Linda Luebbering, Director, Missouri Division of Budget and Planning presentation at the NSC 2012 Missouri Budget Forum

1. Missouri
Budget Update
presented at
Nonprofit Services Center
2012 Missouri Budget Forum
March 2, 2012
Missouri Division of Budget and Planning

2. MISSOURI BUDGET UPDATE
March 2012
 Economic Data – Actual & Projected
 State revenue update.
 State spending update.
 What’s ahead for FY 2012 and FY 2013.
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3. MISSOURI BUDGET UPDATE
March 2012
Economic Data – Actual & Projected
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4. Growth in MO Personal Income
Q/(Q-4)
10%
8%
6%
4%
2%
0%
(2%)
(4%) Personal Income
(6%)
(8%) Wages & Salaries
(10%)
2008q1
2010q1
2011q1
2012q1
2013q1
2009q3
2009q1
2008q3
2012q3
2010q3
2011q3
 Personal Income growth has been relatively strong in recent
quarters, despite lackluster increases in wages and salaries.
 Growth will likely cool somewhat, but pick up again as employment begins
to improve.
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5. Change in US Total Industrial Production
Over Previous Three Months
4%
2%
0%
(2%)
(4%)
(6%)
(8%)
Jan-07
May-07
Sep-08
Jan-09
May-09
Jan-08
May-08
Sep-10
Sep-07
Jan-10
May-10
Sep-11
Sep-09
Jan-11
May-11
 Industrial Production has slowed in the past three months. Inventories of
manufacturers and retailers have increased relative to sales, and there have
been complications in the global supply chain, leading to fewer orders.
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6. US & MO Unemployment Rates
Seasonally Adjusted Data
11%
10%
9%
8%
7% US
6% MO
5%
4%
2007q3
2008q3
2009q1
2007q1
2008q1
2010q3
2011q3
2012q3
2010q1
2012q1
2013q3
2011q1
2013q1
2009q3
 US Unemployment is expected to remain high, though decline
slightly, through 2012.
 In general, the unemployment rate in MO follows the national trend.
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7. Inflation (CPI)
CPI
Q/(Q-4) Core CPI
6%
5%
4%
3%
2%
1%
0%
(1%)
(2%)
2008q1
2008q3
2010q1
2010q3
2007q1
2007q3
2011q1
2011q3
2009q1
2009q3
2012q3
2013q1
2013q3
2012q1
 The lack of consumption or wage growth is keeping inflation
subdued, despite the impacts of high gasoline prices earlier this year.
 There is some evidence that higher energy prices may impact “core”
inflation, the statistic that monetary policy makers generally emphasize. 7

8. MISSOURI BUDGET UPDATE
March 2012
STATE REVENUE UPDATE
 Sources of general revenue.
 General revenue projections.
 Federal stabilization & relief funds.
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9. FY 2012 NET GENERAL REVENUE COLLECTIONS
($ in millions)
Total $7,300.9
All Other
$94.9
1% Individual
County Foreign
$171.0 Income
3% $4,835.0
66%
Corporate
$375.0
5%
Sales
$1,825.0
25%
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10. NET GENERAL REVENUE COLLECTIONS
($s in millions)
8,004
8,000 7,586
7,301
7,000 6,775
6,000
5,210 5,072
4,835
5,000
4,434
4,000
3,000
1,891
1,931 1,825
2,000 1,732
1,000 352
459
288 375 186 177 171 181 218 144 95 91
-
Individual Sales Corporate CF Ins All Other Total
FY 08 FY 09 FY 10 FY 11 FY 12 Est FY 13 Est
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11. REVENUE COLLECTIONS
HOW ARE WE DOING?
 Consensus forecast for FY12 would require growth of about 2.7%
above FY11 actual collections.
 Positive signs are seen in withholding taxes, biggest source of state’s
income. Growth in FY11 was 3.1%. (Expected to be 3.2% in FY12)
 Sales tax collections are expected to improve from only 1.0% growth
in FY11 to 3.6% growth in FY12.
 Gaming and cigarette tax revenues projected to fall short.
 Hurdles: high unemployment rate; continuing housing market flux;
European debt crisis; continuing federal budget saga.
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12. FEDERAL STABILIZATION FUNDS
($s in millions)
FY 09 FY 10 FY 11 FY 12 Total
Resources
Enhanced FMAP $432.1 $718.8 $628.3 $49.5 $1,828.7
Education $0.0 $530.1 $158.2 $64.9 $753.2
General Purpose $0.0 $88.5 $75.6 $3.6 $167.7
Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7
Total $432.1 $1,337.4 $1,051.8 $118.0 $2,939.3
Estimated
Expenditures
Enhanced FMAP $255.8 $639.0 $588.7 $345.2 $1,828.7
Education $0.0 $530.1 $158.2 $64.9 $753.2
General Purpose $0.0 $88.5 $75.6 $3.6 $167.7
Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7
Total $255.8 $1,257.6 $1,012.2 $413.7 $2,939.3
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13. MISSOURI BUDGET UPDATE
March 2012
STATE SPENDING UPDATE
 State spending pie.
 Operating budget summary.
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14. FY 2013 General Revenue Operating Budget
Governor’s Recommendations
($ in millions)
Total $8,029
All Other Elementary & Secondary
Education
$933
Human Services $2,944
12%
$2,431 37%
30%
Higher Education
Corrections & Public Safety $741
$690 Judiciary, Elected Officials, &
9%
8% General Assembly
$290
4%
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15. MISSOURI BUDGET UPDATE
March 2012
FY 2012 and FY 2013 BUDGET
 What’s Ahead?
 How Do We Make It Work?
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16. FY 2012 AND FY 2013 BUDGETS
WHAT’S AHEAD?
 Hopeful that core revenue will remain on track with forecast.
Continuing economic situation adds uncertainty. Behind now.
 Legislative issues – franchise tax; tax amnesty.
 Gaming funds projected to fall below appropriations.
 Recovering and rebuilding from multiple disasters will require
significant investment from the state.
 Federal budget negotiations could lead to significant reductions in
federal funds for state programs.
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17. FY 2012 AND FY 2013 BUDGETS
WHAT’S AHEAD? (continued)
 Over $600 million in one-time revenue sources in
FY2012 budget will not be available in FY13.
 Continued improvement in economy should lead to better
revenue numbers for FY13.
 Health care cost increases will continue to impact budget.
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18. FY 2013 BUDGET
HOW DO WE MAKE IT WORK?
 More people working in good jobs!
 More focused use of tax credits.
 Improved collections of existing taxes.
 Reduced spending.
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