Overview
While the House Ways and Means budget sought to close the entire budget gap with program cuts and federal revenue, the final House budget takes a more balanced approach that includes deep cuts, federal revenue, and a sales tax increase. The House made real progress during the floor debate, but the state’s fiscal challenges continue to become more severe as the national recession batters state finances.
The Governor and House initially confronted a budget gap of approximately $3.5 billion. This week, however, the official revenue estimate for FY 2010 was reduced by approximately $1.5 billion dollars – expanding the budget gap by that amount. As the budget process moves to the Senate, it is now likely that the final budget will require deeper cuts and more new revenue than the House budget proposed, as well as the use of more of the expected federal stimulus revenue and draws on the state’s own reserves.
This Budget Monitor describes the House floor action, explaining the major changes from the House Ways and Means (HWM) proposal and comparing final House funding levels to last year’s levels and the Governor’s proposals. The House budget proposes to use the $900 million in new revenue generated by the sales tax increase to restore some of the funding that the HWM proposal would have cut, and to begin to address the long-term deficit the state faces in maintaining its transportation infrastructure. Specifically, the budget allocates $275 million of the sales tax revenue to meet transportation needs and over $600 million to reduce budget cuts, including $205 million to reduce cuts in local aid that had been proposed in the HWM budget. Because $108 million of this money is used to reduce Medicaid cuts, the state will also receive more federal Medicaid reimbursements than it would have under the HWM proposal, bringing the new revenue available to approximately $950 million. That is the amount the House spent during floor debate to reduce proposed cuts and to address existing transportation shortfalls.
Comparing FY2010 line items to the 2009 budget is complicated by a technical issue relating to how the budget now funds technology. Like the Governor’s, the House budget has consolidated information technology spending in new technology line items as part of an effort to improve technology management. Therefore, the amount of each existing line item that had been spent on technology is taken out of those line items and moved to the new technology line items. If one were simply to look at these line items alone it would appear that they had been cut when, in fact, some of their funding was just moved to other line items.
To adjust for these technology transfers and allow for comparison with prior years, the Monitor uses information made available through the Governor’s budget website to estimate the effects of these technology transfers for specific line items.
In addition, the Monitor includes in both the House and Governor’s totals federal stimulus funds that are included in the budget proposals. For example, both the House and Governor’s budget use more than $300 million in American Recovery and Reinvestment Act (ARRA) money to fund public K-12 and higher education. Similarly, both budgets rely on substantial federal stimulus Medicaid reimbursements.1 The budget totals in this Monitor do not include stimulus funds that do not directly impact the state budget.
Staff
