State Budget Update - Michigan House of Representatives€¦ · State Budget Update Kyle I. Jen,...

State Budget Update

Kyle I. Jen, Deputy DirectorHouse Fiscal Agency

Representative GenetskiAllegan County Local Officials Conference

June 21, 2013

Presentation Topics

6/05/2013House Fiscal Agency2

Economic Trends Long-Term Budget Trends FY 2014 State Budget Outstanding Budget Issues

Economic Trends

June 2013House Fiscal Agency3

Percent Change in Total Non-Farm Employment

-20.0%

-16.0%

-12.0%

-8.0%

-4.0%

0.0%

4.0%

8.0%

Jan2000

Jul Jan2001

Jul Jan2002

Jul Jan2003

Jul Jan2004

Jul Jan2005

Jul Jan2006

Jul Jan2007

Jul Jan2008

Jul Jan2009

Jul Jan2010

Jul Jan2011

Jul Jan2012

Jul Jan2013

U.S. Michigan

June 2013House Fiscal Agency

January 2000 through April 2013

Source: U.S. Department of Labor, Bureau of Labor Statistics

4

Average Agency Forecasts

Michigan Job Gains Expected

88.0

-112.7-76.7 -71.0

-17.0 -9.2

-63.2 -58.7-105.6

-291.6

-7.2

72.351.0 53.6 47.3 44.9

91-00Avg.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Joint Presentation – Consensus Conference May 2013

Change in Michigan Wage and Salary Employment(in Thousands)


Sales Up; Big 3 Market Share Stabilizes

14.8 15.1 15.2 15.617.0 17.4 17.2 16.8 16.6 16.9 16.9 16.5 16.1

13.1

10.411.6

12.7

14.415.3 15.6 15.9

30%

40%

50%

60%

70%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Mill

ions

U.S. Light Vehicle Sales Big 3 Share

Source: Automotive News and May 2013 Consensus Estimates

2013 - 2015are May 2013Consensus Estimates


Percent Change in Employment


1.57%

2.88%

0.68%

1.66%

0.37%1.29%

1.65%

-0.39%

0.85%

-5.91%

4.14%

0.78%

-2.83%

0.93% 0.58%

-1.16%

Total Non-Farm

Construc-tion

Manufac-turing Trade Information

FinancialActivities

OtherServices Government

U.S. MichiganSource: U.S. Department of Labor, Bureau of Labor Statistics

April 2012 Through April 2013

7

Disposable Personal Income and Consumer Spending

0.1% 0.2% 0.2% 0.1% 0.4% 0.3%

1.4%

3.1%

-5.1%

1.2%

0.2%

-0.1%-0.2%

0.0%0.4% 0.3%

0.8%0.0% 0.3% 0.2% 0.3%

0.8%0.1%

-0.2%

May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13

Disposable Personal Income Consumer Spending


Percent Change from Preceding Month

Source: U.S. Department of Commerce, Bureau of Economic Analysis

8

Long-Term Budget Trends


GF/GP Net Revenue

House Fiscal Agency10

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Mill

ions

FY 13 through FY 15 areMay 2013

ConsensusEstimates

Actual Dollars

Note: For consistency, revenue figures for years prior to FY 2010-11 have been adjusted to include sales tax revenue previously designated for statutory revenue sharing.

Total GF/GP revenue is well below FY 2000 and 2008 peaks in nominal terms and has fallen 33.1% since FY 2000 in inflation-adjusted terms.

Adjusted using Detroit CPI

June 2013

School Aid Fund Net Revenue

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Mill

ions

FY 13 through FY 15 areMay 2013

ConsensusEstimates

Actual Dollars

Adjusted using Detroit CPI


Total SAF is at roughly the FY 2008 level in nominal terms and has fallen 12.4% since FY 2000 in inflation-adjusted terms.

June 2013

Constitutional Revenue Limit(Billions of Dollars)


-$0.5

-$1.2-$1.4-$1.3

-$0.2$0.0-$0.4

-$0.8-$1.4-$1.4

-$2.2

-$3.0

-$3.7-$3.2

-$2.2

$0.1

-$0.2

-$1.0-$0.6

$0.0 $0.2

-$2.4

-$3.9-$4.2

-$4.4-$4.2

-$5.0-$5.3

-$4.7

-$8.0-$7.6

-$5.6-$5.3

-$6.4

-$7.0-$7.0

FY80

FY81

FY82

FY83

FY84

FY85

FY86

FY87

FY88

FY89

FY90

FY91

FY92

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13*

FY14*

FY15*

Am

ount

bel

ow/a

bove

lim

it

*May Consensus Estimates

As a percentage of state personal income, total state tax and other revenuecollections have fallen by about $7 billion since FY 2000.

June 2013

Total State AppropriationsRemoving federal funds, total appropriations funded from state revenue sources (GF/GP plus

restricted) have grown by only 0.8% per year since FY 2002.

$0

$10

$20

$30

$40

$50

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Bill

ions

GF/GP Restricted Local/Private ARRA Federal

House Fiscal Agency13 June 2013

State Sources

School Aid Appropriations

14

$8

$9

$10

$11

$12

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Bill

ions

Federal stimulus funds used to offset state funds OPEB Prefunding

Excluding funding added to pay down retirement liabilities, appropriations for School Aid have been reduced by $404 million since FY 2007 at the previous peak excluding Federal Stimulus funds.

GF/GP ContributionSchool Aid Fund

NOTE: Beginning in FY 2009, state funds increased by about $350 million to replace local revenue due to personal property tax reductions.


Per Pupil Foundation Allowances Increases/Decreases

$153 $155 $154$238 $300 $300

$200$0 $0

$175 $210$48 $56 $0 $0

-$470

$30

$306 $310 $308

$46

$530

$400

$96 $112$120

$110

FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10*

FY11*

FY 12 FY13*

FY14*

State Maximum Change Minimum Change

Per P

upil

Cha

nge

*Notes: 1. FY 2010 school district funding was reduced $154 per pupil and FY 2011 funding was reduced an additional $16 per pupil. 2. FY 2013 districts with a foundation allowance below $6,966 received an equity payment of up to $120 per pupil. 3. In FY 14 foundation increases ranged from $30-$60, and then districts with a foundation allowance below $7,026 also

received an equity payment of up to $50 per pupil.

House Fiscal Agency June 201315

GF/GP Appropriations

16

$5

$6

$7

$8

$9

$10

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Bill

ions

Federal ARRA used to offset state GF/GP OPEB prefunding

The ongoing base GF/GP budget is $940 million lower than in FY 2008, when adjusted for funding added to pay down retirement liabilities.

One-time approps


State Appropriations forPublic University Operations


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

Mill

ions

GF/GP School Aid Fund

State support for public universities has been reduced by $350 million (22%) since FY 2002 and is still $155 million (11%) below FY 2011 levels.

June 2013

Community CollegesAppropriations and Enrollment


State support for community colleges operations is roughly flat since FY 2001, while total college enrollment has increased by about 50%.

June 2013

0

20

40

60

80

100

120

140

160

180

200

$0

$50

$100

$150

$200

$250

$300

$350

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

Thou

sand

s

Mill

ions

GF School Aid Fund FTE Students

Revenue Sharing toCities, Villages, and Townships


$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

Mill

ions

Statutory Constitutional

Statutory revenue sharing payments to CVTs have been reduced by $448 million (66%) since FY 2001, including $78 million (25%) over the last three

years, to help balance the GF/GP budget.

June 2013

Corrections Budget Increases

$0

$500

$1,000

$1,500

$2,000

$2,500

5

15

25

35

45

55

FY71

FY73

FY75

FY77

FY79

FY81

FY83

FY85

FY87

FY89

FY91

FY93

FY95

FY97

FY99

FY01

FY03

FY05

FY07

FY09

FY11

FY13

GF/

GP

Expe

nditu

res

in M

illio

ns

Pris

on/C

amp

Popu

latio

n in

Tho

usan

ds

Prison/Camp Population MDOC GF/GP ExpendituresFiscal Year 2008-09 includes GF/GP reductions due to appropriation of federal ARRA funds.


Corrections Personnel Costs

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

Spen

ding

(in

mill

ions

)

Regular Salaries Overtime FICA/Medicare Fringe Benefits Retirement OPEB Prefunding

21 June 2013House Fiscal Agency

Excluding cost increases associated with paying down retirement liabilities, total Corrections compensation costs have fallen by $170 million (14%) over four years (FY 2008 to FY 2012).

Medicaid Expenditures


Overall Medicaid costs have increased rapidly due to rising caseloads, but GF/GP support has been basically flat for a decade due to increased federal match and the

use of special financing mechanisms.

$0

$2

$4

$6

$8

$10

$12

$14

0.0

0.5

1.0

1.5

2.0

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Bill

ions

(Exp

endi

ture

s)

Mill

ions

(Cas

eloa

d)

Fede

ral

GF/

GPO

ther

Sta

teM

atch

Temporary ARRA

Total caseload

June 2013

Total Classified Employees


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13

The total number of state employees has declined by 14,000 (23%) since FY 2001.

June 2013

Michigan’s Transportation Budget


$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14

Mill

ions

State Restricted Funds Federal Funds General Fund/General Purpose Local/Private/Other Funds

Note: The increase in federal funds in FYs 2008-09, 2009-10, and 2010-11 was due to funds provided through the America Reinvestment and Recovery Act of 2009 (ARRA).

June 2013

State Trunkline Pavement Condition Combined Freeway and Non-Freeway

Source: Michigan Department of Transportation, 2013-2017 Five-Year Transportation Program

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Perc

ent G

ood/

Fair

MDOT Historic and Projected RSL Pavement ConditionCurrent Funding vs. Match All Federal Aid

Match All Federal Aid

Current Funding

Historic

Goal

Year


State Source Appropriation Changes

(20)

0

20

40

% Change: FY 2003-04 to FY 2013-14

CommunityHealth

Corrections

HumanServices

Transportation

RevenueSharing

SchoolAid*

HigherEducation

AllOther

Consumer Inflation

CommunityColleges*


*Includes recent increases for MPSERS rate cap, which are a pass-through to the retirement system.

26

FY 2014 State Budget


May 2013 Consensus Revenue Estimates

FY 2012-13 FY 2013-14

Total

$ Chg from Jan

$ Chg from

FY 12

%Chg from

FY 12 Total

$ Chg from Jan

$ Chg from

FY 13

%Chg from

FY 13

School Aid Fund $11,213.2 $85.5 $334.5 3.1% $11,470.1 $37.6 $256.9 2.3%

General Fund/ General Purpose (GF/GP) $9,189.2 $396.9 ($76.0) (0.8%) $9,446.2 $181.8 $257.1 2.8%

Total Revenue $20,402.3 $482.4 258.5 1.3% $20,916.3 $219.3 $514.0 2.5%

(Dollars in Millions)


School Aid Balance Sheet

FY 2012-13 FY 2013-14REVENUE

Beginning Balance $254.1 $140.4School Aid Fund (SAF) Revenue 11,213.2 11,470.1General Fund/General Purpose (GF/GP) 282.4 230.0Federal Funds 1,701.0 1,764.4MPSERS Reserve Fund 0.0 156.0

TOTAL REVENUE $13,450.7 $13,760.9

EXPENDITURESK-12: FY 13 (YTD) and FY 14 (HB 4228) $12,944.7 $13,361.8

FY 13 Adjustments (HB 4228) (32.5) 0.0Subtotal K-12 Expenditures $12,912.2 $13,361.8

Subtotal Postsecondary Expenditures $398.1 $398.1TOTAL EXPENDITURES $13,310.3 $13,759.9

ESTIMATED ENDING BALANCE $140.4 $1.0

MPSERS Reserve Balance $174.0 $18.0MPSERS 3% Health Care Contribution Escrow Fund Balance $508.0 $508.0



School Aid Appropriations

Foundation Allowances

$8,943,700,000 67%

Special Education$1,424,446,100

11%Federal Programs (non-Special Ed)$1,320,421,300

10%

Other Programs$433,665,000

3%

MPSERS$504,600,000

4%

At-Risk Programs$308,988,200

2%Best Practices / Performance /

Technology$176,400,000

1%Early Childhood Programs

$185,475,000 1%

ISDs$64,108,000

1%

House Fiscal Agency

FY 2013-14 School Aid Budget = $13,361,803,600.

30 June 2013

* Foundation allowance spending does not include the locally funded portion, but does include FY 2013-14 Equity Payment.

FY 2013-14 School Aid Budget Foundation Allowance – Provides an increase through the 2x

Equity Formula ranging from $30-$60 per pupil.

Equity Payment – Up to $50 per pupil equity payment for Foundation Allowances below $7,076.

MPSERS Retirement Health Care Prefunding Costs – Up from $160 million in FY 2012-13 to $403 million in FY 2013-14.

MPSERS Cost Offset – Reduced from $155 million to $100 million, reducing each district’s allocation by about 36%.

Early Childhood Increases – $65 million increase, adds 16,200 half-day slots and increases half-day per diem from $3,400 to $3,625.

Best Practice Grants – Maintains $80 million in grants equal to $52 per pupil for best practices.

Technology Infrastructure Grants – Maintains $50 million.House Fiscal Agency31 June 2013

General Fund Balance Sheet

FY 2012-13 FY 2013-14REVENUE

Beginning Balance $979.2 $652.8General Fund/General Purpose Revenue 9,190.4 9,430.2EVIP / Revenue Sharing (370.6) (396.6)

TOTAL REVENUE $9,799.0 $9,686.4

EXPENDITURESFY 2013 YTD and FY 2014 (HBs 4228 and 4328) $9,036.7 $9,260.0Deposit into Budget Stabilization Fund 140.0 75.0Transportation Match/Road and Risks Reserve 0.0 351.3Pending Supplemental Adjustments (30.5) 0.0

TOTAL EXPENDITURES $9,146.2 $9,686.3

ESTIMATED ENDING BALANCE $652.8 $0.1



FY 2013-14 GF/GP Appropriations

Community Health$2,916,047,100

31%

Human Services$1,003,000,000

11%

Corrections$1,982,265,800

21%

State Police$353,474,300

4% Higher Ed / Comm Colleges$1,271,344,900

14%

School Aid / Dept of Ed

$300,893,9003%

Debt Service$409,758,600

4%

Other$1,144,407,800

12%

House Fiscal Agency

88% of the $9.4 billion GF/GP budget is appropriated for health and human services, public safety, education, and debt service. The remaining 12% provides funding for 11 state departments, the

Michigan Strategic Fund, and the Legislature, Judiciary, and Executive Office.

33 June 2013

Where did the additional GF/GP revenue added at May Consensus go?


Budget Item Millions of $Allocated for Transportation Match or Reserve $351.0Replace Medicaid Expansion Savings Assumed in Exec Rec 103.0Increase Film Incentives from $25m to $50m 25.0Increase County and Local Revenue Sharing 16.0Increased Department of Human Services Costs 12.0Reserve for Individual Tax/Fee Relief 20.0Other FY 2013-14 increases (approximate) 33.0Total $560.0

June 2013

Budget Stabilization Fund Balance


$1,2

64.4

$994

.2

$145

.2

$0.0

$81.

3

$2.0

$2.0

$2.1

$2.2

$2.2

$2.2

$2.2

$365

.1 $5

08.8

$591

.4

FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13* FY 14** HFA Estimate

Millions of Dollars

FY 2013-14 Major Outstanding Issues

Medicaid Expansion Expand Medicaid to cover persons below 133% of poverty

level – projected state General Fund savings of $206 million in FY 2013-14

Health Insurance Claims Assessment (HICA) Action needed to fill $130 million annual shortfall; full $400

million assumed in FY 2013-14 budget

Transportation Funding Governor has proposed $1.2 billion in new ongoing

funding for roads & bridges; FY 2013-14 budget includes $350 million in one-time funding


www.house.mi.gov/hfa

State Budget Update - Michigan House of Representatives€¦ · State Budget Update Kyle I. Jen,...

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