Economists predict the state government will bring in more money in the next fiscal year, but that’s compared to months on end of declining revenues.
The State Funding Board estimates how much tax money the state can depend on as it sets a spending plan for the budget year, which begins in July. Right now, it’s predicting a modest growth rate of about 2 percent.
Historically, the state’s tax collections have tended to grow at a faster rate. But for the last several years, revenues have shrunk, not grown.
State Finance Commissioner Dave Goetz is a member of the Funding Board. Even with the modest growth predictions, he still has to make cuts in both this year’s and next year’s budgets.
“We’re continuing to lose money, and …now we’ll have to figure out how to make, how to propose seventy-five million dollars in additional reductions, in a very tough budget to begin with.”
That’s on top of one hundred and fifty-five million dollars already cut from the current year’s budget since February.
Goetz says he’ll confer with the governor and the administration will bring new budget cuts to the legislature in two weeks, in time to keep the General Assembly on schedule to finish its work in the last half of May.
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When Goetz’s Department of Finance & Administration reported February revenues, the state was “under-collected” by about $44 million in the General Fund, which is used to pay most state expenses.
Based on this week’s estimate by the Funding Board, Goetz must now plan for this year, which ends June 30, to finish up $77 million in the red. Goetz says the administration will probably dip further into reserves, the Rainy Day Fund, to make up that shortfall.
Revenues have failed to live up to expectations for 21 straight months. This fiscal year will almost certainly finish below the actual dollar “intake” for the previous year. In English that’s “shrinkage,” in bureaucratese that is “negative growth.” Goetz says that even if 2010-11 (the budget year that starts July 1) manages to grow by 2 percent, the money that comes in will still be less than the state’s income in 2005-06.
After figuring the $77 million that must be cut from the current year’s budget, the administration must trim $75 million from the already sparse budget proposed for 2010-11, Goetz says.
The revenue growth for 2010-11 is estimated at 1.7% to 1.98%. At the high end, that would bring in $10.17 Billion. But some of that money is dedicated to special purposes, like the gasoline tax that goes to the road fund. When the Board looked at just those revenues that come in to the General Fund, the funds that can be used for almost any purpose, the growth would be above 2 percent but the total dollars brought in would be between $8.2 Billion and $8.36 Billion.
The Board also looks at projected lottery revenues. The recommended range of figures adopted by the board was the most pessimistic since the state began running the education lottery.
On the low side, the experts project that lottery proceeds are DOWN 1.28 percent for the year ending June 30. Next year, and for the three years following, the proceeds would be expected to fall one-half percent per year. On the optimistic side, this year might finish up with 2.45 percent growth. That would mean the lottery would bring in an additional $10 Million.
Going forward with the same optimism, the rosiest guess is growth of about 1 percent per year for the next four years.
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