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Alabama |
The state has two budgets: the education trust fund budget ($4.6 billion for FY 2005) and the general fund budget ($1.4 billion for FY 2005). The growth taxes (sales and income) are earmarked for the education trust fund, while the health and public safety programs with high rates of growth in expenditures (Medicaid, Children's Health Insurance Program and corrections) are funded from the general fund. Also, the state constitutionally earmarks all gasoline and fuel taxes for the public road and bridge fund to be expended almost exclusively for roads and bridges. There are no actions being taken at this time to address the tax structure. |
|
Alaska |
A structural imbalance exists, but high oil prices have allowed Alaska to avoid solutions other than spending from reserves. |
|
Arizona |
Revenue growth is solving most of the problem. |
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Arkansas |
N/A |
|
California |
California faces a large ongoing imbalance between revenues and expenditures, which exist because the state has not come to terms with the large shortfalls that opened up when revenues plunged in 2001-02. Officials have not implemented ongoing actions on either the revenue or expenditure side of the budget, but instead have closed annual shortfalls with considerable borrowing and other one-time actions. |
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Colorado |
Colorado faces a structural gap between the permitted operating growth and the allowed revenue growth. The Colorado General Assembly is debating a ballot issue that would be submitted to the voters to deal with this structural gap. |
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Connecticut |
Connecticut's projected structural imbalance for FY 2006 is largely attributable to: 1) prior use of one-time revenues and tax changes together totaling $508.4 million; and 2) expenditure growth that is anticipated to exceed revenue growth. In order to obtain $237.7 million in federal funds over the 2005-2007 biennium, the governor has proposed implementing a 6% nursing home provider tax and increasing Medicaid rates and using the increased federal revenue from the provider tax to fund those rate increases at no net cost to the state. For FY 2006, the governor also recommends $414.2 million in tax increases primarily related to cigarettes, alcohol and corporation tax changes. The governor also claims that she has reduced spending by $563.7 million from her FY 2006 current services projections. The legislature is beginning to work on its own response to the governor's budget recommendations. |
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Delaware |
N/A |
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Florida |
N/A |
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Georgia |
A study committee will be formed to look at designating a 3% sales tax for education. Revenue structure changes have been discussed and are probably needed; however, no formal actions have been taken. |
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Hawaii |
N/A |
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Idaho |
Idaho has a structural imbalance because of a temporary sales tax set to expire in FY 2006. The state is able to cover that revenue loss with one-time surplus funds, and projects that the structural deficit may be eliminated in increments by FY 2008 if officials continue to set budgets at a rate of growth about 2 percentage points below the rate of ongoing revenue growth. |
|
Illinois |
The current administration often cites the structural imbalance as contributing to the state's financial ills. In the Budget Book, the administration states: "Despite its increasing strength and anticipated further growth, the state's revenue base remains insufficient to support the growth of the state's fixed costs, especially pensions, and still allow the state to fund its key priorities. To break the cycle of structural imbalance, the state must aggressively pursue meaningful reform of its core fixed costs--especially pensions and debt service--as well as its primary health care costs (Medicaid and group health insurance)." |
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Indiana |
Indiana is currently working on the FY 2005–FY 2007 budget and is attempting to address and close any budget gaps. |
|
Iowa |
Iowa faces a structural imbalance. The governor initiated a task force on local governance, consisting of the governor and 12 legislators, that met weekly between January and March. The group's mission was to craft legislation to enhance governmental services in Iowa by focusing on restructuring government, property taxes and school finance. The governance group completed its work, developing proposals to enhance how local governmental entities relate to each other when it submitted reports to the governor at the end of March. The governor also proposed his FY 2006 budget using a purchasing results process (where the "buyers" try to get the best value they can from the sellers or state agencies). The Legislature has shown some interest in the process, but has not yet utilized it completely in the subcommittee or decision-making process. |
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Kansas |
Kansas currently is facing increasing costs in the Medicaid program and is considering creating a Health Policy Authority to try and mitigate some increasing costs with purchasing efficiencies. |
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Kentucky |
N/A |
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Louisiana |
N/A |
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Maine |
Some of the proposals to address the current shortfall include: lengthening the repayment of the outstanding unfunded liability of the state employee and teacher retirement plan; further delays in conformity with federal tax law; other tax enforcement and enhancement initiatives; several fee increases; increases in fines and fine revenue; reductions to public higher education institutions; and several initiatives to reduce Medicaid and health insurance increases. The governor had proposed a plan to securitize lottery revenue, enhancing short-term revenue in return for giving up long-term revenue. That proposal was replaced by legislative action that proposed a $450+ million pension bonding package to prepay certain retirement liabilities to realize FY 2006 and FY 2007 savings and provide some reduction in the outstanding unfunded pension liability. |
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Maryland |
Maryland has had a structural deficit since FY 2002 due partly to general fund revenue decreases in FY 2002 and FY 2003 (reductions of 5% and 1%, respectively), coupled with expenditure growth for local education aid and Medicaid. Legislation enacted in 2002 provided for increased appropriations for local education aid (in excess of $1 billion in extra aid by FY 2008) without an ongoing revenue source to pay for it. Thus, local education aid has risen about 9% annually. Medicaid spending also has grown approximately 6% annually since 2002. State agency spending has remained virtually flat due to annual budget and position reductions. Ongoing general fund revenues have grown nearly 5% annually; however, this has not provided enough additional revenue to address the structural deficit that was created in 2002 and 2003 nor to offset the increases in Medicaid and local education aid. Measures to ensure balance on a cash basis have included $4.8 billion in one-time balance and fund transfers, $350 million in one-time federal aid, and over $400 million in short-term revenues. Note that the administration's annual proposals to enact video lottery terminals to address the structural deficit have not been enacted, nor has the administration supported other major revenue enhancement proposals. Stronger revenue growth and continued agency spending reductions have mitigated the magnitude of the current structural deficit (down from more than $1 billion for FY 2006 as estimated in May 2004 to just under $500 million in current estimates). |
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Massachusetts |
N/A |
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Michigan |
The governor's FY 2006 budget recommendation does include several proposals that would affect a structural budget deficit. These include $140 million of proposed tax and fee increases, reductions in the corrections budget that are based on modest sentencing reforms, adjustments to eligibility for Medicaid services for a relatively small number of recipients and expansion of the usage of Medicaid provider taxes to shift more of the overall Medicaid budget to the federal government. The outcome of these proposals in the Legislature is uncertain. |
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Minnesota |
Under current estimates, Minnesota faces deficits in FY 2006 and FY 2007, the biennium for which the 2005 session will budget. Current estimates for FY 2008 and FY 2009 show a structural balance in those years. |
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Mississippi |
The Legislature is working to balance recurring revenue with recurring expenditures. |
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Missouri |
The structural budget gap situation has been discussed during the past two years. The Senate passed a Medicaid reform bill to address this issue. The state is looking at changing the foundation aid formula for schools primarily because of equity funding issues, but changes will affect the budget. Given the governor's standing on no tax increases, a general "tightening of belts" by agencies also is expected as an approach to address the structural budget gap issue. |
|
Montana |
None expected. The Legislature is attempting to create a structural balance for the 2007 biennium. |
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Nebraska |
No structural imbalance is likely in the near term (the next two years). |
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Nevada |
The 2003 Legislature approved tax increases after completion of a study that was designed to review and make recommendations to address the structural imbalance in the state's revenue structure. Some time must elapse before it can be determined how well the revenue changes addressed the structural imbalance in Nevada's tax structure. |
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New Hampshire |
N/R |
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New Jersey |
New Jersey has faced for the last five years and continues to face a structural budget imbalance. Certain program cuts and tax increase proposals recommended for FY 2006 will, if enacted, mitigate but not eradicate future structural imbalances. Recommended formula aid freezes, spending deferrals, and the continuing use of one-time revenues will allow New Jersey to cope with the structural gap for another year, rather than resolving the fundamental structural imbalance. |
|
New Mexico |
New Mexico could face a structural deficit in FY 2007. This imbalance is largely due to a nearly flat revenue forecast compared with estimated baseline spending growth of nearly 4%. The primary reason for the flat revenue estimate is that personal income tax revenues are expected to be flat in the next few years as the state absorbs rate reductions. Also, oil and gas related revenues (severance taxes, rents and royalties) are expected to decline based on the assumptions that historically high prices for these commodities will decline. |
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New York |
N/R |
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North Carolina |
Like that of most states, the FY 2005 budget used a lot of one-time measures. In addition, the cost of Medicaid and employee health insurance grows at double-digit rates. The overall elasticity of North Carolina's tax system is sufficient due to reliance on the personal income tax, but dependence on manufacturing employment is hampering recovery in the withholding portion of the income tax. |
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North Dakota |
N/A |
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Ohio |
The potential FY 2006 gap was viewed as a structural imbalance. The imbalance is being addressed through tax reforms and spending constraints included in the proposed budget for the upcoming biennium. |
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Oklahoma |
Oklahoma does not have a structural imbalance at this time. |
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Oregon |
(N/R) |
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Pennsylvania |
The Medical Assistance (MA) program has a significant structural imbalance primarily due to the commonwealth's heavy reliance on intergovernmental transfers (IGTs)--both the amounts from annual transactions and the reserves accumulated from prior transactions--to pay for program growth in budgets since the late 1990s. Faced with the loss of funds due to the IGT phase-out (and the depletion of IGT reserves), the administration proposed assessments on nursing homes (in the FY 2004 budget) and managed care organizations (in the FY 2005 budget) to help pay for the MA program. Both assessments were approved by the federal Centers for Medicare and Medicaid Services (CMS) in January 2005; however, the resultant annual revenues are not sufficient to close the structural budget gap. Consequently, a key element in the upcoming budget is the administration's proposal to redesign the MA program, projected to generate state savings of $384 million in FY 2006. Specifically, the proposal would limit services for adult recipients (i.e., the number of prescriptions, provider visits, hospital admissions, etc.); increase existing co-payments and impose new co-payments for services; require high-income households to pay a monthly premium for MA coverage provided to "loophole" children (with disabilities); contain pharmaceutical costs by establishing a preferred drug list and reducing reimbursements to pharmacies for prescription drugs; cap hospital pass-through payments (disproportionate share, medical education, etc); and increase third party liability recoveries/cost avoidance. The proposal would not eliminate eligibility for anyone currently receiving benefits in FY 2006. However, the secretary of the Department of Public Welfare testified before the House appropriations committee that even with the proposed changes to Medical Assistance, the commonwealth will face a $500 million funding hole going into the FY 2007 budget and further changes (i.e., cuts) likely will be necessary. A structural imbalance also existed in programs supported with Temporary Assistance to Needy Families (TANF) funds. After several years of overspending (in excess of the annual block grant amount), TANF reserves were largely depleted and the commonwealth faces a TANF deficit going into FY 2006. In particular, county child welfare budgets, the cost of which is shared between the counties and the state, have relied heavily on TANF funds to pay for child welfare services. To bring TANF spending back in line with the annual block grant amount and to target TANF funds to core programs (such as cash grants, employment and training, and child care), the administration proposes to reduce TANF funding for county child welfare by $225 million (to $68 million in FY 2006) and thereby solve the TANF deficit. The proposed FY 2006 county child welfare budget replaces the $225 million of TANF funds largely with state funds plus an increase in the county funding share for services. |
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Rhode Island |
Rhode Island has a structural deficit that is balanced on a year-by-year basis. |
|
South Carolina |
South Carolina has a structural imbalance through the use of one-time nonrecurring revenues. The General Assembly is attempting to make a better effort in using estimated surpluses for one-time expenses; however, the use of year-end surpluses for recurring expenses in the following year will not be totally eliminated in FY 2006. |
|
South Dakota |
For FY 2005, South Dakota is estimated to have a structural budget gap of $24.8 million, and $20.8 million in FY 2006. No actions have been taken because the state general fund's reserves are 11% of FY 2006 appropriations. |
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Tennessee |
N/R |
|
Texas |
N/A |
|
Utah |
Utah had a small structural deficit for FY 2006, but new revenue estimates eliminated that. The 2005 Legislature put $125 million of ongoing money into one-time projects, which will help with any future structural deficits. |
|
Vermont |
Vermont faces a structural deficit in Medicaid. The state is addressing this issue since current projections indicate that the deficit worsens each year. Mental Health and corrections show similar long-term structural issues, but these are being managed for the present. |
|
Virginia |
The tax package from 2004 was considered a key step taken to address Virginia's structural gap. The intention was to develop sustainable revenue streams that could support budget obligations, rather than resorting to the "budget gimmicks" that all states use to tide them over during tough times. Virginia continued its efforts this year by using only general funds for capital projects (thereby reducing reliance on debt), eliminating a gimmick that required retailers to accelerate their July sales tax remittance into June, and by limiting spending for on-going items to make sure there were sufficient revenues next biennium to address growth in Medicaid, K-12, etc. |
|
Washington |
The faces a structural deficit. No formal actions have been taken by the Legislature to address the state's structural budget imbalance. |
|
West Virginia |
N/R |
|
Wisconsin |
The biennial general fund budget as recommended by the governor is in structural balance for the 2006–07 fiscal year by $1 million. The Legislative Fiscal Bureau also does an out-year structural balance exercise for the Legislature that projects current level expenditures (no program or caseload growth) compared with the continuation of existing revenue levels under current law (no revenue growth) in the following biennium. Based on the governor's budget, a structural imbalance of $555 million in 2007-08 and another $152 million in 2008-09 (for a total imbalance of $707 million) is indicated. The exercise notes that the needed amounts to correct the structural imbalance in 2007-09 could be met by increased revenues (growth or new taxes), appropriation reductions, or some combination of the two. |
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Wyoming |
N/A |
|
N/A = Not applicable.
N/R = No response.
Source: National Conference of State Legislatures survey of legislative fiscal offices, March 2005. |
