The Commonwealth's fiscal year 2008 budget of $26.808 billion currently relies on about $600 million of reserve transfers and $180 million of non-recurring revenues carried forward from fiscal year 2007. In the aggregate, this means that a structural deficit of $780 million is the starting point for developing a fiscal year 2009 budget that maintains existing services and programs. This does not include spending pressure that exists in fiscal year 2008 from requests for supplemental funding and continued expansion of programs and services.
The fiscal year 2009 budget challenge is compounded by the fact that there are significant pressures on expenditures in fiscal year 2009 for a relatively small number of cost items, including Medicaid, Chapter 70 education aid, and others. Expenditures needed to provide the same level of services in fiscal year 2009 as in fiscal year 2008 are projected to grow by almost 6%, far exceeding the revenue consensus growth of 3.8%.
The structural deficit for fiscal year 2008 together with the projected growth in costs exceeding revenues, not surprisingly, results in a fiscal year 2009 projected shortfall of over $1.3 billion.
Note: controlling for county sheriffs coming into the state budget, the total bottom line for H.2 is $28,075 Billion.
|FY2008 Est. Spending||27,205|
|House 2 FY2009:||28,165||3.53%|
|Adjustments: County Corrections Reform||(90)|
|Adjusted House 2 FY2009:||28,075||3.20%|
|Spending Through Consolidated Transfers:|
|Health Care Reform Transfers:|
|Commonwealth Care Trust Fund||618||869|
|Hospital & Physician Rates||154||225|
|S. 122 Payments||180||160|
|Health Safety Net Trust (Pool)||147||63|
|Medical Assistance Trust Fund||501||251|
|Essential Community Provider Trust Fund||28||28|
|State Retiree Benefit Trust Fund||360||382|
|RMV Revenues to the Transportation Improvement Fund||-||6|
|Subtotal of Consolidated Transfers:||1,988||1,984|
|Spending Through Statutory Transfers:|
|Subtotal of Statutory Transfers:||2,789||2,935|
|Grand Total of Spending:||31,982||32,994||3.16%|
The fiscal year 2009 budget authorizes spending of $28.165 billion, an increase of 5.1% over the fiscal year 2008 General Appropriations Act. Factoring in additional spending now authorized in fiscal year 2008 through supplemental appropriations and prior appropriations continued, the Governor's budget recommendation reflects growth of 3.5% over the current projected spending level for fiscal year 2008.
The Governor's fiscal year 2009 budget proposal relies on a balanced set of solutions to close the projected shortfall described earlier. The Governor's budget recommendations are balanced and transparent. The Administration restrained spending through a variety of initiatives that resulted in gross reductions of $479 million ($344 million net) or almost 2% of state spending. This combined with revenue initiatives, spending controls, reforming the Stabilization Fund deposit, and a rational approach to the use of reserves combined to close a $1.3 billion gap.
In addition to these solutions, the budget holds nearly 190 line-items to zero growth in spending for fiscal year 2009. Base spending for these items total almost $1.5 billion in fiscal year 2009.
|A.||Spending Controls and Reductions|
|Elimination of Earmarks||$ (40)|
|State Employee Health Care Contributions||$ (51)|
|Constrained growth in agency & program spending||$ (84)|
|B.||Medicaid Cost Controls and Savings - (Net of Revenue Loss)|
|Value and Cost Based Purchasing Principles||$ (105)|
|Right Care, Right Setting Efficiencies||$ (26)|
|Efficient Drug Utilization||$ (10)|
|Administrative Savings||$ (29)|
|Subtotal of Spending Controls and Reductions ($479M Gross Savings)||$ (344)|
|C.||Enhanced Revenue Collection and Enforcement Efforts||$ (166)|
|D.||Recommendations Of the Study Commission on Corporate Taxes||$ (297)|
|E.||Casino Revenues Used to Cover the Lottery Shortfall||$ (124)|
|F.||Stabilization Use - In Accordance with Administrations Proposed Policy||$ (369)|
|G.||Reforming the Stabilization Fund Deposit||$ (100)|
|Total Solutions:||$ (1,399)|
|Note: Total savings cover the budget gap along with limited targeted investments|