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Top Fiscal Issues for 2014 Legislative Sessions

Top Fiscal Issues for 2014 Legislative Sessions

12/30/2013

Legislative fiscal officers are keenly attuned to the budget demands and fiscal pressures confronting legislatures. This year’s survey asked these fiscal experts to identify the top fiscal issues their states are expected to address in the 2014 legislative sessions (Four states—Montana, Nevada, North Dakota and Texas—do not have a regular legislative session in 2014). Table 1 and Appendix A provide additional details on the top fiscal issues for 2014 legislative sessions. 

Table 1. Top Fiscal Issues for 2014 Legislative Sessions

Jurisdiction

Medicaid and  Health Care

State Employee Salaries and Benefits

Taxes & Revenues

Education

Infrastructure

Other

Alabama 

X

 

X

   

X

Alaska 

X

X

 

X

 

X

Arizona

     

X

 

X

Arkansas 

X

X

     

X

California

       

X

X

Colorado

     

X

X

X

Connecticut

X

       

X

Delaware

X

 

X

X

 

X

District of Columbia

   

X

 

X

X

Florida

           

Georgia

X

         

Hawaii

X

     

X

X

Idaho

X

   

X

 

x

Illinois

 

X

X

   

X

Indiana 

           

Iowa 

X

       

X

Kansas

     

X

 

X

Kentucky

X

X

 

X

 

X

Louisiana 

X

     

X

X

Maine

X

 

X

   

X

Maryland

 

X

     

X

Massachusetts

X

 

X

     

Michigan

X

 

X

     

Minnesota

X

     

X

X

Mississippi

X

   

X

 

X

Missouri 

X

   

X

 

X

Montana

           

Nebraska

   

X

   

X

Nevada

           

New Hampshire

X

       

X

New Jersey

           

New Mexico

 

X

X  

X

 

New York

   

X

   

X

North Carolina

X

X

     

X

North Dakota

           

Ohio

X

 

X

   

X

Oklahoma

X

X

     

X

Oregon

 

X

     

X

Pennsylvania

 

X

   

X

X

Rhode Island

           

South Carolina

X

X

 

X

 

X

South Dakota

   

X

X

   

Tennessee

X

   

X

   

Texas

           

Utah

X

     

X

X

Vermont

X

X

     

X

Virginia

X

       

X

Washington

X

       

X

West Virginia

X

 

X

   

X

Wisconsin

           

Wyoming

x

x

     

x

Total

29

13

13

12

9

--

Source: NCSL survey of legislative fiscal offices, fall 2013. 

Appendix A. Summary of State Responses (top fiscal issue in italics) 

Alabama 

1. Medicaid funding/expansion. The state has decided not to expand Medicaid under the Affordable Care Act (ACA).
2. Additional Revenues for the General Fund. Temporary revenues expire at the end of FY 2015.
3. Education Trust Fund Rainy Day Account Repayment. Required to repay remaining $163 million by FY 2015

Alaska
1. Retirement assistance
2. K-12 education
3. Medicaid

These three cost drivers now absorb half the state's general fund revenue. Extending recent growth trends indicates they will absorb over 95 percent of general fund revenue by FY 2022.

Arizona
1. K-12 spending
2. University spending
3. Department of Economic Security spending

Arkansas
1. Medicaid. Implementation of the Health Care Independence Act of 2013, often referred to as the Private Provider Option, continues to be a major topic of discussion.
2. Corrections/community corrections/parole. Inmate and parole reform for prison overcrowding.
3. Ethics. Legislative ethics, especially related to campaign expenditures, including collections and disclosures.
4. Teacher insurance. Teachers insurance has had dramatic increase in enrollment cost over the past several years.

California
1. How to allocate potential budget surplus.
2. Rainy-day fund policies.
3. Water infrastructure financing.

Colorado
1. Higher education funding.
2. Infrastructure issues.
3.
Reinstate funding for disaster emergency funds.

Connecticut
1. Medicaid and the Affordable Care Act (ACA). It is unclear whether there will be any impact in Medicaid from increased enrollments in non-1-percent federally reimbursed caseload increases or other indirect ACA effects.
2. Rising debt service. The biennial budget includes bonding for the GAAP deficit and a pushing out of other debt costs. This has made debt service the single largest line item increase in the projected FY 2016 budget.
3. GAAP funding. The conversion to GAAP still remains a murky issue. How much adjustment is required and how it should be handled will still be debated and possibly altered.

Delaware
1. Flat revenues. The most recent five-year forecast is relatively flat.
2. State school testing implementation. Delaware is transitioning to a smarter, balanced test with Common Core.
3. Growth in Medicaid. Officials will continue to assess the impact of the federal health care legislation.

District of Columbia
1. Increasing the minimum wage. $11.50 by 2016 and indexed to CPI.
2. Funding significant infrastructure initiatives. Placing electrical lines underground, Washington Metropolitan Area Transit Authority upgrades, streetcars and green infrastructure to mitigate combined sewer overflow.
3. Publicly financed soccer stadium.
4. Implementing recommendations from the Tax Revision Commission.

Florida
Yet to be determined.

Georgia
1. Medicaid/Affordable Care Act (ACA). Officials are expected to continue to evaluate the impact on the program.

Hawaii
1. Medicaid. Cost and benefits of expansion.
2. Hawaii Health Systems Corporation. Neighbor island hospital and health care system faces large projected revenue shortfalls.
3. Repair and maintenance. Infrastructure needs have gone unaddressed since the start of the Great Recession.

Idaho
1. Corrections and private prison. Previous contract expired and it is being studied whether to continue with privatization or not.
2. Medicaid growth.
3.
K-12 education. There are two competing task forces that will submit recommendations for education policy in the future, which may have a significant price tag.

Illinois
1. Pensions. Talks continue with leadership, but no proposals decided on.
2. Expiration of temporary income tax. Tax rates will begin to lower Jan. 1, 2015, unless temporary tax rates extended.

Indiana
No response.

Iowa
1. The change in the Federal Medical Assistance Percentage (FMAP) rate. The federal share of the FMAP rate for federal fiscal year 2015 is 2.39 percent lower than federal fiscal year 2014. This has resulted in increased costs to the state of approximately $90 million.
2. Policies related to the general fund surplus. The general fund budget for FY 2013 ended the year with a record surplus of $927.9 million, which was 13.7 percent of annual revenues. In addition, reserve fund balances total $649.6 million, or 10 percent of annual revenues. A significant issue will be whether the excess funds should be used to reduce taxes or retained to fund anticipated appropriation increases over the next five years.
3. Reducing spending to match ongoing revenue. There will be a strong push to limit appropriations to a level that does not exceed the annual revenue collections and to not use the surplus carry forward funds for ongoing spending.

Kansas
1. K-12 education funding. The Kansas Supreme Court is currently reviewing a lower court ruling that could require up to a 2 percent increase in school funding.
2. Corrections funding. Corrections is the only Kansas agency that does not have an approved FY 2015 budget.
3. Higher education funding. The governor has recommended restoring all or part of the reductions made by the 2013 Legislature.

Kentucky
1. Education funding. Requests from many areas for additional funding.
2. Pension funding. Teachers' Retirement System has submitted a large request for additional funding.
3. Medicaid funding. Growth in eligible populations and medical inflation.

Louisiana
1. Use of ad hoc funding resources in the operating budget.
2. Sustainable funding for health care privatization.
3. Implementing a capital outlay bonding program.

Maine
1. Streamlining recommendations. Officials are expected to review proposed "streamlining" recommendations from the executive totaling $22.5 million in FY 2015.The biennial budget enacted a $22.5 million savings placeholder related to these "streamlining" savings.
2. Tax expenditures. Officials are expected to review and possibly eliminate a number of tax expenditures to generate $4 million revenue increase in FY 2015. Failure to enact the tax expenditure savings will result in a reduction to municipal revenue sharing.
3. Medicaid expansion.

Maryland
1. Structural general fund deficit. The state's general fund structural deficit is projected to worsen based on downward revenue revisions and additional spending increases. The effects of the federal shutdown have not been reflected in current revenue estimates.
2. Impact of federal actions. As sequestration continues its effects on direct state and local grants and impact on general fund revenues may require budget cuts or replacement of lost revenue with general funds.
3. Pension reinvestment. At issue is whether the state can afford to continue contributing approximately $300 million above the annual required contribution to expedite reaching an 80 percent funded status.

Massachusetts
1. Tax revenue exposures. Addressing revenue exposures related to the repeal of the technology tax, Part B income tax reduction, and a potential ballot question related to the repeal of automatic gas tax increases.
2. Affordable Care Act (ACA).
3. Minimum wage increase.

Michigan
1. Health care/Medicaid expansion. The state is pursuing a waiver and may need additional implementation legislation.
2. Personal property taxes. Additional implementation legislation may be necessary regarding the enacted repeal on commercial and industrial personal property, as well as matters related to an August 2014 ballot issue on the subject.
3. Impact of Detroit bankruptcy.

Minnesota
1. Implementation of Affordable Care Act (ACA). There remain many questions about the level of federal funds that will be provided based on Minnesota's implementation of ACA.
2. Bonding bill. The Legislature is anticipated to debate a substantial package of capital projects during the 2014 session.
3. Budget stability. The goal would be for the budget not to be an issue in the 2014 session.

Mississippi
1. Medicaid. Funding for continued growth in the Medicaid program and to address potential costs associated with the Affordable Care Act (ACA).
2. Corrections. Costs associated with an increasing prison population.
3. Education. Expanded funding for K-12 education, Institutes of Higher Learning (IHL) and community colleges.

Missouri
1. Medicaid expansion.
2. Education. Transfers between districts.
3. Education. Foundation formula funding.

Montana
No regular session in 2014.

Nebraska
1. Cash reserve fund (rainy day fund). Officials are expected to discuss the appropriate level of reserve funds under current economic conditions.
2. Tax modernization. Interim study may stimulate changes to the tax system.
3. Prison population. Alternatives to incarceration will be considered.

Nevada
No regular session in 2014.

New Hampshire
1. Medicaid expansion. Governor called Legislature back into special session Nov. 7-21, 2013, to discuss legislation relative to Medicaid expansion in New Hampshire. Special Session HB 1 has been introduced in the House, and Special Session SB 1 has been introduced in the Senate. Process ongoing. Although resolution is sought before the 2014 session, continued debate is expected.
2. Gaming. Several bills have been filed for the 2014 session relative to expanded gaming.

New Jersey
No response.

New Mexico
1. Revenue reserve levels. Revenue estimates continue to project some weakness in current fiscal year.
2. State employee compensation.
3. Infrastructure/capital outlay.

New York
1. Tax reductions and reform.
2. Spending control. The executive is expected to submit a budget at or below the rate of inflation

North Carolina
1. Compensation for teachers and state employees.
2. Medicaid/healthcare.
3. Impact of federal budget.

North Dakota
No regular session in 2014.

Ohio
1. Medicaid reform.
2.
Tax reform.
3. Mid-biennium budget review.

Oklahoma
1. "Pinnacle Plan" year-three funding. Human Services’ multi-year restructuring of the child welfare system. Year-three increases in appropriations are currently estimated at $36 million.
2. Medicaid maintenance of effort. Reduced Federal Medical Assistance Percentage (FMAP) and other factors point to a significant maintenance of effort requirement.
3. State employee compensation. Last adjusted in 2006, state employee pay, particularly in the public safety area, has received much attention and discussion.

Oregon
1. Covering costs from the state's 2013 wildland fire season.
2. General Fund balance. Officials are expected to review the adequacy of the general fund ending balance, including whether or not to restore a 2 percent reduction made to all state agency budgets during the 2011 session.
3. State employee compensation. Expected to determine the timing on releasing funding to pay for compensation plan changes for state employees.

Pennsylvania
1. Transportation funding.
2. Pensions/employer contribution costs.
3. Public welfare mandatory cost increases.

Rhode Island
No response.

South Carolina
1. Medicaid funding. State match portion.
2. K-12 funding.
3. State employees’ health insurance.

South Dakota
1. One-time revenue receipts.
2. Education funding. Ongoing formula funding versus one-time funding.
3. State employee self insurance fund deficit.

Tennessee
1. Medicaid (TennCare)
2. Education

Texas
No regular session in 2014.

Utah
1. Education
2. Transportation
3. Corrections

Vermont
1. Maintaining a balanced budget. Spending needs continue to exceed revenue overall.
2. Addressing the funding for teachers’ retirement. Retired teacher health care is a current state expense which needs to be addressed. Its funding comes from teachers’ retirement contributions generally and the growing cost creates a fiscal drag on the overall funding for this fund.  
3. Preparation for health care finance changes. Vermont is considering a major change in health care finance with a move to "single payer" type system in 2017. While decisions about financing are a year or more away, the development of tools and analytical capacities will be discussed this session.

Virginia
1. Medicaid expansion. A study commission has been evaluating this issue.
2. Dealing with the impacts of sequestration. Crafting a budget will be more difficult with uncertainty about federal budget cuts.
3. Cost of Deptartment of Justice settlement. Closure of state training centers will require additional state funding.

Washington
1. Caseloads, per-capita and technical corrections. A supplemental budget will be needed to align appropriated levels with updated estimates of entitlement program spending.
2. Mental health. There are a variety of budget and policy issues in this area including procurement methodology, children’s mental health services and costs/income at the state hospitals.
3. Litigation. The legislature will continue to monitor litigation in a number of areas including K-12 finance, pension benefits and various human service and health care programs.

West Virginia
1. General revenue collections. Tax reductions in the previous five years are now being realized in the general revenue budget. These were the removal of food tax completely and reductions in franchise and corporate net income tax rates. There has been low to no growth in the economy. The coal industry has decreased as a result of mining permit approvals and the reduction in coal-fired electrical plants.
2. Medicaid.
3. Lottery. Lottery negative growth of approximately 8 percent per year for the past five years due to lotteries in all surrounding states.

Wisconsin
No response.

Wyoming
1. The level of on-going expenditures for state government operations, including salaries, for the 2015-2016 biennium. In the 2013 general session,  the Wyoming Legislature enacted budget reductions for most agencies. Looking forward, maintenance of prior reductions and opportunities for growth will likely be examined.
2. One-time expenditures. The level of one-time expenditures, including capital construction, for the state's 2015-2016 biennium.
3. State responses to the Affordable Care Act (ACA).

Source: NCSL survey of legislative fiscal offices, fall 2013.

 
 
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