Fiscal Affairs Program

State Budget Update: November 2002

Posted 22 November 2002.

Contents

State Budget Update: November 2002: Executive Summary

Table 1. FY 2003 Budget Gaps

Table 2. General Fund Revenue Collections through October 2002

Table 3. Has the FY 2003 Revenue Estimate Been Revised Yet?

Table 4. What Is the Outlook for General Fund Revenues Through the End of FY 2003?

Table 5. FY 2003 Budget Overruns

Table 6. Meeting Spending and Revenue Targets

Appendix A. Balancing the FY 2003 Budget

Appendix B. General Fund Revenue Performance Through October 2002

Staff Contacts:

Corina Eckl
303-856-1388
Arturo Pérez
303-856-1493

State Budget Update: November 2002

State fiscal conditions continue to deteriorate. A November survey conducted by the National Conference of State Legislatures (NCSL) revealed that more than half the states are facing gaps in their fiscal year (FY) 2003 budgets. Anemic revenue growth remains a problem, with two-thirds of states reporting that revenues are failing to meet projected levels. Additionally, more than half the states report that expenditures are exceeding budgeted levels.

This report is based on information collected from legislative fiscal directors in mid-November. It covers the revenue and expenditure situation through the early months of FY 2003. 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).

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

Thirty-one states reported budget gaps in the early months of FY 2003. Some already have taken action to close them. Seventeen report no gap or indicate that it is too early to specify the size of a potential budget gap. Two states did not provide information.
The current cumulative budget gap is approximately $17.5 billion for FY 2003 (3.6 percent of original FY 2003 appropriations). This amount has developed since the fiscal year began. When developing their FY 2003 budgets, states faced an aggregate gap of $49.1 billion. Most of that amount was resolved by the time states began the new fiscal year.
State revenue collections continue to be anemic. Thirty-three states report that revenue collections were below forecasted levels through October.
Twenty-nine states have revised their revenue estimates for FY 2003. In 26 states, the revenue forecast was lowered.
The revenue outlook for the remainder of the fiscal year does not reflect confidence for strong revenue recovery. Twenty-nine states are concerned about revenue performance, and nine are pessimistic. Eight states report a stable outlook, and two are optimistic.
Twenty-nine states report that spending is exceeding budgeted levels. Twenty-four states report that Medicaid or health care programs are over budget.

Table 1. FY 2003 Budget Gaps (1)
State	Initial FY 2003 Budget Gap		Recent FY 2003 Budget Gap
State	Amount (millions)	Percent of General Fund Budget	Amount (millions)	Percent of General Fund Budget
Alabama General Fund	$5.0	0.4%	$5.0	0.4%
Alabama Education Trust Fund	$45.0	1%	$45.0	1%
Alaska	$842.7	35.0%	$490.0	20.6% (2)
Arizona	$931.3	14.7%	$500.0	8%
Arkansas	$0.0	0.0%	$0.0	0.0%
California	$15,100.0	19.7%	$6,100.0	7.8%
Colorado	$437.6	7.0%	$558.0	9.2%
Connecticut	$944.8	7.8%	$495.5	4.1%
Delaware	$41.8	1.7%	$44.2	1.8%
Florida	$0	0.0%	$0.0	0.0%
Georgia	$80.0	0.5%	$450.0 (3)	3.1%
Hawaii	$162.0	4.6%	(N/R)	(N/R)
Idaho	$75.0	3.5%	$160.0	8.1%
Illinois	$1,000.0	4.0%	$200.0	0.9%
Indiana	(N/R)	(N/R)	$300.0	3%
Iowa	$492.9	10.7%	$50.0	1%
Kansas	$704.4	15.8%	$254.3	5.8% (4)
Kentucky	(N/R)	(N/R)	$220.0	5%
Louisiana	$0.0	0.0%	$86.0	1.3%
Maine	$243.0	9.0%	$148.2 (5)	5.8%
Maryland	$572.6	5.5%	$590.0	5.5% (6)
Massachusetts	$2,300.0	15.0%	$547.0	2.6%
Michigan	$380.0	4.1%	$600.0	6.5% (7)
Minnesota	$1,690.0	11.5%	$0.0	0.0%
Mississippi	$0.0	0.0%	$96.8	2.8% (8)
Missouri	$848.3	10.7%	$0.0	0.0%
Montana	$118.0	8.4%	$58.0 (9)	4.6%
Nebraska	$250.0	9.3%	$160.5 (10)	5.9%
Nevada	$199.0	9.7%	$206.0	10.5%
New Hampshire	$54.6	4.4%	$0.0	0.0%
New Jersey	$6,000.0	25.6%	$0.0 (11)	0.0%
New Mexico	$30.0	0.8%	$0.0 (12)	0.0%
New York	$5,100.0	13.0%	$2,500	6.3% (13)
North Carolina	$1,700.0	11.0%	$0.0	0.0%
North Dakota	$7.6	0.9%	$0.0	0.0%
Ohio	$1,941.6	8.4%	$0.0	0.0%
Oklahoma	$290.0	5.7%	$291.7	6.5%
Oregon (14)	$1,322.0 (B)	12.2% (B)	$500.0 (B)	4.6% (B)
Pennsylvania	$1,800.0	8.8%	$500.0 (15)	2.4%
Rhode Island	$300.0	11.2%	$0.0	0.0%
South Carolina	$0.0	0.0%	$331.0	6.1%
South Dakota	$36.1	4.1%	$0.0	0.0%
Tennessee	$800.0	8.2%	$0.0	0.0%
Texas	$0.0	0.0%	$0.0	0.0%
Utah	$173.1	4.6%	$173.0 (16)	4.7%
Vermont	$38.0	4.2%	$0.0 (17)	0%
Virginia	$1,200.0	10.0%	$950.0	7.7%
Washington	$920.0	8.0%	$120.0	1.1%
West Virginia	$0.0	0.0%	$0.0	0.0%
Wisconsin	$1,117.3 (B)	5.0% (B)	(N/R)	(N/R)
Wyoming	$0.0	0.0%	$0.0	0.0%
Total	$49,074.1	10.1%*	$17,730.5	3.6%*
Key: * = Budget gap as a percentage of original FY 2003 appropriations. (B) = biennial amount (N/R) = No response
Source: NCSL survey of state legislative fiscal offices, November 2002.
Notes: For more information on state budget gaps and actions proposed or taken to resolve them, see Appendix A. Alaska--The $842.7 million gap for FY 2003 has dropped to about $490 million ($350 million revenue shortfall plus $140 million in expected supplementals). Georgia--The estimated budget gap ranges from $400 million to $500 million. For the purposes of reaching a national total, $450 million was used. Kansas--Based on the Nov. 5, 2002 consensus revenue estimates and the current authorized budget (after the governor's $41.1 million reduction), the projected state general fund ending balance on June 30, 2003, is a negative $254.3 million or 5.8 percent of expenditures. This amount does not take into account estimated supplementals of $56.7 ($21.7 million for welfare and aging caseloads and $35 million for school finance). Maine--The pending revenue forecast will be revised downward again by $40 million to $60 million in FY 2003 (less than 2.5 percent below the revised estimate of general fund revenue). Maryland--This consists of the net shortfall from the FY 2002 closeout ($104.4 million), estimated deficiencies ($100.1 million), and the department of legislative services estimated revenue shortfall for FY 2003 ($385.1 million). Michigan--The general fund has a $600 million gap. The school aid fund is close to being balanced. Mississippi--The state general fund revenue shortfall is currently estimated to be $96.8 million. This does not include funding for budget deficits to Medicaid, corrections or human services. Montana--Actions already have been taken to close the budget gap. Additionally, an initiative could affect FY 2003 revenues, requiring several million dollars currently deposited to the general fund to be used for tobacco use prevention activities. Nebraska--In the first year of the biennium. New Jersey--Too early to tell. Much depends on decisions made by federal government about cost sharing and on how much is raised by enacted revisions to business tax laws. Most of this won't be known until January at the earliest. New Mexico--The current (planned) excess of revenues over expenditures is estimated to be $18.4 million. New York--Per announcement by Senate Majority Leader Joseph Bruno Nov. 13, 2002. Oregon--To arrive at the FY 2003 total estimated budget gap, the calculation includes half of the biennial shortfall reported. Pennsylvania--We reported one-time funding sources for the FY 2003 budget at $1.8 billion. In addition to that, we anticipate a revenue shortfall, but no official numbers have been yet released. We may know a little more when the outgoing governor presents his mid-year budget briefing in mid-December. Utah--Actions already have been taken to close the budget gap. Vermont--Actions already have been taken to close the budget gap.

Table 2. General Fund Revenue Collections through October 2002 (1)
State	Budgeted FY 2003 Revenue Growth (2)	Compared with Budgeted Estimate			Compared with Revised Estimate
State	Budgeted FY 2003 Revenue Growth (2)	Above	On Target	Below	Above	On Target	Below
Alabama	2.9%			X
Alaska	-5.2%	X
Arizona	-2.4%			X
Arkansas	2.3%	X
California	7.1%			X
Colorado	2.0%			X
Connecticut	(N/R)		X			X
Delaware	-2.5%			X			X
Florida	2.1%	X
Georgia	5.3%			X
Hawaii	8.3%			X
Idaho	6.6%			X	X
Illinois	4.3%			X
Indiana	17.3%			X
Iowa	1.8%			X
Kansas	9.7%			X
Kentucky	3.3%			X
Louisiana	-0.2%			X
Maine	3.0%	X
Maryland	1.9%	X
Massachusetts	0.1%			X			X
Michigan	0.2%			X
Minnesota	7.7%		X
Mississippi	3.8%			X			X
Missouri	0.9%			X
Montana	0.3%			X			X
Nebraska	9.2%			X			X
Nevada	11.0%			X
New Hampshire	4.9%			X
New Jersey	15.1%		X
New Mexico	-0.9%			X
New York	-4.5%		X
North Carolina	7.0%		X
North Dakota	4.1%	X			X
Ohio	5.4%	X
Oklahoma	2.0%			X
Oregon	11.5%			X			X
Pennsylvania	8.7%			X
Rhode Island	4.7%	X				X
South Carolina	8.6%			X			X
South Dakota	3.7%			X
Tennessee	15.0%			X
Texas	3.5%	(N/R)
Utah	2.8%			X
Vermont	4.8%			X	X
Virginia	3.4%			X		X
Washington	4.1%		X
West Virginia	2.7%		X
Wisconsin	-3.2%			X
Wyoming	0.9%		X
Total	4.4%	8	8	33	3	3	7
Key: (N/R) = No response
Source: NCSL survey of state legislative fiscal offices, November 2002.
Notes: For more information on state general fund revenue collections, see Appendix B. This information was taken from "State Budget and Tax Actions 2002--Preliminary Report."

Table 3. Has the FY 2003 Revenue Estimate Been Revised Yet? (1)
State	Yes	No	Comments
Alabama		X	The estimate will be revised before the 2003 regular session scheduled to begin March 4, 2003.
Alaska		X	An upward revision is expected in early December.
Arizona	X		The estimate has been revised downward informally by $450 million. The next formal revision will occur in January 2003.
Arkansas		X
California	X		The revised forecast for FY 2003 revenues is down by $4.1 billion from the FY 2003 budget act projection because of weak revenue and economic trends. No word yet on what the administration will do in January when it releases its FY 2004 budget proposal, but a significant reduction in revenue estimates is anticipated given current negative economic and revenue trends.
Colorado	X		$252 million (4.2%) was trimmed from the FY 2003 forecast.
Connecticut	X		The Nov. 12, 2002, revised revenue estimate for FY 2003 is $2.7 million higher than the Aug. 5, 2002, estimate ($11.7 billion base).
Delaware	X		The revenue estimate was revised in September 2002 by $95 million less than projected in June 2002.
Florida	X		On Nov. 15, 2002, the current year estimate was reduced by $7 million. The FY 2004 estimate was reduced by $232 million.
Georgia		X	The governor will set a revenue estimate during the first week in December. It probably will be revised downward in the $400 million range.
Hawaii	X		A September update revised the new estimate to 6.1% growth. The next revision is set for January 2003.
Idaho	X		The revenue estimate was revised downward 8% ($160 million) in September from an original estimate in January 2002, given the awful conclusion to FY 2002. The new forecast projects 3.8% growth over FY 2002 actual collections. Collections are beating this revised projection after four months, with overall revenues coming in at about 4.5% over the same period last year.
Illinois	X		The bureau has revised the forecast down by $200 million. The commission will probably make an even larger revision.
Indiana		X	The FY 2003 revenue estimate will be revised Dec. 19, 2002.
Iowa	X		In September, the revenue estimating conference lowered the estimate to 0.0% growth for FY 2003.
Kansas	X		The general fund estimate for FY 2003 was revised on Nov. 5, 2002 (its normal meeting time for revisions). The overall estimate was revised downward by $263.5 million or 8%.
Kentucky	X		The FY 2003 revenue estimate was revised downward by $169.7 million (4.3%) Nov. 15.
Louisiana	X		Louisiana revised its estimate downward by $86 million on Oct. 10, 2002.
Maine	X		The economic forecast was revised downward Nov. 6, 2002. The revenue forecasting committee has a scheduled update due Dec. 1, 2002. The expected change in the economic forecast is likely to drive revenue estimates down by $40 million to $60 million in FY 2003.
Maryland		X	The Board of Revenue Estimates indicated in September 2002 that revenues were likely to be revised downward for the year by $309.7 million. The Department of Legislative Services estimates a downward revision of $385 million. The next formal revenue update will occur on Dec. 16.
Massachusetts	X		The FY 2003 revenue estimate was revised downward by $247 million in mid-October.
Michigan		X	The next revision is expected in early January.
Minnesota		X	The FY 2003 revenue estimate will be revised Dec. 4, 2002.
Mississippi	X		On Nov. 4, 2002 the joint legislative budget committee revised the FY 2003 forecast down by $96.8 million to an estimated growth of 3.2% over actual FY 2002 collections.
Missouri		X	A mid-December revision is expected.
Montana	X		The forecast was revised downward in the August 2002 special session. The next revision will be on Nov. 19, 2002, when the revenue and transportation committee meets to set preliminary revenue estimates for 2003, 2004 and 2005.
Nebraska	X		Original base budget estimates have been revised downward twice (in July and October) almost exclusively in personal and corporate income tax estimates. In July, the estimate was lowered by $129.9 million. In October, the estimate was lowered by another $37.5 million. The FY 2003 estimate will be considered for revision again in February and April of 2003. Likelihood of further revisions at those times is uncertain-tracking of the actual to the revised October estimate is only now beginning.
Nevada	X		In October 2002, the economic forum developed preliminary revenue estimates for FY 2003. The revised estimates are $93.6 million below the FY 2003 revenue estimate developed in May 2001. The October 2002 revenue estimates will be updated by the forum in December 2002.
New Hampshire		X	The official estimate shown in the budget is usually not formally changed.
New Jersey		X	The estimate has not been revised. The next official revision, if required, would accompany the governor's FY 2004 budget proposal in late January 2003.
New Mexico	X		The October 2002 estimate reduced FY 2003 revenues by $69.6 million when compared to the May estimate.
New York		X	The only revision is likely to occur with the submission of the 2004 executive budget in January.
North Carolina		X	A January 2003 update is possible. At this point there is no need for revision.
North Dakota	X		The FY 2003 revenue estimate was revised in July 2002, down $64 million, and will be revised in December 2002.
Ohio		X
Oklahoma		X	FY 2003 revenues will be not officially revised until December.
Oregon	X		The FY 2003 revenue estimate was revised downward in September by an additional $482 million for the 2001-03 biennium. The next forecast is due in December. Preliminary data indicate an additional $200 million shortfall.
Pennsylvania		X
Rhode Island	X		Revised upward by $6 million on Nov. 8, 2002.
South Carolina	X		FY 2003 general fund revenues were revised in September 2002. After learning that FY 2002 closeout fell short by $148.5 million, the interval of revenue growth from FY 2002 (actual) to FY 2003 (appropriated) was 10.2%. The board of economic advisors revised that growth figure down to 4.1%, or a shortfall of $331 million. Through the fiscal quarter, general fund revenue growth was negative 1%.
South Dakota		X
Tennessee		X	The Funding Board meets each fiscal year (usually December) and sometimes more than once to adjust the original revenue estimates.
Texas		X	The estimate will be revised in January 2003 by the state comptroller.
Utah		X	A December revision is likely.
Vermont	X		In July the revenue forecast was revised downward by $38.7 million. At present, revenues are tracking just above the July forecast, so it will not be revised in November. The next forecast update will occur in January on its normal schedule.
Virginia	X		On Aug. 19, 2002 the governor submitted an official revenue reforecast to the General Assembly for the remainder of FY 2003 and for FY 2004. The FY 2003 revenue estimate was reduced by $739.7 million. The revised growth rate for FY 2003 is 0.8%
Washington	X		In September, the FY 2003 forecast was reduced by $39 million. On Nov. 15 the forecast was adjusted upward by $23 million (0.22%).
West Virginia		X
Wisconsin	X		The administration is required on Nov. 20 to issue updated revenue projections for both FY 2003 and the 2003-05 biennium. The legislative fiscal bureau will issue its revenue estimates in January 2003.
Wyoming	X		The FY 2003 revenue estimate was revised upward by $6.9 million (1.13%) on Oct. 23, 2002.
Total	29	21
Source: NCSL survey of state legislative fiscal offices, November 2002.
Note: For more information on state general fund revenue collections, see Appendix B.

Table 4. What Is the Outlook for General Fund Revenues Through the End of FY 2003?
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 (N/R)
Oklahoma			X
Oregon				X
Pennsylvania				X
Rhode Island		X
South Carolina				X
South Dakota			X
Tennessee		X
Texas (N/R)
Utah		X
Vermont			X
Virginia			X
Washington		X
West Virginia		X
Wisconsin			X
Wyoming	X
Total	2	8	29	9
Key: (N/R) = No response (Ohio and Texas)
Source: NCSL survey of state legislative fiscal offices, November 2002.

Table 5. FY 2003 Budget Overruns
State	Budget Overruns?		Programs
State	No	Yes	Programs
Alabama	X
Alaska		X	Medicaid, roughly $100 million; fire suppression, roughly $20 million; other programs, $20 million.
Arizona	X
Arkansas	X
California		X	Corrections, Medi-Cal and state operations costs.(1)
Colorado	X
Connecticut		X	Of $93.4 million in total net deficiencies currently projected, $68.5 million is attributable to Medicaid.
Delaware	X
Florida		X (2)
Georgia		X	Medicaid has a $417 million shortfall
Hawaii		X	Expenditures for Medicaid may run up to $20 million over budget for FY 2003.
Idaho	X
Illinois		X	Health care and human services.
Indiana	X
Iowa		X	Medicaid ($50 million).
Kansas		X	Caseload costs for the state welfare agency and the state aging agency were revised upward by $21.7 million (4.1%). The school finance estimates were revised upward by $35 million.
Kentucky		X	Medicaid and the education equalization funding formula.
Louisiana	X
Maine	X (3)
Maryland		X	Legislative Services estimates $100 million in deficiencies: mental health services ($36 million), foster care ($16 million), overestimated reversions ($25 million), human resources underattainment of federal funds ($13 million) and other ($10 million).
Massachusetts		X	Despite having restricted Medicaid eligibility, which will include cutting 50,000 recipients (effective April 1, 2003), the state is facing a gross Medicaid deficit of at least $300 million. Other anticipated deficiencies are expected to range from $100 million to $150 million.
Michigan	X
Minnesota	X (4)
Mississippi		X	Medicaid, corrections and human services.
Missouri		X	Medicaid.
Montana		X	Medicaid overruns primarily hit the budget in FY 2002, although there will be effects in FY 2003 and a supplemental appropriation is anticipated. The state does not budget for fire costs, which are traditionally funded through supplementals. A concern in corrections was addressed through early release.
Nebraska		X (5)	Corrections medical costs, Medicaid, public assistance.
Nevada		X	Lower than budgeted sales tax revenues (which support K-12 education) mean that an additional estimated $40.1 million will be required from the general fund. Medicaid and welfare-related cost overruns are currently estimated to require an additional $14.7 million from the general fund.
New Hampshire		X	Medicaid provider payments.
New Jersey	X (6)
New Mexico		X	Medicaid is currently $28 million over budget. Corrections inmate growth is running at 8%.
New York		X	Medicaid and pension costs.
North Carolina	X
North Dakota		X	Medicaid.
Ohio	X
Oklahoma		X	Corrections and Medicaid.
Oregon	X (7)
Pennsylvania	X
Rhode Island	X
South Carolina		X	Higher education scholarships and the property tax relief fund (both open ended accounts).
South Dakota	X
Tennessee	X
Texas		X	Medicaid and CHIP.
Utah	X (8)
Vermont		X	Corrections appears to be the most pressing area and could be 2% to 3% over budget. Child welfare caseloads are reported up, but no cost figures have been released yet. Medicaid appears on track for FY 2003 due to changes made in the August reduction plan.
Virginia		X	Personal property tax relief, Medicaid, CSA (services for at-risk youth), state employee health care and loss of revenue from out-of-state prisoners.
Washington		X	Human services, primarily health care.
West Virginia		X	Medicaid (supplemental appropriation of $40 million made in September).
Wisconsin	X (9)
Wyoming		X	Medicaid is likely to exceed original appropriated levels. This past session the state encumbered $25 million for a supplemental appropriation if necessary. At this point, the agency is asking for the $25 million (mostly because of a match rate difference between what it based its original request on and what it actually turned out to be), but it is too early to tell yet whether the $25 million will suffice.
Total	21	29
Source: NCSL survey of state legislative fiscal offices, November 2002.
Note: California--The Department of Corrections has a deficiency because of (1) higher compensation costs of correctional officers, (2) higher health care costs for inmates, and (3) lower than expected reimbursements from the federal government for the incarceration of undocumented felons. Medi-Cal is up because of a lack of federal funds assumed in the budget and lower than expected savings from fraud detection. State operations costs will be higher than budgeted because of reduced savings from unspecified cuts that were authorized by the Legislature, plus no savings from a retirement incentive program that had been expected to save $285 million. Caseloads in most major programs (Medi-Cal, CalWORKs, SSI/SSP, etc) are not exceeding estimates at this time. Florida--$1.1 billion of recurring program costs in the 2003 budget are financed with nonrecurring general revenue. Maine--Medicaid spending appears a little tight. Minnesota--Unknown until new budget forecast on Dec. 4, 2002. Nebraska--Based on preliminary estimates and early deficit requests, overruns are occuring in corrections (medical costs), Medicaid and public assistance. New Jersey--Not yet, but New Jersey usually has $200 million to $300 million of supplemental appropriations in any given year. In addition, there is potential to incur large unbudgeted expenses for Medicaid nursing home reimbursement (up to $330 million) and prescription drug assistance program for seniors and disabled (up to $148 million) if pending appeals and waiver applications to the federal government are not approved. Oregon--All areas of the state budget have experienced spending reductions of some magnitude; human service costs continue to rise, primarily due to Oregon health plan expenditures; latest rebalance plan for the department of human services required management actions and program reductions of $24 million. Utah--There are concerns with Medicaid. Wisconsin--There is pressure on the medical assistance budget.

Table 6. Meeting Spending and Revenue Targets
Spending overruns and lower than expected revenues (19 states)		Spending on target and lower than expected revenues (14 states)
California Georgia Hawaii Illinois Iowa Kansas Kentucky Massachusetts Mississippi	Missouri Montana Nebraska Nevada New Hampshire New Mexico Oklahoma South Carolina Vermont Virginia	Alabama Arizona Colorado Delaware Idaho Indiana Louisiana	Michigan Oregon Pennsylvania South Dakota Tennessee Utah Wisconsin
Spending overruns and revenues on target (5 states)		Spending and revenues on target (3 states) Minnesota New Jersey North Carolina
Connecticut New York	Washington West Virginia Wyoming
Spending overruns and higher than expected revenues (4 states)		Spending on target and higher than expected revenues (4 states)
Alaska Florida	Maryland North Dakota	Arkansas Maine	Ohio Rhode Island
Note: Texas did not provide information on revenue performance but reported spending overruns. Expenditures for Medicaid and CHIP are over budget.

Appendix A. Balancing the FY 2003 Budget
State	Actions to Balance the FY 2003 Budget	FY 2003 Budget Gap
Alabama	N/A.	The gap in the general fund is $5 million (0.4%). The gap in the education trust fund is $45 million (1%).
Alaska	Various funds were tapped and the state shifted some capital projects to debt.	Even though revenue is likely to be higher than anticipated, a revenue gap in excess of $350 million is expected. Spending deficiencies of $140 million bring the total gap to $490 million (20.6%).
Arizona	No formal action. The governor has presented a plan, including requesting agencies to reduce spending by between 5% and 10%, but he does not have statutory authority to force reductions. Many of the governor's proposals require legislative action. The Legislature has not acted on the governor's proposals. A special session is scheduled to begin on Nov. 25.	The current estimate of the budget gap for FY 2003 is $500 million (8%).
Arkansas	N/A.	None.
California	The governor has indicated that he will contact leadership regarding potential actions, but no actions have been taken at this time.	California currently estimates that FY 2003 will end with a deficit of $6.1 billion (7.8%), instead of ending with a $1 billion reserve as included in the FY 2003 budget act. (The FY 2003 budget act addressed a cumulative $23.6 billion shortfall). About $4.9 billion of the deterioration is due to weaker revenues (including a FY 2002 shortfall of $0.8 billion and $4.1 billion in projected FY 2003 collections). The balance is mainly related to higher current-year expenditures in Medi-Cal, state operations and corrections.
Colorado	The governor has proposed that most state agencies trim 10% from their FY 2003 budgets, with some exceptions. Other actions include early retirement programs and delaying capital projects. Total budget balancing measures proposed to date equal $647 million.	The estimated budget gap in FY 2003 is $558 million (9.2%).
Connecticut	The governor may implement some allotment reductions. So far the governor and legislature have only just begun to discuss how to solve the estimated FY 2003 budget shortfall as well as the projected gap for the 2003-2005 biennial budget.	Comparing initial revenue estimates on Aug. 5, 2002 (no revised revenue estimates for FY 2003 were adopted by the legislature) with original net general fund appropriations indicates a projected shortfall of $386.8 million. Revised revenue and expenditure estimates as of Nov. 12, 2002 indicate a projected shortfall of $495.5 million (4.1%). This is an increase of $108.7 million over the Aug. 5, 2002 estimate (largely attributable to projected deficiencies).
Delaware	Actions taken to balance the FY 2003 budget since it was enacted include across-the-board budget cuts and delays of capital projects.	The estimated budget gap in FY 2003 is $44.2 million (1.8%).
Florida	N/A.	None.
Georgia	The governor has required all agencies to reduce spending by 5% across-the-board.	The current estimated budget gap in FY 2003 ranges from $400 million to $500 million ($450 million is 3.1% of the budget).
Hawaii	None	At this time we cannot accurately report any potential budget gap as our budget and finance department is still calculating potential cost overruns for programs other than Medicaid.
Idaho	Because the state revised its revenue projection downward, steps have been identified to close the current year gap estimated at $160 million. The governor has initiated an across-the-board spending reduction of 3.5% (exempting K-12 and higher education, which comprise 65% of the budget). He recommends using all the remaining cash reserves available to the state. These recommendations will have to be approved by the Legislature when it convenes in January.	Idaho was estimating a budget gap of about $110 million in June/July, which has since grown to $160 million (8.1%) with the new official revenue estimate that came out in September.
Illinois	N/A.	The estimated budget gap is $200 million (0.9%).
Indiana	In a March special session and through a tax restructuring bill, actions taken to balance the FY 2003 budget (post enactment) included across-the board budget cuts, higher education cuts, employee furloughs, tax increases, fee increases, tapping rainy day and other funds, early retirement programs, delayed capital projects and gaming expansion.	The estimated budget gap is $300 million (3%).
Iowa	N/A.	Medicaid will need a supplemental of about $50 million.
Kansas	In August 2002 the governor made reductions of $41.1 million to the approved general fund budget. In general, the reduction was 2% across-the-board with certain exceptions. K-12 education and higher education were only reduced 0.75%. Financing for welfare and aging caseloads were not subject to the reduction.	Based on the Nov. 5, 2002 consensus revenue estimates and the current authorized budget (after the governor's $41.1 million reduction), the projected state general fund ending balance on June 30, 2003, is a negative $254.3 million or 5.8% of expenditures. This amount does not take into account any estimated supplemental appropriations of $56.7 ($21.7 million for welfare and aging caseloads and $35 million for school finance).
Kentucky	N/A.	The governor estimates a gap of $220 million or 5% of the general fund.
Louisiana	The governor froze $75 million of spending authority. Additional freezing or outright cuts of approximately $86 million are pending.	The estimated budget gap is $86 million (1.3%).
Maine	The governor proposed budget reductions for a special session that began Nov. 13, 2002. The proposals on the table do not include the savings necessary to solve the potential general fund budget shortfall that will be identified by Dec. 1, 2002. Actions taken to date include temporary curtailments of allotment and three furlough days for state employees, travel and hiring freezes and capital expenditure freezes. Additional proposals are pending before the Legislature in the special session that would delay an increase in local revenue sharing, tap other funds and special revenue funds, including the highway fund and tobacco funds.	Maine revised revenue estimates for FY 2003 downward by $148.2 million (5.8%) in August. The pending revenue forecast will be revised downward again by $40 million to $60 million in FY 2003 (less than 2.5% below the revised estimate of general fund revenue).
Maryland	A hiring freeze was made more stringent. There are certain exceptions, such as direct care workers and public safety employees.	The budget gap is $590 million (5.5%). This consists of the net shortfall from the FY 2002 closeout ($104.4 million), estimated deficiencies ($100.1 million) and the Department of Legislative Services estimated revenue shortfall for FY 2003 ($385.1 million).
Massachusetts	The governor exercised statutory authority to reduce appropriation amounts in certain areas for total savings of $100 million. Areas affected included K-12 education, higher education, local revenue sharing and state employees (layoffs, furloughs and a travel ban).	The FY 2003 budget adopted in July was intended to close the anticipated budget gap through a combination of spending cuts, tax increases, fee increases and other savings measures. At this point in the fiscal year, revenues are below expectations by $247 million. There will be $300 million in deficiencies. The combined amount ($547 million) represents 2.6%. While the governor's administrative cuts addressed about $100 million of the current year gap, additional measures will need to be considered. These include additional cuts to Medicaid, further spending reductions, further use of reserve funds and potential additional revenue enhancements. A slower than expected recovery could well result in a further revenue shortfall of hundreds of millions below the revised benchmark.
Michigan	N/A.	The general fund budget gap is expected to be $600 million (6.5%). The school aid fund is close to being balanced.
Minnesota	N/A.	None.
Mississippi	The governor withheld 5% of the first allotment period allocations.	The state general fund revenue shortfall is currently estimated to be $96.8 million. It does not include funding for budget deficits to Medicaid, corrections or human services.
Missouri	N/A.	None at this time. More will be known after Dec. 1.
Montana	Both the governor and Legislature have made reductions. The governor cut $19 million, and the Legislature implemented $38 million in reductions. A variety of programs have been affected, including K-12 education, higher education, Medicaid and corrections. Various state funds have been tapped. A hiring freeze has been implemented.	The state already has resolved a $58 million (4.6%) budget gap. The electorate just passed an initiative that could affect FY 2003 revenues, requiring several million dollars currently deposited to the general fund to be used for tobacco use prevention activities.
Nebraska	During a special session this past summer, the Legislature enacted changes that included across-the-board budget cuts, cuts in higher education, Medicaid, and local revenue sharing, fee increases, and tapping state funds.	At the end of the special session, the gap at year-end FY 2003 was estimated at $124.2 million. With lower revenue estimates (October), the year-end gap is approximately $160.5 million. This is a calculated variance from a minimum reserve requirement in statute, not a variance from a $0 ending balance. Nebraska currently estimates the minimum statutory reserve to be approximately $155 million unobligated general fund balance, which we estimate we are $160.5 million short of meeting.
Nevada	A 3% reduction in FY 2003 appropriations was imposed on state agencies by the governor (does not include K-12) at an estimated savings of $37.5 million. The governor is also recommending that $100 million (of the $136.3 million available) be accessed from the rainy day fund when the Legislature convenes in February 2003.	The total budget gap in FY 2003 is estimated at approximately $206 million, which represents about 10.5% of ongoing general fund appropriations.
New Hampshire	Governor put in executive orders to limit spending. The expected savings is $15.2 million.	None at this time.
New Jersey	N/A.	It is too early to tell. Much depends on decisions made by the federal government about cost sharing and on how much is raised by enacted revisions to the state's business tax laws. Most won't be known until January at the earliest.
New Mexico	N/A.	None. The current (planned) excess of revenues over expenditures is estimated to be $18.4 million in FY 2003.
New York	N/A.	None
North Carolina	Normal reversions run around 2%. The governor is using monthly allotments to force reduction of about 4% for overall budget as a hedge against uncertainty of military engagement. The education target is 2%.	None.
North Dakota	The governor reduced budgets through the allotment process and transferred $25 million from the state-owned bank.	None.
Ohio	N/A.	None.
Oklahoma	The state finance office is responsible for ensuring agency allocations match revenue collections. They have implemented across-the-board cuts for an annual reduction of 6.5% ($291.7 million). Other actions taken to balance the FY 2003 budget since it was enacted include employee layoffs and furloughs and a travel ban.	The estimated budget gap is $291.7 million (6.5%).
Oregon	The governor took administrative actions and the legislature took budget actions. The across-the-board budget reduction taken in September amounts to $310 million, to be restored if a temporary tax increase measure referred to voters passes in January 2003. Oregon created a rainy day fund at a September special election with passage of a ballot measure to establish the Education Stability Fund; $150 million from the fund was tapped as part of the budget shortfall solution.	The budget gap is $1.7 billion or approximately 15% of the close of session forecast.
Pennsylvania	N/A.	We reported one-time funding sources for the FY 2003 budget at $1.8 billion. In addition to that, we anticipate a revenue shortfall, but no official numbers have been yet released. We may know a little more when the outgoing governor presents his mid-year budget briefing in mid-December. The estimated gap is greater than $500 million (2.4% of appropriations).
Rhode Island	N/A.	No budget gap currently exists.
South Carolina	$100 million was sequestered from the capital reserve fund.	The state faces a budget gap of $331 million (6.1%).
South Dakota	N/A.	None.
Tennessee	N/A.	None.
Texas	N/A.	It is estimated that CHIP will need $32 million and Medicaid $122.1 million in general revenue. It is anticipated that unexpended balances in other areas of the state budget will cover these needs.
Utah	Actions to close the gap included budget cuts (affecting K-12 and higher education, Medicaid and corrections), tapping various funds (including tobacco funds) and shifting capital projects to debt.	The state already has resolved a $173 million (4.7%) budget gap.
Vermont	The administration, with approval of a special legislative committee, implemented a deficit reduction plan utilizing spending cuts and transfers of money from other funds to eliminate the $38.7 million projected deficit. Areas affected included K-12 education, Medicaid, corrections and state employee (layoffs and a travel ban). Tobacco and other funds were tapped.	The state already has resolved a budget gap.
Virginia	Agencies submitted budget reduction plans in response to the revenue reforecast. Agencies were given targets of 7%, 11% and 15%. Through administrative action, the governor instituted plans to reduce non-exempted programs by about 10%. Across-the-board cuts for FY 2003 total $260.2 million in the general fund, along with $22.6 million in targeted reductions and $59.7 million in non-general fund reductions. Virginia anticipates targeted reductions in K-12 and possibly Medicaid or other "exempted" programs when the governor releases his budget in December.	With the downward revenue adjustment, and with projected spending requirements in high priority programs, it is anticipated that there will be a budget gap of about $950 million for FY 2003 (7.7% of the general fund budget).
Washington	N/A.	The estimated budget gap is $120 million (1.1%).
West Virginia	Actions taken to balance the FY 2003 budget since it was enacted include tapping a variety of funds including lottery ($18.6 million), the traffic account ($14 million); and the personal income tax reserve ($8.3 million).	None.
Wisconsin	N/A.	Unknown at this time.
Wyoming	N/A.	None. A FY 2003-04 biennial surplus is projected.

Appendix B. General Fund Revenue Performance Through October 2002
State	General Fund Revenue Performance Through October 2002
Alabama	General fund revenue collections, including revenues from interest earnings, performed below budgeted estimate through October. Based on FY 2002 receipts, however, the insurance premium tax is anticipated to perform above original estimates for FY 2003 (the first payment from that tax is not due until Nov. 15, 2002). Personal and corporate income and utility taxes, major sources of revenue for the education trust fund (but not the general fund) are performing below original estimates.
Alaska	General fund revenues were above budgeted estimate, with oil revenues above estimate and corporate income taxes on target. The FY 2003 revenue estimate is expected to be revised upward in early December. Even with a revised projection, a revenue shortfall in excess of $350 million is expected.
Arizona	Year to date, the sales tax is 1% below forecast, the personal income tax is 14% below forecast, and the corporate income tax is 6.6% below forecast. The estimate has been revised downward informally by $450 million. The next formal revision will occur in January 2003.
Arkansas	General fund revenue collections are above budgeted estimate. The personal income tax is $12.4 million (2.3%) above forecast; the sales tax is on target; and the corporate income tax is $28.7 million (60.7%) above forecast. The FY 2003 revenue estimate is not likely to be revised.
California	Genera