fully resolved and could continue during the 2006 session.
|
Health/ Medicaid
|
Medicare Part D. Efforts began during the 2005 special session concerning Medicare Part D funding, but the issue may not be fully resolved and could continue during the 2006 session.
|
|
Delaware
|
Corrections
|
Whether or not to retain the current contract for medical services in corrections.
|
Infrastructure/ Transportation
|
Authorized projects in the six-year plan outstrip projected revenues in the Transportation Trust Fund.
|
Health/ Medicaid
|
Retiree health care and the effects of GASB 45.
|
|
Florida
|
Education
|
Class-size reduction. A constitutional amendment in 2002 requires annual reductions in class sizes until constitutionally mandated targets are reached. This requires a significant increases in operating and fixed capital budgets.
|
Health/ Medicaid
|
Medicaid. Continued emphasis in reducing the growth rate in the Medicaid budget to bring it in line with normal revenue growth.
|
Infrastructure/ Transportation
|
Funding of the infrastructure deficit, especially important in a high-growth state like Florida. The 2005 session increased funding for transportation, water projects and educational facilities by $1.5 billion. The 2006 legislature will revisit the 2005 legislation amid renewed demands for additional funding.
|
|
Georgia
|
Education
|
Midterm adjustments will exceed original projections because of 10,000 additional students from the Gulf area. The state anticipates some relief from the federal government.
|
Health/ Medicaid
|
Loss of indigent care trust funds for Right From the Start Medicaid services for pregnant women and children. Loss of upper payment limit for Medicaid benefit services for pregnant women and children, and for the aged, blind and disabled.
|
Health/ Medicaid
|
Employee Health Insurance. The state anticipates a $34 million shortfall this year.
|
|
Hawaii
|
Education
|
Funding the next phase of reform efforts initiated in 2004.
|
Housing
|
As part of affordable housing initiatives in 2005, an interim task force was initiated to make additional recommendations to the 2006 Legislature to address affordable housing and homeless issues.
|
Health/ Medicaid
|
An interim task force was organized to develop universal health care recommendations for the Legislature to consider in 2006.
|
|
Idaho
|
Taxes
|
Property tax relief. Rising values, rising assessments, rising bills, rising emotions, etc.
|
Health/ Medicaid
|
Medicaid cost control—the state cannot afford the programs it has in place.
|
Corrections
|
Prison growth. The state is over capacity in bed space and must either build or send prisoners out of state.
|
|
Illinois
|
To Be Determined
|
The legislature has indicated its intention to adjourn by mid-April. This early date indicates that few major pieces of legislation are likely.
|
|
|
|
|
|
Indiana
|
Taxes
|
Property taxes and other revenue sources available to local governments. State officials may look at taking over the costs of the county welfare system. They also may address the issue of tax shifts resulting from rules that will be implemented in 2007. Local governments also are looking at reducing their reliance on property taxes and proposing other revenue sources such as sales and other local taxes.
|
Gambling
|
Legalizing cherry masters or slots at race tracks.
|
Infrastructure/ Transportation
|
Toll roads and highway funding. The governor has proposed privatizing the toll road.
|
|
Iowa
|
Health/ Medicaid
|
Medicaid. A significant portion of Medicaid has been funding from nongeneral fund sources that are now depleted or no longer available (e.g. the Senior Living Trust Fund). The shortfall for FY 2007 could be more than $100 million. Action at the federal level is also a significant concern.
|
Education
|
School finance and education. Allowable growth for FY 2007 was set last session at 4%, considerably higher than the general fund growth estimate of 0.7%.
|
Budget
|
Use of one-time funds. For several years, Iowa has shifted general fund expenditures to one-time sources of funds. Those sources are becoming depleted. If the programs or expenditures are to continue, new sources must be found or programs must be reduced.
|
|
Kansas
|
Education
|
School finance. Kansas is under a court order to increase school funding and awaits studies to determine the appropriate level of funding.
|
|
|
|
|
|
Kentucky
|
Health/ Medicaid
|
Medicaid.
|
Corrections
|
|
Health/ Medicaid
|
Other health care issues.
|
|
Louisiana
|
Hurricanes
|
Dealing with the aftermath of Hurricanes Katrina and Rita.
|
Health/ Medicaid
|
Health care financing.
|
Education
|
K-12 education and higher education financing.
|
|
Maine
|
Energy Costs
|
The governor is reviewing supplemental budget requests for potential submission during the 2006 legislative session. They reflect the underfunding in many programs from higher energy costs: fuel for state buildings (including state correctional and mental health institutions), fuel for state vehicles and equipment, and petroleum-based products such as asphalt. The governor has called a special session to address LIHEAP funding concerns. So far, no specific proposals have been made to address the effect on local units of government.
|
Health/ Medicaid
|
Medicaid. Issues include the discrepancy between the "clawback" payment and anticipated savings from Medicare drug coverage, state-funded wrap-around drug coverage, Medicaid claims payment and funding issues related to the processing system replacement and upgrade, and FFY 2006 FMAP changes not fully funded in the 2005 legislative session.
|
Tobacco Settlement
|
Significant factor proceedings under the Master Settlement Agreement may reduce tobacco settlement payments in April 2006 and April 2007 from the original participating manufacturers by 18.6%. Resulting program adjustments will be required because of the nearly full commitment of these tobacco settlement funds.
|
|
Maryland
|
Budget
|
Structural deficit. As the last two years of education enhancement are implemented, a structural deficit in the range of $600 million is projected. Ongoing revenue from video lottery terminals or other taxes and fees could be contemplated.
|
Budget
|
Unfunded liabilities. With the advent of GASB 45, the state has determined that its unfunded liability for retiree health insurance could exceed $20 billion. Along with liabilities for retirement ($4+ billion) and workers’ compensation ($200+ million), there is concern over the effects on bond ratings.
|
Taxes
|
Property taxes. A portion of the property tax is dedicated to the payment of debt service on general obligation bonds. The rate was increased during the fiscal crisis, and there is interest in reducing the rate, but this will require general fund support in future years.
|
|
Massachusetts
|
Budget
|
|
Health/ Medicaid
|
|
Economic Stimulus
|
|
|
Michigan
|
Taxes
|
Business tax reform.
|
|
|
|
|
|
Minnesota
|
Infrastructure/ Transportation
|
Capital budget. 2006 is a non-operating budget year, so it is the time to consider a major bonding bill.
|
Stadiums
|
Continued discussion of new stadiums for the University of Minnesota football, Minnesota Twins baseball and Minnesota Vikings football teams.
|
|
|
|
Mississippi
|
Hurricanes
|
The massive task of recovery and rebuilding after Hurricane Katrina.
|
Taxes
|
The hurricanes’ effects on state revenues and the required state match for federal funds.
|
Education
|
Continued funding for all education.
|
|
Missouri
|
Health/ Medicaid
|
Medicaid.
|
|
|
|
|
|
Montana (N/S)
|
|
|
|
|
|
|
|
Nebraska
|
Taxes
|
Tax reductions. The improved near-term financial outlook has fueled interest in tax cuts.
|
Budget
|
Rainy Day Fund. The Cash Reserve Balance is at a high level. Policymakers will consider the extent it should be used or saved.
|
Budget
|
Budget sustainability. The near-term positive outlook is counterbalanced with a longer-run risk of an unbalanced budget. Policymakers will consider what 2006 budget actions can be sustained.
|
|
Nevada (N/S)
|
|
|
|
|
|
|
|
New Hampshire
|
Energy Costs
|
Higher energy costs and energy assistance to low-income families. Other energy-related bills are to be considered during the 2006 session.
|
Health/ Medicaid
|
Medicare Part D. The issue is whether the state-budgeted savings will be realized.
|
Taxes
|
Business tax credits. Various business tax credits are being considered to give businesses tax relief.
|
|
New Jersey
|
Taxes
|
Property tax relief and reform. The governor-elect has cited property taxes as a major issue requiring action and is considering calling a special session on this topic during the spring of 2006. Strong advocacy continues for a constitutional convention on property taxes—the lower house has approved it but the upper house has not as yet.
|
Infrastructure/ Transportation
|
Since the mid-1980s, transportation system capital funding has been provided through a transportation trust fund, using a combination of constitutionally and statutorily dedicated revenues and bonding. Annual debt service now consumes virtually all constitutionally dedicated revenue, leaving no capacity for either additional pay-as-you-go financing or additional bonding for projects beyond FY 2006. The Legislature is under severe pressure to continue transportation system capital funding at recent levels, if not to increase such funding.
|
Education
|
Public school construction and education aid. A multi-year public $8.6 billion school construction program authorized in 2000 has insufficient capacity to complete court-mandated projects in certain low-income school districts and proposed projects in others. The public corporation responsible for the program has been criticized for inefficiency and mismanagement. Litigation is pending that would compel the state to provide special needs funding. Both organizational and funding issues are likely to be addressed.
Also, the Legislature is under pressure to revisit school aid formulas. A recent Department of Education study of special needs districts, which are entitled to court-mandated funding levels, found that some districts may no longer meet criteria for special needs designation. Also, statutory funding formulas for non-special needs districts have not been followed for several years.
|
|
New Mexico
|
Infrastructure/ Transportation
|
The oil and gas revenue windfall means that there will be many more projects that can be funded.
|
Taxes
|
Tax reform. Several ideas about changing the tax structure are likely to emerge.
|
Employee Compensation
|
Public employee pay.
|
|
New York
|
Taxes
|
Property taxes and local relief. Several spending categories are driving the need for reform, including Medicaid, the retirement system and school funding that is increasing reliance on real property taxes.
|
Education
|
Education financing. Dealing with a lower court decision ordering a $14.5 billion increase in school aid.
|
Health/ Medicaid
|
Medicaid. Cost containment for rising Medicaid program costs and local relief for counties.
|
|
North Carolina
|
Health/ Medicaid
|
Overall health care costs and Medicaid. High growth rates continue with no relief.
|
Education
|
Education improvement. Addressing at-risk students, class size reduction and adequacy.
|
Employee Compensation
|
Teacher and state employee pay raises.
|
|
North Dakota (N/S)
|
|
|
|
|
|
|
|
Ohio (N/R)
|
|
|
|
|
|
|
|
Oklahoma
|
Education
|
Teacher pay raises each year for the next three years. Annualized costs of the state’s full-day kindergarten program. Annualized costs of the debt service on higher education’s $500 bond issues.
|
Corrections
|
The Senate and House each plan to increase the number of correctional officers and increase their pay. Other budget issues will be addressed, and the new statewide drug court will be evaluated.
|
Health/ Medicaid
|
A decrease in Oklahoma’s FMAP will need to be addressed, as will a shortfall in the dedicated revenue source for Medicaid.
|
|
Oregon (N/S)
|
|
|
|
|
|
|
|
Pennsylvania
|
Taxes
|
Property tax reduction. A special session on property taxes will run concurrently with the regular session.
|
Tax or Expenditure Limit (TEL)
|
Spending cap. House and Senate Republicans are expected to propose a spending cap.
|
Health/ Medicaid
|
Containing medical assistance costs and dealing with vanishing Intergovernmental Transfer funds, growing caseloads and increasing cost of service.
|
|
Rhode Island
|
Budget
|
FY 2006 supplemental budget. Unless revenues recover, Rhode Island will need to identify $50 million to $60 million in savings or new revenue sources.
|
Gambling
|
Potential expansion of gambling to include full-scale casinos rather than current allowance of racino-type gaming venues.
|
Tax or Expenditure Limit (TEL)
|
Some local groups are pushing for a constitutional amendment to implement TABOR-like restrictions.
|
|
South Carolina
|
Taxes
|
Property taxes. The House and Senate established interim committees to develop proposals for reducing or eliminating homeowner property taxes. The proposed source of replacement revenue would be an increase in the state sales tax.
|
Health/ Medicaid
|
Medicaid waiver. The Department of Health and Human Services has submitted a 1115 Demonstration Waiver Proposal to the U.S. DHHS to pursue a Medicaid model (South Carolina Medicaid Choice) that would allow Medicaid recipients to make choices from among competing coverage options.
|
Tax or Expenditure Limit (TEL)
|
In his FY 2007 budget recommendations, the governor is planning to propose a new spending limitation that would cap the annual increase in general fund appropriations to population plus inflation.
|
|
South Dakota (N/R)
|
|
|
|
|
|
|
|
Tennessee (N/R)
|
|
|
|
|
|
|
|
Texas (N/S)
|
|
|
|
|
|
|
|
Utah
|
Taxes
|
The tax reform task force will have a number of proposals for legislative consideration.
|
Health/ Medicaid
|
Medicaid. Required supplemental funding for FY 2006 will increase FY 2007 requirements. Also, officials expect utilization to continue to grow.
|
Education
|
Enrollment growth will require significant funding increases in FY 2007.
|
|
Vermont
|
Health/ Medicaid
|
Implementation of a new Medicaid "global commitment" waiver, Medicaid deficit, implementation of Medicare Part D and overall health care reform.
|
Budget
|
Federal funds. The budget impact of anticipated reductions in federal funds, particularly in programs related to human services.
|
Infrastructure/ Transportation
|
The main issues are absorbing higher costs (because of energy) in transportation maintenance and construction projects as well as finding the state match for federal transportation reauthorization.
|
|
Virginia
|
Infrastructure/ Transportation
|
Officials seek sustainable revenue sources—other than gas taxes—to fund the commonwealth’s growing maintenance and construction needs. Last year, only one-time funding was provided.
|
Water Quality
|
Officials will look for a sustainable revenue source to meet the state’s commitment to improving water quality of the Chesapeake Bay.
|
Budget
|
How best to use the surplus. With large revenue revisions, the challenge will be to tie one-time or sustainable revenues to one-time purposes, and not to incur additional ongoing expenses.
|
|
Washington
|
Pensions/ Retirement
|
Pension liability. Many members believe "extra" revenue ought to be spent on meeting the state’s pension obligations.
|
Budget
|
Maintaining reserves. 2006 is a supplemental year; much of the discussion has been on making sure to maintain sufficient reserves for the 2007-09 biennium.
|
Education
|
K-12 funding. Increased enrollments and inflation-driven salary increases for teachers are likely to be addressed.
|
|
West Virginia
|
Health/ Medicaid
|
Medicaid.
|
Pensions/ Retirement
|
|
Taxes
|
|
|
Wisconsin
|
Health/ Medicaid
|
Medical assistance. The need for additional revenues to support the original appropriations.
|
Tax or Expenditure Limit (TEL)
|
Taxpayer Bill of Rights. A proposed constitutional amendment will be considered.
|
|
|
|
Wyoming
|
Education
|
Recalibration of the K-12 education funding model.
|
Education
|
Whether to fund a $400 million higher education scholarship program.
|
Budget
|
How to spend $1.8 billion in revenues in excess of the standard budget.
|
|
(N/R) = No response.
(N/S) = No session.
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, 2005.
|
Table 9. Special Focus on Higher Energy Costs in FY 2006
|
|
State
|
Comment
|
|
Alabama
|
State receipts from oil and gas severance and utility taxes are anticipated to increase. There is no discussion at this time of specifically addressing increased energy or fuel costs of individual agencies that will be affected.
|
|
Alaska
|
Discussion of energy assistance is likely, either alone or as part of a revenue sharing and municipal assistance package. State revenue effects swamp the impact of increased prices, but getting the money from the general fund to those affected by higher prices will take some discussion, especially regarding the duration of proposed programs, the amounts to be distributed and the conditions under which money is distributed.
|
|
Arizona
|
N/R
|
|
Arkansas
|
Agencies would have to reduce spending in other operational areas if the difference cannot be made up by salary savings. It is too early to determine if anything out of the ordinary, such as a special session. will be needed.
|
|
California
|
Some state agency budgets will be affected directly by higher energy costs. However, the main effects are on the statutory cost-of-living adjustments, particularly for K-12 education apportionments.
|
|
Colorado
|
The state budget is primarily affected in areas with institutional requirements (i.e., corrections, higher education and mental health institutes). The governor will submit supplemental requests in January and the Joint Budget Committee will deliberate over the changes during January. Supplemental appropriations are usually through the Legislature by the end of February. More will be known in January.
|
|
Connecticut
|
Officials anticipate emergency appropriation requests from all state agencies for higher energy costs.
|
|
Delaware
|
Officials won’t know until January, but bus contractors are mustering.
|
|
Florida
|
Officials have has just begun to analyze the effects of higher energy prices. They will have a direct effect on transportation with the higher cost of major inputs, like asphalt. Surprisingly, Florida does not expect a significant reduction in the purchases of highway fuel, so very little revenue impact in gas taxes is expected. Utility costs overruns in state agencies are expected, but to date these costs are absorbed within existing budgets. Also, this will also positively affect utility tax revenues. Some local school districts have complained about increased transportation and utility costs, but it is too soon to tell what the legislative response will be.
|
|
Georgia
|
The governor signed an executive order eliminating non-essential state travel and requiring alternative work schedules or telecommuting for all state employees where possible. This can include four-day, 10-hour work schedules, telecommuting and other alternative work schedules for certain state employees. The governor also asked local governments and businesses across the state to adopt active policies allowing employees to conserve fuel. He asked that alternative work schedules, telecommuting, and other conservation methods be implemented immediately. The Governor’s Office is working to share conservation strategies with local governments and the business community.
The governor also asked all state school systems to take two "early snow days" on Sept. 26 and Sept. 27, to save more than 225,000 gallons of diesel fuel per day. Four consecutive days of school building closures, from Saturday to Tuesday, will allow further heating and cooling energy conservation. The Georgia Environmental Facilities Authority (GEFA) is monitoring gas supply and helping to provide supply to law enforcement, emergency health services and schools.
|
|
Hawaii
|
The state anticipates emergency appropriation requests from all state agencies for higher energy costs.
|
|
Idaho
|
The state does not anticipate specific energy assistance for local governments or school districts.
|
|
Illinois
|
N/R
|
|
Indiana
|
Uncertain, although efforts are underway to assist low income households with high heating bills.
|
|
Iowa
|
Energy consultants have estimated that home energy costs will increase 30% to 50% this winter. This increase in energy costs is also likely to have an impact on both state revenues and expenditures. It is uncertain whether the governor will address the issue in his budget or if the Legislature will address it in the appropriations committee process.
|
|
Kansas
|
Each agency request will be handled through the supplemental budget process, although no specific energy assistance for local governments or school districts is currently being considered.
|
|
Kentucky
|
Recent estimates suggested that diesel and gas price increases had already cost school districts close to $20 million. Public testimony on this issue suggested that districts could use their reserve accounts to cover some of this unanticipated increase and that any unanticipated receipts be first set aside for this purpose. Ultimately the General Assembly will decide this issue—whether and to what extent to assist school districts—in the upcoming 2006 session.
|
|
Louisiana
|
It has not been a problem to date. As a producer, Louisiana has seen higher revenues from energy price increases.
|
|
Maine
|
Supplemental budget requests being reviewed by the governor for potential submission to the 2006 legislative session reflect the under funding in many programs from higher energy costs and include fuel costs for state buildings (including state correctional and mental health institutions), fuel costs for state vehicles and equipment, and costs for petroleum-based products such as asphalt. Low-Income Home Energy Assistance Program (LIHEAP) effectiveness has been significantly diminished with higher home heating costs. The governor will be submitting budget proposals to address many of these issues in January and has called for a special session to address LIHEAP funding concerns. At this point, no specific proposals have been made to address impacts on local units of government, including county jails, school districts and municipal governments.
|
|
Maryland
|
Higher energy costs likely will affect spending. Agencies such as the state police or the Maryland Transit Administration, which rely heavily on vehicle usage, are expected to request deficiency funding for fuel costs. The full impact cannot yet be determined. Specific energy assistance for local governments or school districts is not currently being contemplated. The state does have programs to assist low-income residents with energy assistance, and increases may be provided in the governor’s allowance.
|
|
Massachusetts
|
The state just passed legislation for energy tax credits, low interest loan programs and assistance for low-income residents to supplement LIHEAP funding.
|
|
Michigan
|
There is a possibility that officials may provide a general fund appropriation for home heating assistance for low-income households. The governor has yet to recommend, but such a request is anticipated.
|
|
Minnesota
|
The governor has directed state agencies to reduce fuel consumption wherever possible. Some legislators are proposing increases in fuel assistance for low-income people and also additional aid for school districts. There is no indication yet how much support these proposals will receive.
|
|
Mississippi
|
This issue will be considered in the 2007 regular session.
|
|
Missouri
|
At this time there has been no discussion of special assistance for schools or local governments.
|
|
Montana
|
The state is contemplating measures to increase assistance to low-income people for heating costs, including use of certain funds available to the Public Service Commission and funds to supplement LIHEAP. If and when the legislature is called into special session to address the recommendations of the current school funding panel, measures to provide additional assistance could also be a part of the session call. The impact of higher natural gas prices on state-owned and -leased buildings is currently being monitored. However, aside from calls for conservation, no other action is in the works at this time until more information is available. (A significant number of state buildings are on a very favorable natural gas contract until June 30, 2007.) The school funding panel is discussing new funding formulas, and maintenance costs are a part of that discussion. However, with the exception of long-term funds for school weatherization, no discussion of short-term assistance is taking place. (The largest school districts are also on the natural gas contract.) Montana is currently monitoring the impact of higher gasoline prices on state operations to determine whether essential state services may be in jeopardy. Right now, falling prices (as well as vacancies, including some in Iraq) seem to have cooled the potential crisis in the highway patrol, which was facing a major funding shortfall. The governor said he was open to temporarily suspending the state’s gas tax to ease the burden on consumers, but this action seems unlikely as of this writing.
|
|
Nebraska
|
The most likely actions appears to be around higher heating costs, whereas motor fuel prices have recently moderated (perhaps reducing deficit requests that were made when fuel prices were at the highest). There are no energy assistance initiatives for local governments or schools at this time.
|
|
Nevada
|
Currently there is no plan for the state to provide local governments or school districts with additional funds because of higher energy costs. State agencies will reduce costs in other areas of their budgets to offset higher energy expenses.
|
|
New Hampshire
|
A fast-tracked bill was considered in November to provide emergency energy assistance to low-income families. Other bills will be considered during the 2006 session.
|
|
New Jersey
|
Effects are uncertain at this point, and the likelihood of future actions is also uncertain.
|
|
New Mexico
|
New Mexico had a special session in October to address these issues and the Legislature and governor provided additional funds for school districts, local governments, low-income households and public safety agencies for gasoline and heating relief. A statewide tax rebate was mailed in November with an acceleration of the phase-in of personal income tax rate cuts.
|
|
New York
|
According to the governor’s mid-year update to the financial plan, state energy costs will increase by $86 million in FY 2006, $121 million in FY 2007 and $123 million in FY 2008 above previously forecasted levels. These cost increases will be financed with available revenues in the current year and will add to out-year gap estimates.
|
|
North Carolina
|
N/R
|
|
North Dakota
|
Legislators have expressed concerns about higher energy costs, especially in regard to school districts. Options are being discussed for how the state may assist.
|
|
Ohio
|
The governor authorized by executive order that $75 million in Temporary Aid for Needy Families funds be used to supplement the $100 million available in the Home Energy Assistance Program (HEAP), providing a 10% increase in the average benefits Ohioans received in 2004. The program will provide an estimated $430 per household, on average, to help pay heating bills this winter. The governor also directed that income eligibility be increased from 151% to 175% of the federal poverty level. Expanding eligibility will allow the state to serve approximately 70,000 more households than the 330,000 served in 2004 under HEAP. Although the state has not yet provided additional funds for school districts to help counter the effect of higher energy costs, a provision was added into HB 79 by the Senate to provide some flexibility for school districts to use their state bus purchase allowances to purchase fuel for school buses in FY 2006. School districts have to apply for a waiver from the Department of Education in order to do so. HB 79 has passed the Senate and is currently waiting for House concurrence. Also, school districts in Ohio are exempted from paying six cents of the 28-cent per gallon motor fuel gas tax, an exemption not created because of the current higher energy costs. There is a bill that would exempt school districts from all the 28-cent per gallon tax. The following energy-related bills have been introduced. HB 245 requires that half of all motor vehicles purchased for state agency fleets be capable of using alternative fuels, requires greater use of E-85 (high ethanol content gasoline) in state fleets, and offers tax incentives for installation of E-85 pumps at gas stations. SB 193 eases restrictions for oil and gas exploration and coal mining on state lands. Theoretically, this may increase energy supply and lower costs in the long-term. HB 251 requires the use of energy-efficient plans, building materials, and equipment for state-funded construction projects.
|
|
Oklahoma
|
Oklahoma is considering a state subsidy for LIHEAP and will be reviewing supplemental appropriations to cover rising energy costs for common education, higher education and others.
|
|
Oregon
|
Most state agencies will be expected to absorb higher than budgeted energy costs within their legislatively adopted budgets. Some agencies (e.g., the Department of State Police) may request supplemental funding from the Legislative Emergency Board to cover unbudgeted higher expenditures on fuel because of increased gasoline prices. There are no plans to provide additional state assistance to local governments or school districts for any higher energy expenditures they might experience.
|
|
Pennsylvania
|
Higher energy costs will be absorbed within existing agency appropriations. There is no particular movement to extend assistance to local governments.
|
|
Rhode Island
|
This issue will be addressed during budget discussions and negotiations. The governor has proposed creating a heating assistance program for low-income families, but there has been no discussion yet of programs for municipalities/school districts.
|
|
South Carolina
|
The largest impact would be to the Department of Education. The state operates and maintains the school bus fleet. The department is managing increased fuel expenditures through flexibility provisions allowing the use of appropriations for the purchase on new buses to cover fuel purchases also.
|
|
South Dakota
|
There may be some discussion of creating an assistance program for local units of government.
|
|
Tennessee
|
N/R
|
|
Texas
|
Agencies are absorbing higher energy costs within their existing appropriations.
|
|
Utah
|
Requests for additional funding to meet the higher costs of energy have been submitted, but no estimates are currently available.
|
|
Vermont
|
Officials have made a significant contribution to low-income fuel assistance for the current year. The extent of the impact on budgets (state police and buildings departments) that have significant fuel bills is not yet known. Local aid is not a topic at this point. Vermont expects energy policy issues to be a topic of interest, but specific policy initiatives are still in formative stages.
|
|
Virginia
|
The numbers are not firm for impact on state agencies or assistance to local governments. Officials expect something in the governor’s budget. The state anticipates a need to augment the federal low-income home energy assistance program of about $5 million this year.
|
|
Washington
|
State officials have received many requests for funding, but what the Legislature might decide is unknown.
|
|
West Virginia
|
No effect so far, but the cost of school bus transportation probably will increase for the coming budget year.
|
|
Wisconsin
|
N/R
|
|
Wyoming
|
The state will appropriate additional funds for utilities and fuel.
|
|
Source: National Conference of State Legislatures survey of legislative fiscal offices, November 2005.
|
|