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State Fiscal Outlook for FY 2002: November Update

Posted 3 December 2001

State Fiscal Outlook for FY 2002: November Update
Recent Changes in State Fiscal Picture
FY 2002 Expenditure Update
Budget Cuts or Holdbacks to Balance FY 2002 Budgets
Use of Reserves to Balance FY 2002 Budgets
Other Measures to Balance FY 2002 Budgets
State Fiscal Outlook for FY 2002 by State as of Nov. 30, 2001

For more information: statebudget-info@ncsl.org

This report is also available in pdf.


State Fiscal Outlook for FY 2002: November Update

State fiscal conditions continue to deteriorate. An October survey conducted by the National Conference of State Legislatures (NCSL) revealed that almost all states were experiencing revenue shortfalls. One-third were seeing expenditures exceeding budgeted amounts. A November update to the original report shows that the number of states reporting budget gaps has grown.

This report is based on information collected from legislative fiscal directors in late November. It covers the revenue and expenditure situation through the early months of FY 2002 and state plans to address budget shortfalls. Forty-six states began their fiscal year on July 1. The four exceptions are New York (April 1), Texas (Sept. 1) and Alabama and Michigan (Oct. 1). Massachusetts was the last state to pass its FY 2002 budget, which was enacted Nov. 21.

These are the highlights from NCSL’s November survey update:

  • Revenues continue to be anemic, although three states reported improvement. Forty-three states and the District of Columbia now report that revenues were below forecasted levels in the opening months of FY 2002.
  • Twenty-one states and the District of Columbia report that spending is above budgeted levels. Medicaid continues to exceed budgeted levels, proving to be an ongoing problem.
  • At least 36 states have implemented or are considering budget cuts or holdbacks to address fiscal problems.
  • Twenty-four states may tap reserve funds to balance their FY 2002 budgets. Most states are eyeing their rainy day funds, although a handful may tap tobacco settlement money.
  • Twenty-two states have implemented belt-tightening measures that include hiring freezes, capital project cancellations and travel restrictions.
  • Six states have convened in special sessions to address budget problems, and one will begin a special session on Dec. 4. Several others are considering special sessions.


Table 1.
Recent Changes in the State Fiscal Picture
November Update

Key Fiscal Developments

October 2001

(Number of States)

November 2001

(Number of States)

Revenues below projections

44

44*

Expenditures over budget

17

22**

Budget cuts or holdbacks

28

36

Use of reserves

20

24

Other measures

14

22

* Three states left this category, but were replaced by two others and the District of Columbia

** Includes the District of Columbia

Source: National Conference of State Legislatures, Oct. 2001; Updated Nov. 2001

State fiscal conditions vary considerably in the current fiscal year. This means state actions to deal with problems also will vary. Generally, the states fall into four categories that illustrate the magnitude of their fiscal situations:

Spending overruns and lower than expected revenues (21 states)

Spending on target and lower than expected revenues (23 states)

Alaska
Arizona
Connecticut
District of Columbia Georgia
Hawaii
Idaho
Illinois
Kansas
Kentucky
Maryland

Massachusetts
Michigan
Mississippi
New Jersey
New Mexico
North Carolina
Oregon
Rhode Island
Virginia
Washington

Alabama
Alaska
Arkansas
California
Colorado
Delaware
Florida
Idaho
Illinois
Indiana
Iowa
Maine
Michigan
Minnesota
Missouri

Nebraska
Nevada
New York
North Dakota
Ohio
Oklahoma
Pennsylvania
South Carolina
South Dakota
Tennessee
Utah
Vermont
West Virginia
Wisconsin
Wyoming

Spending overruns and revenues on target
(one state)

Louisiana

Spending and revenues on target
(six states)

Alabama
Delaware
Montana
Nevada

New Hampshire
North Dakota
West Virginia
Texas

Note: States new to a category are in blue italics. Red struck-through states have left the category since the October survey.


Table 2.
FY 2002 Expenditure Update
November Update

State

On Target

Programs Over Budget

Yes

No

Alabama

--

 

 

Alaska

 

X

Medicaid and anti-terrorism highway security

Arizona

 

--

Medicaid

Arkansas

--

 

 

California

--

 

 

Colorado

--

 

Medicaid a concern

Connecticut

 

--

Health and human services, corrections, education, others

Delaware

--

 

 

District of Columbia

 

--

Education, Medicaid, public safety

Florida

--

 

 

Georgia

 

--

Medicaid

Hawaii

 

--

Security costs, dengue fever outbreak, child mental health

Idaho

 

X

Medicaid

Illinois

 

X

State group insurance, prescription assistance for the elderly, security

Indiana

--

 

 

Iowa

--

 

Medicaid supplemental likely

Kansas

 

--

Welfare, Medicaid, general and supplemental school aid

Kentucky

 

--

Medicaid

Louisiana

 

--

Various programs including security costs

Maine

--

 

The executive branch is trying to fill shortfalls within agency budgets

Maryland

 

--

Medicaid, mental health

Massachusetts

 

--

Medicaid, public safety and welfare

Michigan

 

X

Medicaid and welfare will require supplemental appropriations

Minnesota

--

 

 

Mississippi

 

--

Medicaid, corrections

Missouri

--

 

Medicaid a concern

Montana

--

 

 

Nebraska

--

 

 

Nevada

--

 

Medicaid and TANF are concerns

New Hampshire

--

 

 

New Jersey

 

--

Property tax rebate program, various others

New Mexico

 

--

Medicaid

New York

--

 

 

North Carolina

 

--

Medicaid

North Dakota

--

 

Medicaid a concern

Ohio

--

 

Expenditures below estimate

Oklahoma

--

 

Medicaid is facing a shortfall, but the agency is trying to resolve it internally

Oregon

 

--

Medicaid, other health programs

Pennsylvania

--

 

 

Rhode Island

 

--

Medicaid, other health and human service programs, public safety, others

South Carolina

--

 

 

South Dakota

--

 

 

Tennessee

--

 

 

Texas

--

 

 

Utah

--

 

 

Vermont

--

 

 

Virginia

 

--

Medicaid, other human resource programs

Washington

 

--

Medicaid, corrections, firefighting, education, etc.

West Virginia

--

 

 

Wisconsin

--

 

 

Wyoming

--

 

 

Total

29

22

 

Source: National Conference of State Legislatures, Oct. 2001; October categories are marked thus: --; November updates are shown by "X" and notes are in blue italics


Table 3. Budget Cuts or Holdbacks to Balance FY 2002 Budgets
November Update

State

No

Yes

Possible

Notes

Alabama

 

 

X

Because the education trust fund is facing a shortfall of about $150 million, pro-rations might occur.

Alaska

--

 

 

Supplemental appropriations will be drawn from reserves.

Arizona

 

 

--

A special session on budget issues began on Nov. 13. It is unknown if any programs will remain exempt from potential budget reductions.

Arkansas

 

X

 

Across-the-board cuts were triggered with K-12 education, human services and corrections being the hardest hit.

California

 

 

X

The governor has proposed $2.2 billion in FY 2002 reductions, with the largest share (about $843 million) coming from K-12 education

Colorado

 

--

 

The governor has asked state agencies to cut 1 percent from their budgets. Exempt agencies include K-12 education and Medicaid.

Connecticut

 

--

 

The governor reduced budget allotments by $20 million early in the year.

Delaware

 

 

--

The governor instructed department heads to set aside 2 percent of their budgets in anticipation of cutbacks later in the year.

District of Columbia

--

 

 

 

Florida

 

 

X

Legislators are meeting in their second special session to debate cuts in the current budget that could result in reductions of 5 percent. No budget areas are being protected from potential spending cuts, although some programs (e.g., health and human services) may receive lesser proportional cuts than other areas.

Georgia

 

X

 

The governor called for reductions of $740 million in the current budget. Education and TANF are protected.

Hawaii

 

X

 

Budget cuts implemented

Idaho

 

--

 

Spending holdbacks--2 percent for state agencies and 1.5 percent for public schools--are in place. The governor implemented another 1 percent holdback for all agencies, including K-12 education. Law enforcement and other security-related agencies may escape some portion of the cuts.

Illinois

 

 

X

The legislature is in session to debate about $500 million in cuts. Education and security will be protected as much as possible.

Indiana

 

 

--

The governor proposed a plan Nov. 15 that includes one-time and permanent base spending cuts; the plan protects education spending/

Iowa

 

X

 

The governor implemented a 4.3 percent across-the board cut (about $203 million) and called the legislature into special session to restore funding for K-12 education, community colleges, public safety and some other programs.

Kansas

 

 

--

There is some expectation K-12 education and welfare would be exempt from cuts.

Kentucky

 

--

 

Budget cuts totaling $530 million have been approved.

Louisiana

--

 

 

 

Maine

 

--

 

The governor issued an executive order to constrain spending. School subsidies, retirement funding and debt service are exempt.

Maryland

 

--

 

The governor has reduced some operating expenses. About half of state programs are exempt, including public safety and direct care. So far, K-12 education has been preserved.

Massachusetts

 

 

--

Proposals to address the projected $1.3 billion budget gap include $650 million in reductions.

Michigan

 

--

 

K-12 education and state police have been protected from cuts.

Minnesota

 

 

X

The finance department has asked all agencies (including the university system) to examine their budgets with an eye to applying 5 percent cuts.

Mississippi

 

X

 

The governor has imposed general funds cuts of $55.1 million. Education, Medicaid, debt service and the homestead exemption were exempt.

Missouri

 

--

 

The governor’s office has ordered $150 million in holdbacks. Education is protected. The governor has asked agencies to develop 10 percent to 15 percent budget reduction scenarios.

Montana

--

 

 

 

Nebraska

 

X

 

In special session, the Legislature cut spending by $53.7 million over the biennium. Several programs were exempt from the cuts, including public safety, K-12 and higher education, Medicaid, and others.

Nevada

 

 

--

Some agencies are freezing one-time expenditures.

New Hampshire

--

 

 

 

New Jersey

 

 

--

The outgoing administration has identified up to $500 million in appropriated funds to be placed into budget reserves.

New Mexico

--

 

 

 

New York

 

 

X

The governor has discussed various proposals, but any cuts require the Legislature’s approval.

North Carolina

 

X

 

The governor cut various agencies by as much as 4 percent--K-12 and higher education have not been cut as much as other programs.

North Dakota

--

 

 

 

Ohio

 

--

 

Recent actions include a $224 million budget reduction. K-12 education, school construction and debt service are among the exemptions.

Oklahoma

--

 

 

 

Oregon

 

 

--

The governor has called for a 2 percent reduction in spending by agencies.

Pennsylvania

 

 

--

The governor has called for $200 million in spending cuts. The Community and Economic Development Agency was singled out for significant cuts.

Rhode Island

--

 

 

 

South Carolina

 

X

 

All state agencies received a 4 percent budget reduction

South Dakota

--

 

 

 

Tennessee

--

 

 

Agencies are trying to reduce expenditures to deal with expected declines in revenues.

Texas

--

 

 

 

Utah

 

--

 

The governor has reduced budgets by $73 million and is looking for additional cuts

Vermont

 

--

 

The governor rescinded an additional $8.5 million in November bringing the total to $17 million--corrections and Medicaid were the hardest hit. Direct support for K-12 education was not reduced, although the education department was cut.

Virginia

 

X

 

A 2 percent across-the-board reduction implemented

Washington

 

 

--

The governor is expected to propose budget cuts to help close a $1.2 billion budget hole.

West Virginia

--

 

 

 

Wisconsin

--

 

 

 

Wyoming

--

 

 

 

Total

15

20

16

 

Source: National Conference of State Legislatures, Oct. 2001; October categories are marked thus: --; November updates are shown by "X" and notes are in blue italics


Table 4. Use of Reserves to Balance FY 2002 Budgets

November Update

 

State

No

Yes

Possible

Notes

Alabama

--

 

 

 

Alaska

 

X

 

Typically, $500 million is drawn from the constitutional budget reserve every year to cover insufficiencies in general funds. This year will be no different. Supplemental appropriations will be drawn from reserves

Arizona

 

 

--

A special session on budget issues convened in November. Policymakers are expected to tap into the state’s $300 million rainy day fund.

Arkansas (N/R)

 

 

 

 

California

--

 

 

 

Colorado

--

 

 

 

Connecticut

 

 

--

 

Delaware

--

 

 

 

D.C.

--

 

 

 

Florida

--

 

 

 

Georgia

--

 

 

 

Hawaii

 

 

--

There is some consideration of tapping the rainy day and tobacco settlement funds.

Idaho

 

 

--

Tapping the rainy day fund would be done carefully and only for one-time expenditures, not to prop up the overall budget.

Illinois

--

 

 

 

Indiana

 

 

--

The governor proposed a plan Nov. 15 that includes transfers from reserve accounts and re-allocation of tobacco settlement and gaming funds

Iowa

--

 

 

 

Kansas

--

 

 

 

Kentucky

 

--

 

Substantial withdrawals from the rainy day fund (about half the $240 million available) will be necessary to balance the budget.

Louisiana

--

 

 

 

Maine

 

 

--

 

Maryland

 

 

X

 

Massachusetts

 

 

--

There is some consideration of using the tobacco settlement fund. Proposals to close the budget gap include tapping reserves for about $700 million

Michigan

 

 

--

 

Minnesota

--

 

 

 

Mississippi

 

 

--

While there has been no discussion to tap the rainy day fund, state law allows the governor to use up to $50 million without legislative approval.

Missouri

--

 

 

 

Montana

--

 

 

 

Nebraska

--

 

 

 

Nevada

--

 

 

 

New Hampshire

--

 

 

 

New Jersey

 

--

 

The budgeted surplus includes both a rainy day fund and undesignated fund balances. Both will be drawn down.

New Mexico

--

 

 

 

New York

 

 

X

The budget surplus might be tapped for $1.5 billion in FY 2002

North Carolina

 

X

 

The governor has tapped some reserve funds for bioterrorism prevention activities

North Dakota

--

 

 

 

Ohio

 

X

 

The state may tap the rainy day fund and temporarily reallocate a portion of tobacco settlement revenues

Oklahoma

--

 

 

 

Oregon

 

 

--

May tap tobacco settlement funds.

Pennsylvania

 

 

--

There is a strong possibility that the state will tap its rainy day fund.

Rhode Island

--

 

 

 

South Carolina

 

--

 

The budget control board tapped $100 million from the rainy day fund.

South Dakota

 

 

--

 

Tennessee

 

 

--

 

Texas

--

 

 

 

Utah

 

 

--

 

Vermont

--

 

 

 

Virginia

 

 

X

The governor has proposed tapping the rainy day fund

Washington

 

--

 

 

West Virginia

--

 

 

 

Wisconsin

--

 

 

 

Wyoming

--

 

 

 

Total

26

7

17

 

N/R: No response

Source: National Conference of State Legislatures, Oct. 2001; October categories are marked thus: --; November updates are shown by "X" and notes are in blue italics


Table 5. Other Measures to Balance FY 2002 Budgets

November Update

 

State

Measures

Alabama

A special session to address the education trust fund shortfall begins on Dec. 4.

Alaska

N/A

Arizona

A special session to address the budget gap began Nov. 13.

Arkansas

N/A

California

The governor has ordered a current year hiring and contract freeze that exempts only public safety and K-12 education. The governor is considering a special session to run concurrently with the regular session to focus on the budget situation.

Colorado

The state has cut $173 million in general fund transfers to highway projects and an additional $219 million from other capital projects.

Connecticut

A special session to address the budget gap ran Nov. 13-16.

Delaware

N/A

D.C.

N/A

Florida

Legislators are meeting in their second special session to address the budget gap

Georgia

The governor cut $365 million from previously approved capital outlay projects that will be paid for with bonds rather than cash

Hawaii

Lawmakers transferred excesses from non-general fund resources to the general fund.

Idaho

N/A

Illinois

The governor has called on agencies to build up reserves from within their FY 2002 budgets. A hiring freeze, restrictions on travel and cuts in equipment purchase are currently in place. Consideration in being given to delaying the opening of some new prisons. The legislature is in session to address the budget gap.

Indiana

The current budget already anticipates using gaming revenue, which is not generally used by the general funds. It also includes payment delays for K-12 tuition support and higher education funding. The governor proposed a plan Nov. 15 that includes various revenue enhancement measures.

Iowa

N/A

Kansas

The state finance council has issued a $150 million certificate of indebtedness, a cash-flow instrument or internal borrowing tool to keep the general fund in the black. It transfers money from other funds, but these must be repaid by the end of the fiscal year.

Kentucky

N/A

Louisiana

N/A

Maine

N/A

Maryland

The governor has directed agencies to freeze hiring. He also has canceled $65 million in pay-go capital projects.

Massachusetts

N/A

Michigan

The state cancelled $29 million in work projects, mostly multiyear capitol projects. Previously approved tax cuts scheduled to take effect were left in tact.

Minnesota

N/A

Mississippi

N/A

Missouri

N/A

Montana

N/A

Nebraska

Actions include redirecting existing revenues, funding shifts and funding lapses.

Nevada

The governor has instituted a hiring freeze until November.

New Hampshire

N/A

New Jersey

Some capital expenditures already have been postponed; certain departmental purchases have been frozen.

New Mexico

N/A

New York

N/A

North Carolina

The governor has imposed spending restrictions on travel, purchasing and hiring.

North Dakota

N/A

Ohio

The governor has proposed closing a variety of tax "loopholes" on businesses.

Oklahoma

N/A

Oregon

A special session is likely in late January or early February to consider proposed budget reductions.

Pennsylvania

N/A

Rhode Island

The governor issued a hiring, spending and travel freeze in late October.

South Carolina

N/A

South Dakota

N/A

Tennessee

N/A

Texas

N/A

Utah

N/A

Vermont

The governor delayed funding disbursement for a number of one-time measures.

Virginia

The governor froze capital outlay and left agency positions unfilled.

Washington

N/A

West Virginia

N/A

Wisconsin

N/A

Wyoming

N/A

N/A - Not applicable at this time

Source: National Conference of State Legislatures, Oct. 2001; November updates are in blue italics


State Fiscal Outlook for FY 2002 by State as of Nov. 30, 2001

 

 

 

What’s the revenue situation through the end of October?

Are any areas of general fund spending over budget? If yes, what are they?

Have any new measures been implemented or announced to balance the current budget?

What areas, if any, have been or might be spared from cuts?

Alabama

The general fund is on target. It will be reviewed again in December. Focus is on the Education Trust Fund, which is facing a $150 million to $160 million shortfall. A special session to address this begins Dec. 4.

General fund expenditures are still on target.

No budget balancing measures have been announced or implemented to date.

The Education Trust Fund was cut across-the- board this year, but several areas, such as salaries, were exempt. The same exemptions would apply if a pro-ration was made again by the governor.

Alaska

The average price of crude oil has continued to run below the budgeted estimate set in April and revised in July. Oil related tax collections account for 75 percent of state revenues. A revised estimate to the forecast will be available Dec. 15, and the revenue shortfall could be close to $1 billion.

A supplemental appropriation of at least $20 million will be needed for Medicaid. Other supplemental appropriations, such as anti-terrorism highway security, could reach a total of $40 million.

Supplemental appropriations will be drawn from reserves.

There currently are no discussions of budget cuts. Indeed, the governor wants more funding for education and anti-terrorism efforts. This additional funding could bring the total supplemental appropriations needed up to $100 million.

Arizona

The general fund revenue estimate remains unchanged following October collections. Total collections are still projected to end $675 million or 10.3 percent below the budgeted estimate.

A projected shortfall for Medicaid of $40 million in FY 2002 remains unchanged.

The Legislature is in special session and attempting to find solutions to the projected budget gap.

It is unknown if any programs will remain exempt from potential budget reductions.

Arkansas

FY 2002 revenue projections were lowered by $142 million (4.2 percent). Collections through the end of October were $42 million below forecast-a decline of 1.8 percent from FY 2001. The revised revenue estimate for FY 2002 is now calling for a decrease of 0.3 percent or $9.3 million from FY 2001 collections.

No areas are over budget relative to original appropriations, but with reduced revenues cuts are necessary.

With the downward forecast revision, across-the- board cuts were triggered with K-12 education, human services and corrections the hardest hit.

All programs are affected.

California

Preliminary general fund tax collections for October were $220 million or 13 percent below estimate. General fund tax collections through October were $827 million or 4 percent below the budgeted estimate. Combined with lower than anticipated revenues from the last quarter of FY 2001, the total year-to-date and prior-year revenue shortfall is 3.6 percent below estimate. Personal income tax collections through October were down $698 million or 6.4 percent.

General fund expenditures appear to be on target, but the projected deficit of $4.5 billion or 5.7 percent could require substantial adjustments to FY 2002 spending.

The governor has issued a call for action to address the projected budget gap. The proposed measures will be taken up in a special session and include $2.2 billion in FY 2002 reductions. An additional $900 million in FY 2003 budget cuts are likely to be considered. The largest reductions would be in K-12 education with an estimated $843 million in proposed cuts. Most other state agencies face proposed cuts.

No reductions have been proposed for programs that provide immediate stimulus to the state’s economy.

Colorado

General fund tax collections continued to decline through October and are now $90 million or 1.5 percent below their budgeted level. During October, the primary area of weakness was in personal income tax collections with underperformance from the sales tax also reported.

General fund expenditures are on target but concern exists over potential Medicaid cost overruns.

To date, $442 million has been cut from the FY 2002 budget, including $50.6 million in a targeted 1 percent budget cut and $392 million in suspended capital projects. Legislative review of the governor’s proposed budget cuts is considered likely since none of the reductions are yet considered done deals.

Agencies exempt from budget cuts remain K-12 education and Medicaid. The upcoming December revenue revision will provide information that could determine additional budget adjustments.

Connecticut

The revenue forecast remains unchanged following an October revision that reduced projected FY 2002 revenues by $301 million or 2.5 percent.

General fund expenditures were running $60 million over budget through October. The largest deficit is in the Department of Social Services and TANF accounts. The state administered general assistance programs had higher-than-budgeted medical costs. The state employee medical account is over budget because of later-than-anticipated recovery from federal funds. Corrections is over by $3.5 million, education by about $6 million and workers’ compensation by $5 million (because of a delay in transfer to private insurance).

Connecticut finished a Nov. 16 special session that addressed $200 million of the projected $300 million budget gap in FY 2002. Budget balancing measures included spending reductions and re-appropriations of FY 2001 money. The measures will affect spending in the second half of the current biennium.

The legislature negotiated budget balancing measures by considering all programs expenditures but avoided cutting educational and other grants to towns.

District of Columbia

Revenue is down by at least $100 million.

Education, Medicaid and public safety (police and fire) are all over budget.

A request has been submitted to the federal government for $250 million in emergency expenses related to Sept. 11.

No decisions have been made yet on protecting any programs from budget reductions.

Delaware

General fund revenue collections were up 12.1 percent from FY 2001 through the end of October. While some of the strength derives from unexpected business tax payments, growth in franchise and bank tax collections also has been robust. The double-digit growth is not expected to persist through the end of the fiscal year. Many corporate and personal income tax payments that are dependent on the strength of the underlying economy and stock markets are made in the spring. These payments are expected to reduce revenue growth closer to the projected 0.9 percent.

General fund expenditures remain on target.

The governor instructed department heads to set aside 2 percent of their budgets in anticipation of cutbacks later in the year.

Children and youth programs are exempt from potential budget cuts.

Florida

Following October collections, the revised revenue estimate remains unchanged. The estimate projects a general fund revenue decline of $1.3 billion or a 2.6 percent from FY 2001.

General fund spending remains on target with budgeted estimates.

Legislators are meeting in their second special session to debate cuts in the current budget. This could result in budget reductions of 5 percent or between $800 million and $1.3 billion.

No areas of the budget are being protected from spending cuts, although some programs like health and human services may receive lower proportional cuts than other areas.

Georgia

Revenues in October dropped another tenth of a percent. Revenues are down 6.4 percent from the same four-month period last year.

Medicaid remains over budget and is expected to require supplemental appropriations before the end of the fiscal year.

The state still has a surplus, but the governor is talking about revising the forecast downward and has called for reductions of $740 million in the FY 2002 budget. The plan calls for $215 million to be cut from state agency budgets, $160 million will come out of state health care programs and $365 million will come from previously approved capital outlay projects that will be paid for with bonds rather than cash.

Education and TANF are protected from the cuts.

Hawaii

General fund tax collections for the first four months of October were up 3.1 percent. The November revision to the FY 2002 general fund revenue forecast reduced the projected growth from 4.1 percent to -0.7 percent or a loss of $151.8 million in revenue.

Due to a federal consent decree, expenditures for child mental health programs are running over budget.

Budget cuts and transfers of excess from non-general fund resources have been implemented as budget balancing measures. Other plans continue to be developed.

To date, all program areas are being reviewed for potential budget reductions.

Idaho

October revenue collections were close to revised (lowered) projections, indicating that sales tax collections were holding steady.

A supplemental appropriation for Medicaid will be needed (spending has increased 15 percent each year for a decade). Enhanced security measures in and around the Capitol building will have a price tag, as well.

The governor announced an expanded budget holdback of an additional 1 percent for all agencies, including K-12. The current year spending reduction is now 3 percent for all entities except K-12, which is now 2.5 percent.

Law enforcement and other security-related agencies may escape a portion of the cuts, but a tough FY 2003 is expected at about 95 percent of current spending levels.

Illinois

Revenues were still below forecast through the end of October. First quarter revenues were down $474 million. Through the first four months, revenues were $262 million below the same period last year.

State group insurance and prescription drug assistance for the elderly are still running over budget. The governor has also supplemented security spending by $17 million.

The legislature is in session right now to decide what to do. The goal is to cut $500 million out of the current budget.

Education will be protected as much as possible and so will security.

Indiana

General fund revenue collections were $209 million or 6.8 percent below the April forecast through the end of October. A November revision reduced expected revenues for FY 2002 by $540 million or 5.7 percent and for FY 2003 by $737.4 million or 7.4 percent.

General fund expenditures remain on target.

The governor proposed a plan in November that would address the projected shortfall in revenues in FY 2002. The includes one-time and permanent spending cuts, transfers from reserve accounts, reallocation of tobacco settlement and gaming funds, and various revenue enhancements, including a cigarette tax increase.

The governor’s plan would protect K-12 education from budget reductions.

Iowa

In the adopted FY 2002 budget, revenues were projected to grow at 3.8 percent. The revenue estimating conference revised its FY 2002 estimate to 1.9 percent growth (the conference will meet again Dec. 7). Through the end of October, revenue collections were $215 million below the original estimate and $120 million below the revised estimate.

Expenditures are on target for the original estimate. Medicaid spending is projected to exceed its estimate by $25 million.

The governor proposed a $203.1 million spending reduction in FY 2002. The proposal called for a 4.3 percent across-the-board spending cut. The Legislature in a special session restored a total of $19.9 million to various programs, but also applied the 4.3 percent cut to legislative and judicial administrative programs.

The Legislature restored spending for K-12 education, public safety, public defense, community colleges and prisons.

Kansas

Receipts are $29.7 million or 2.2 percent below estimates through October. The FY 2002 revenue estimate was decreased by $113 million or 2.5 percent.

 

Welfare and Medicaid caseloads are over budget. Some general and supplemental school aid is over budget, as well.

No budget balancing measures have been enacted to date.

There have been no announced cuts, and none called for by the governor.

Kentucky

General fund revenues were up 1.4 percent over FY 2001 through the end of October. Collections are on target with the revised projection of 0.9 percent growth for FY 2002. The revised projection is $475 million (6.6 percent) less than the estimate included in the adopted budget.

Medicaid overruns are projected to reach $160 million for FY 2002.

Budget cuts totaling $530 million already have been approved ($35 million of that total is still to be assigned.) The consensus forecast group will meet in December and is expected to reduce projections further. The governor is expected to include more cuts when he presents the FY 2003 budget in January.

K-12 and higher education appropriations will be spared from cuts. Medicaid escaped the first round, but will absorb cutbacks in the next round.

Louisiana

General fund revenues are still ahead of forecast, but are starting to slow down.

Supplemental budget requests are expected in several areas, but mostly will deal with security issues.

No budget balancing measures have been enacted to date.

Not applicable.

Maine

A slight improvement in collections was reported for October (probably more of a timing issue), but they are still under budget by $23.4 million or 3.5 percent

The executive branch is trying to fund shortfalls within agency budgets.

The executive branch is waiting for new revenue estimates before announcing any budget balancing measures.

Not applicable.

Maryland

Year-to-date revenues are below current year projections by about 3 percent and are $66 million below collections for the same period last year. Major taxes, especially the corporate income tax, continue to perform below expectations.

Medicaid continues to show the biggest overrun, now projected at $173 million. Mental health programs also are over budget.

No additional actions have been taken since mid- October. The governor may consider additional measures after the December revenue estimate.

About half of the state programs remain exempt from potential budget reductions, including K-12 education funding.

Massachusetts

A new revenue estimate projects a $1 billion or approximate 4 percent shortfall. October tax collections were $60 million below estimate.

Medicaid, public safety and welfare expenditures are an estimated $350 million over budget.

Plans to address the projected $1.3 billion budget gap in FY 2002 include $650 million in budget reductions and tapping budget reserves for $700 million.

Programs likely to remain off limits to budget reductions include larger portions of K-12 education, Medicaid, debt service and pension contributions.

Michigan

In mid-October, revenue projections for the general fund budget were lowered by $462 million and by $256 million for the school fund budget. Year-to-date revenues are 2.5 percent lower than actual figures from last year. Revenues from personal income tax withholding took a particularly bad hit in October. The FY 2002 revenue estimate is about $1 billion lower than last year’s projected actual. A new forecast will be made in mid-January.

Medicaid and welfare spending continue to be over budget. So far, the amounts are modest.

The budget has been balanced through a combination of actions, including $314 million in general fund reductions, $78 million in transfers from restricted funds to the general fund (especially local revenue sharing funds), $120 million in transfers from transportation and tobacco settlement funds to the general fund, and $29 million in cancelled work projects (mostly multiyear capital projects). The Legislature’s budget was cut by 5 percent. The rainy day fund already had been tapped for $155 million and was not tapped again as part of the new budget balancing package. The current balance is about $500 million. Previously approved tax cuts scheduled to take effect were left intact.

School aid and the state police have been protected from budget cuts.

Minnesota

Revenues through the first four months of FY 2002 were running $152.4 million less than forecast, with weakness in both income and sales taxes. Motor vehicle fees were higher than expected due to robust auto sales. FY 2001 unspent appropriations provide a reserve balance that is "not insignificant."

Medicaid spending is expected to be up, although no formal information has been issued. K-12 costs tied to an increase in pupils also are higher than anticipated.

The finance department has asked that all agencies and the university system examine their budgets with an eye to applying 5 percent cuts.

No areas are exempt from examination at this time.

Mississippi

Revenues through the end of October are down $71.8 million or 5.8 percent.

Medicaid and corrections are over budget.

The governor has imposed general fund cuts of $55.1 million.

Education, Medicaid, debt service and the homestead exemption are all exempt from cuts.

Missouri

General fund tax collections were reported below estimate in October and are expected to remain below estimate for the remainder of FY 2002. There has been no official revision to the budgeted revenue estimate.

General fund expenditures remain on target, but concern exists over the Medicaid budget.

The governor’s budget office has requested impact statements from agencies that incorporate 10 percent to 15 percent budget reduction scenarios.

K-12 education funding remains protected from potential budget reductions.

Montana

General fund tax collections remain on target with budgeted estimates.

There will be a supplemental appropriation of $8 million to $9 million to cover fire costs, which is not unusual.

There are no significant budget problems.

Not applicable.

Nebraska

General fund tax collections through October were $33.9 million or 4.34 percent under the budgeted estimate. The revised estimate projects revenues to fall short by $220 million or 3 percent to 4 percent for the biennium.

General fund expenditures remain on target.

A special session of the Legislature was held Oct. 25 through Nov. 8, 2001. Across-the-board cuts totaled $53.7 million over the two years of the biennium. In general, the percentage was the same as the governor’s recommendation, 4percent in FY ‘01-02 and an additional 1percent (total of 5 percent) in FY ‘02-‘03. Other actions include specific cuts, redirecting existing revenues, funding shifts and fund lapses.

Exempt programs include public safety (military and state patrol), state operated institutions (corrections, regional centers, veteran’s homes, youth centers), K-12 school aid, higher education student aid FY ‘01-02 only, formula-based community college aid, Medicaid, public assistance, homestead exemption reimbursement, vocational rehabilitation aid and operations, and community-based aid programs (developmental disability, behavioral health and aging).

Nevada

Sales tax collections through September were down 8.5 percent and gaming tax collections 10.8 percent below projections. Another month should show whether revenues will bounce back.

TANF and Medicaid caseloads appear to be growing, but reserved funds are sufficient to cover increased costs at this time.

The governor has instituted a hiring freeze, and some agencies are freezing one-time expenditures.

If cuts were to become necessary, K-12 education would be protected since it has a basic support guarantee.

New Hampshire

All major taxes remain on target with the revenue plan adopted in June.

General fund expenditures remain on target.

The governor has requested agencies to plan for a 1 percent across-the-board cut, but none have been implemented.

No programs are protected from potential budget reductions.

New Jersey

October general fund revenue collections were down 4.3 percent compared to a year ago. General fund tax collections were running below their budgeted levels through the first four months of FY 2002. Personal income tax collections were down 4.3 percent for the period and below the budgeted level of 6.6 percent growth. Sales tax receipts were down 0.4 percent year-to-date and off from the budgeted growth of 6.2 percent.

The major budget overrun to date has been from the state’s property tax rebate program. The outgoing administration identified about $500 million in potential supplemental needs for FY 2002, ranging from subsidized health insurance to school aid for urban districts to drug assistance for the elderly.

The outgoing administration has identified up to $500 million in FY 2002 appropriated funds that are to be placed into budget reserves, plus freezes on certain departmental purchases.

Programs that remain off limits to budget cuts include municipal and formula school aid, and entitlements.

New Mexico

The October estimate revision identified lower revenues due to economic conditions and low energy prices. A new estimate will be issued the first week in December.

There are significant overruns in Medicaid expenditures.

No budget balancing action is planned at this time.

Not applicable.

New York

The governor’s current revenue estimate for FY 2002 projects a potential gap of between $1 billion and $3 billion. September and October revenue collection numbers are unreliable given the payment extension that was provided to any taxpayer affected by the terrorist attacks. Tourism-related revenues are down significantly, including hotel taxes.

Following the passage of the state’s "bare bones budget," there has been no evidence of over budgeting in any program areas.

The governor has talked about budget balancing measures including a hiring freeze, early retirement and adjusting aid to localities, but any measures require the Legislature’s approval. There is generally more concern for the FY 2003 budget gap than the FY 2002 shortfall. An available $2.5 billion budget surplus could be tapped for $1.5 billion in FY 2002, but the governor is projecting a gap in FY 2003 of between $3 billion and $6 billion.

No announcements have been made on any programs that could be exempt from budget cuts in FY 2002.

North Carolina

Revenue collections continue to come in below projections even though the state raised some taxes. Personal income tax withholding had been stable, but is now being adversely affected by the growing number of layoffs. Sales taxes are down, and the corporate income tax is way down, even before the effects of Sept. 11 are considered.

Medicaid is a significant problem, despite an increase of almost $500 million. If current trends hold, Medicaid could be over budget by $80 million to $100 million.

The governor cut various agencies by as much as 4 percent. He tapped some reserve funds for bioterrorism prevention activities (the funds were spread across agencies such as public health and law enforcement). Any withdrawals from the rainy day fund require General Assembly approval.

Education (K-12, community colleges and higher education) has not been cut as much as other programs.

North Dakota

Revenue collections were on track through the end of October. Total receipts were $800,000 above the revenue estimate. Estimates will be reviewed in January.

Medicaid spending has the greatest potential for overruns.

Not applicable.

Not applicable.

Ohio

General fund revenue collections in October were $17.9 million or 1.3 percent below the budgeted estimate. General fund tax receipts were $207.5 million or 4.2 percent below estimate through October. A revised revenue estimate from October calls for a $709 million decline in general fund revenues in FY 2002 and an additional $763 million in FY 2003, the second half of the biennium.

General fund expenditures were $264.3 million or 3.2 percent below the estimate through October.

No new measures have been called for by the governor aside from the earlier executive order that imposed a 6 percent across-the-board cut or $224 million reduction. Certain institutional agencies, such as the mental health agency, are scheduled for cuts ranging from 1.5 percent to 3 percent. In addition to the spending reductions, the governor has proposed certain revenue enhancements: participation in a multistate lottery game, tapping the rainy day fund and a temporary reallocation of a portion of the tobacco settlement revenues.

K-12 education remains protected from budget cuts, along with school construction, the veterans’ homes and debt service.

Oklahoma

Revenues were 96.6 percent of estimated collections through October. The state appropriates at 95 percent of estimated revenues, so a shortfall has not developed.

Expenditures are still on target.

No measures are being discussed for this year. The health authority, which handles Medicaid, is facing a shortfall of about $15 million, not including prescription drug costs. The agency is trying to address this budget shortfall internally.

If budget cuts were needed, the usual areas would be spared: common education, higher education, Medicaid and transportation, for example.

Oregon

General fund tax collections in October showed a slightly positive increase. A November revenue revision increased the projected shortfall for the biennium from a projected gap of $212 million or 1.9 percent to $720 million or 6.2 percent of the budgeted estimate.

Unexpected caseload increases have pushed Medicaid and other related health expenditures over budget.

State agencies have been requested to provide potential administrative and program savings of 10 percent, in 2 percent increments. If fully implemented, these would total $1.2 billion. This would be likely to cover any anticipated budget gap for the biennium, but some dispute has developed over the governor’s budget cutting authority.

All program areas are currently on the table. A special session is likely in late January or early February to consider the proposed budget reductions.

Pennsylvania

General fund revenue collections were $32 million below estimate in October and down a total of $166 million through the first four months of FY 2002. Further deterioration is expected.

General fund expenditures remain on target.

Aside from previously announced holdbacks totaling $200 million there have been no other budget balancing actions.

No program areas have been identified as being off limits to potential budget reductions or holdbacks.

Rhode Island

General fund tax collections grew 0.4 percent through October compared to a budgeted estimate of 1.2 percent. A revised estimate for FY 2002 projects a 1 percent or $26 million drop in revenues for FY 2002 compared to FY 2001.

The general fund is $33.4 million over budget, including human services, general government, and public safety.

There are new budget balancing measures since the governor’s executive order in October imposed a hiring, spending and travel freeze.

All programs remain on the table for potential budget reductions.

South Carolina

General fund revenue collections are still projected to grow by 1percent compared to a budgeted estimate of 6.5 percent.

Following a 4 percent reduction in FY 2002 spending by the budgeting control board, general fund expenditures are on target.

In addition to the 4 percent budget reduction from all state agencies, the budget control board tapped $100 million from the rainy day fund.

State law requires across-the-board budget cuts.

South Dakota

General fund revenues were $4 million lower than estimate through October. The shortfall could reach $11-12 million for the whole year.

Expenditures are still on target.

There are no discussions yet, but the budget reserve funds may be used.

It is too early to say what areas would be spared from budget cuts.

Tennessee

General fund tax collections have not improved. The revenue shortfall stood at $149 million through October.

General fund overexpenditures will not be known until the governor presents the new budget.

No budget balancing measures have been announced, but the rainy day fund may be tapped.

It is uncertain if any programs will remain exempt from budget reductions.

Texas

General fund tax collections remained on target through the end of October.

General fund expenditures remain on target.

The budget remains on target, and no problems are anticipated.

Not applicable.

Utah

A downward revenue trend continues with collections 3 percent below budget estimates made in spring 2001. Because of economic uncertainty and continued layoffs, both personal and corporate taxes are down; sales taxes also are showing some problems.

FY 2002 expenditures are on target, but budget cuts are anticipated to meet revised revenue conditions.

The governor has reduced budgets by $73 million and will be looking for additional cuts.

K-12 education has so far been spared from budget reductions.

Vermont

The FY 2002 general fund revenue forecast was revised down $26 million or 3 percent.

No significant spending overruns have emerged.

An additional $8.5 million was rescinded in November. Total rescissions are $17 million for the year. Corrections and Medicaid were hit hardest by the cutbacks.

The second round of cuts hit most programs. Direct state support for K-12 education (disbursements to local school districts) was not cut, although funding for the education department was reduced.

Virginia

The revised estimate now projects that general fund tax collections will be below estimate by $892 million or 7.5 percent. The original revenue estimate projected general fund revenue growth of 7.5 percent.

Supplemental appropriations for Medicaid and other human resource programs are expected to total $300 million.

An across-the-board budget reduction of 2 percent remains in place. The governor is proposing tapping the rainy day fund reserve. The total budget gap stands at $1.2 billion.

No programs are exempt from the proposed budget reductions.

Washington

The November forecast revision adjusted revenues down about $813.2 million following an earlier decrease of $95.5 million. Altogether, revenues have been adjusted down $914 million or 4 percent for the biennium since the budget was passed in June. Revenues have been hit hard by the effects of the Sept. 11 terrorist attacks on the airline industry, particularly Boeing’s manufacturing activity.

Overruns are the same as in October, totaling about $300 million for Medicaid, corrections, tort liabilities and lawsuits, firefighting and K-12 education. This includes a $125 million shortfall carryover that was expected to be met by a 2001 bill that did not pass. With revenue shortfalls and overruns, the budget hole totals $1.25 billion or 4.9 percent for the biennium.

The governor has said he will not raise general taxes, including sales, business and property, unless it absolutely cannot be avoided. Budget cuts will be part of the equation, and the governor’s budget will be released Dec. 18 or 19.

Areas spared from budget cuts would include court-defined basic education, retirement contributions and debt service. Budget cuts could affect class size reduction efforts in basic education, higher education (through tuition increases, for example), and could spur discussions of executive agency consolidation.

West Virginia

FY 2002 revenue collections were $32.4 million or 3.6 percent more than projected through the end of October. Corporate and personal income tax revenues are running ahead of estimate; sales taxes are below.

General fund expenditures are on target.

No budget cuts have been made thus far for this fiscal year, but the governor has asked agencies to cut FY 2003 requests by 3 percent.

Not applicable.

Wisconsin

Expectations are that general fund revenues are below estimate, but no specific numbers are available.

General fund expenditures are on target.

No measures have yet been presented or announced to balance the budget.

There is no indication at this time if any programs would be exempt from possible cuts.

Wyoming

General fund actual collections through October are 0.1 percent behind projections. If oil and natural gas prices continue low, a downward revision in January is possible.

General fund expenditures are on target.

No budget balancing action is planned. The state should be able to finish the biennium without any problems.

Not applicable.

This report is also available in pdf.

See also:


Posted December 2001, reviewed December 2003.
Email statebudget-info@ncsl.org for more information.
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