FY 2013 Update

In July 2012, the Governor signed into law the FY 2013 General Appropriations Act (GAA) – Chapter 139 of the Acts of 2012. The FY 2013 budget authorized spending of $32.509 B (or $34.060 B when including the $1.552 B annual pension contribution), a 4.9 percent increase from FY 2012 actual expenditures of $30.976 B.

FY 2012 Year-End Supplemental Funding for FY 2013

Similar to most fiscal years, total FY 2013 spending was increased upon the adoption of “year-end” FY 2012 supplemental budget legislation, which authorized $117 M in FY 2012 budgetary appropriations (known as Prior Appropriations Continued or “PACs”) to continue to be expended into FY 2013. The year-end FY 2012 supplemental bill (Chapter 239 of the Acts of 2012) also provided additional supplemental appropriations for FY 2013 in the amount of $176.3 M. These changes brought total FY 2013 spending to $32.802 B.

FY 2013 Original One-Time Resources

When the Governor signed the FY 2013 budget into law the, Executive Office for Administration and Finance (A&F) projected a total of $616 M in non-recurring or “one-time” resources needed to maintain a balanced budget this year.

FY 2013 One-Time Resources
dollars in millions
  FY 2013 Original
Budgetary Resources:
Stabilization Resources: 350
Delay FAS 109 Deduction: 46
Suspend Statutory Carry-Forward: 110
Unclaimed Check Fund (non-recurring): 10
Non-Budgetary Resources:
Group Insurance Trust Funds: 45
Quasi Public Contributions: 11
Commonwealth Care Reserves: 44
TOTAL ONE TIME RESOURCES 616

 

The largest one-time resource was $350 M of Stabilization Fund (also known as rainy day fund) resources. In addition, an estimated $110 M was estimated in one-time resources by suspending the requirement that one-half of 1 percent of tax revenues be held in reserve and “carried-forward” from FY 2013 to FY 2014. Other one-time resources were $46 M in delaying the FAS 109 tax deduction and $110 M in utilizing non-budgetary resources, largely in health care related trust funds and from shifting costs to quasi-public authorities for programs in-line with their missions.

FY 2013 December Revenue Revision

Through November, total year-to-date state tax revenues had been performing at $235 M below benchmark. The factors that were most cited by economic forecasters as contributing to the underperformance in revenues were the continued uncertainty surrounding the so called “fiscal cliff” (potential federal tax increases and spending cuts) and the global economic slowdown, particularly within the European markets. On December 4, 2012 the Secretary of Administration and Finance informed the Governor that total FY 2013 tax revenues were projected to be $515 M less than the original GAA assumption of $22.011 B, or $21.496 B. In addition, the Secretary noted that, of the taxes collected through November, $25 M had already been used for dedicated purposes, making them unavailable to support general budgetary spending and therefore increasing the total budgetary shortfall to $540 M.

FY 2013 Fiscal Action Plan

Fiscal Action Plan
dollars in millions
Change in Estimated FY 2013 Tax Receipts: (515)
Year-To-Date Dedicated One-Time Tax Settlements: (25)
Projected Budgetary Shortfall: (540)
Solutions:
Increase Rainy Day Fund Withdrawal: 200
Executive Branch Reductions (net)*: 157
Increased Medicaid and Federal Revenue: 98
Non-Executive Branch Reductions (1%): 25
Reduced Sales Tax Transfer to School Building Authority: 20
Local Aid Reduction (1%): 9
Health Care and Debt Service Savings: 20
Other Fund Surpluses: 11
sub-total: 540
Remaining Gap: -
*Total Recurring Executive Branch reductions are $225 M; after accounting for reduced federal revenue resulting from the spending reductions, the net budgetary savings is $157 M.

 

On December 4, 2012 the Governor announced a fiscal action plan to close the forecast $540 M shortfall. The plan was implemented consistent with the Administration’s published long-term fiscal policy which requires that no more than 50 percent of any mid-year budget shortfall should be solved using one-time budget resources. The plan called for increasing the rainy day fund draws from $350 M to $550 M this year. Executive Branch reductions totaled $157 M net ($225 M gross), of which $10 M was one-time in nature through spending delays or payment shifts. In addition, the Governor proposed 1 percent reductions across the Executive and Non-Executive branches and unrestricted general governmental aid to cities and towns, estimated to provide budgetary savings of $34 M. The plan also called for using $98 M in additional federal revenues, $49 M of which could only collected on a one-time basis. Other solutions included: $20 M less in tax transfers to the School Building Authority, resulting from lower forecasted sales tax revenues; $20 M of projected savings in debt service costs and health care savings based on updated spending projections; and, $11 M in one-time resources from non-budgetary resources. The one-time solutions announced by the Governor totaled $270 M. While the Governor’s plan required reduced spending (by an estimated 1 percent statewide) the Governor noted that these actions were not on scale with those required during the 2008-09 economic downturn when in FY 2009 alone budgeted tax revenues dropped over $3 B, from $21.402 B to $18.260 B.

In order to implement the non-executive branch and local aid reductions and the increased rainy day fund withdrawal, the Governor filed legislation on December 4. The Governor also filed supplemental budget legislation calling for increased funding in a limited number of key areas to address time-sensitive deficiencies, such as family homeless funding and public counsel costs.

As a result of the proposed Fiscal Action Plan, A&F updated its projected one-time resources needed to balance the FY 2013 budget to a total of $919 M. In addition to the $270 M in increased one-time sources outlined above, A&F also estimates that $36 M of FY 2012 PACs carried into FY 2013 are used to supporting ongoing costs and has updated the value of the suspension of the statutory carry-forward to reflect the revised FY 2013 tax revenue estimate.

Revised FY 2013 One-Time Resources
dollars in millions
  FY 2013
Revised
Budgetary Resources:
FY12 Resources Used to Support Ongoing FY13 Costs: 36
Stabilization Resources: 550
Delay FAS 109 Deduction: 46
Suspend Statutory Carry-Forward: 107
Unclaimed Check Fund (non-recurring): 10
Federal Revenues (9C Announcement): 49
One-Time Reductions: 10
Non-Budgetary Resources:
Trust Sweeps or Cost Shifts: 11
Group Insurance Trust Funds: 45
Quasi Public Contributions: 11
Commonwealth Care Reserves: 44
TOTAL ONE TIME RESOURCES 919

 

Revised FY 2013 Estimated Spending

The table outlines the changes to the FY 2013 spending since the Governor signed the budget into law, including PACs, supplemental funding, 9C reductions (implemented and proposed), and net A&F contingencies (combination of surpluses and deficiencies recognized in A&F’s budget assumptions). All FY 2013 estimated spending amounts used in this document and the Governor’s FY 2014 budget proposal reflect these assumptions.

FY 2013 Estimated Spending
dollars in millions
FY 2012 Spending 30,976
FY 2013 GAA 32,509
FY 2012 Prior Appropriations Continued (PACs) into FY 2013 117
Supplemental Budget - Chapter 239 of 2012 176
December 4 Fiscal Action Plan Reductions (259)
Net ANF Contingency Expenditures 25
FY 2013 Estimated Spending 32,568
FY 2013 GAA - % Change from FY 2012 Spending 4.9%
FY 2013 Estimated Spending - % Change from FY 2012 5.1%