Vermont Fiscal Update August 11, 2006 Legislative discussion update Legislative Joint Fiscal Office

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Vermont Fiscal Update August 11, 2006
Legislative discussion update Legislative
Joint Fiscal Office
One Baldwin Street Montpelier, Vermont
05633-5301 802-828-2295
http//www.leg.state.vt.us/jfo/
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Order of Presentation

• Key themes
• FY 2006 revenues the good news
• The FY 2007 revenue spending picture
• FY 2008 and beyond
• General Fund (GF)
• Medicaid
• Other pressures

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Key Themes

• FY 2006 ended with a General Fund (GF) surplus
• That surplus will carry us through FY 2007
• FY 2008 and beyond will be impacted by structural
  deficits, budget pressures, and economic issues

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FY 2006

• As of July closeout 2006, GF revenues exceeded
  forecasts by 37 M.
• This is after the 5.2M transfer of surplus
  estate tax to to the Higher Ed. Trust Fund.
• Most of the surplus was allocated by the
  legislature in the 27M Waterfall.
• The E-Board allocated 8.9 to farm relief and
  1.5 for towns emergency road repairs.
• The FY 2007 GF budget is about 1.14B so 11M
  represents 1 of the GF Budget

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Uses of FY 2006 surplus

• 10 M carried forward for FY 2007 base
  expenditures Use of one-time money for ongoing
  costs is a concern
• Waterfall items
• 8.0 M Next Generation higher education
  initiative
• 7.8 M teachers retirement
• 4.0 M AOT one-time technology expense
• 2.5 M pay act 81 funded one-time...a change
• 2.0 M to fund Medicaid
• 2.0 M to meet other fund deficits
• Misc. other (see section 272 of Act 215)
• 14.8 M available for Budget Adjustment Needs

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FY 2007 Budget

• Projected base GF budget growth is 7.4 before
  budget adjustment likely pressures
• Transportation Fund (TF) leaking revenue. GF
  picked up 11M in TF expenses yet TF revenues
  continue to fall short causing another 10M
  problem for current year and an ongoing problem
  for subsequent years.
• Funding pressures in Corrections, TANF, Health
  Dept Public Safety, and others
• We anticipate continuing pressure on federal
  funding source and these cuts will create
  pressure on state funds.

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Where are we? FY 2008 and Beyond Base Budget

• GF Spending Growth
• 5-6 average GF base spending growth past 5
  years
• 7 GF base spending growth past 3 years
• FY 2008 base GF budget projection
• FY 2007 has a 14.8 M revenue surplus which may
  be used for budget adjustment or other needs
• Assuming 4 spending growth, GF revenues 38 M
  less than base budget need.

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Where are we? FY 2008 and Beyond Medicaid

• Medicaid deficit projection (Current)
• State Funds Services ( M)
• FY 2008 ( 30) (72)
• FY 2009 ( 70) (168)
• FY 2010 ( 99) (238)
• Projection (with 10 M in new tobacco money)
• State Funds Services ( M)
• FY 2008 ( 20) ( 48)
• FY 2009 ( 60) (144)
• FY 2010 ( 88) (211)
• Because of federal matching funds, 1 of state
  funds pays for 2.40 of services

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Where are we? FY 2008 and Beyond Other Issues

• Remaining teachers retirement annual shortfall
  7.8M
• GASB 45 (OPEB- Other Post Employment Benefits)
• State Employees 10.5 M a year (possibly less
  1.8M)
• Teachers 24.8 M a year
• Capital Bill Pressures (44 M each year in
  capacity with demands in excess of 100 M)
• Schools and Tech Centers 30-32 M a year
• State Lab 25 m, State Hospital 15 M,
• Corrections work camp 7 M. Pownal 20 M
• Everything else

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Where are we? FY 2008 and Beyond Other Issues 2

• Health Care Reform Implementation
• Transportation Fund shortfall
• 5.8M FY 2006 shortfall covered using
  carryforward which will impact FY 2008
• 10.4M shortfall for FY 2007
• Estimated 6.5M on going shortfall in FY 2008 and
  beyond w/o meeting infrastructure needs
  AMTRAK
• Federal Fund reductions
• Education Fund and grand list growth When will
  grand list growth end? And what will that mean?
• The economy There is economic risk in FY 2008
  and beyond!

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Studies in progress

• The level of fiscal stress is somewhat unique
  this year in that it is structural or long term
  in nature
• This summer the legislature set in motion two
  studies
• An examination of the Medicaid deficit and
  actions to address it
• A look at capital construction commitments and
  resources to bring them into balance
• In part, the awareness of the problem helps to
  bring about the decisions to prevent its
  acceleration