Judging from the initial budget numbers being projected for 2013-15, the first legislative session for the next Governor will look a lot like the past few legislative sessions: focused on realigning state spending within forecasted revenue.
According to numbers released today by the Office of Financial Management (OFM), budget writers are anticipating $1.5 billion more in revenue to help write the 2013-15 budget. This expected revenue increase is based on the state’s June Revenue forecast which was adopted with the caution that there is a 40% chance that this increase could be wiped-out depending on economic developments in Europe and actions (or lack thereof) in Congress.
Depending on various policy choices, however, OFM’s initial budget projections show the need for policymakers to continue their efforts to prioritize and “re-set” state spending obligations.
Among the various policy pressures OFM identified:
- $366 million for actuarially recommended pension payment changes
- $292 million for K-12 pay increases based on I-732
- $242 million for increased debt service
- $171 million to restore the 3% temporary salary cut for state workers
- $166 million to restore K-12 salary reduction
- $30 million for federal health care reform
- $14 million for the “new” paid family leave benefit
These policy decisions along with others leads OFM to project an estimated $1.5 billion shortfall for 2013-15. This doesn’t include the estimated $1.1 billion increase for the McCleary K-12 decision (HB 2776) or leaving any reserves other than the constitutional budget stabilization fund.
This initial budget outlook provides additional context for OFM’s recent memo to agencies signaling its plan to focus on fee increases in the Governor’s budget proposal.
These numbers also underscore why policy makers should exercise caution before committing the state to future large scale costs such as the potential Medicaid expansion under the federal health reform law.
Needless to say, the decision by the Supreme Court on the state’s 20-year old requirement for lawmakers to receive a supermajority vote to raise taxes and voters’ verdict on this year’s I-1185 will help provide the framework for how the 2013-15 budget debate unfolds.