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FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008.

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Presentation on theme: "FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008."— Presentation transcript:

1 FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008

2 A Discussion of the Revenue Stabilization Law and General Improvement Fund. A Presentation by the Bureau of Legislative Research

3 THE ARKANSAS BUDGET BIG HOW BIG IS IT? WHERE DOES IT COME FROM ? WHO GETS THE MONEY?

4

5 “GENERAL REVENUES” are those funds received by the State from fees and taxes levied on the general population of the state. The proceeds are not designated to be used for a particular purpose but are allocated every two years by acts of the General Assembly. Interest earnings are retained in the State Treasury.

6 “SPECIAL REVENUES” are those taxes and fees in the State Treasury which are designated or earmarked by law to be used for a particular purpose. The State Treasury retains most of the interest earnings.

7 “FEDERAL REVENUES” are those monies in the State Treasury received from the U.S. government either as project grants-in-aid or as reimbursement for eligible expenses. The Federal government retains any interest earnings.

8 “TRUST FUND REVENUES” are those funds in the State Treasury that are received by the State in which the State is a trustee and is acting in a fiduciary capacity. Trust funds retain their interest earnings.

9 “CASH FUND REVENUES” are those funds received by the State which are not required by law to be deposited into the State Treasury. Cash funds retain their interest earnings.

10 “APPROPRIATION” is the authority, granted by and limited by the General Assembly, to spend money under the control of the State of Arkansas.

11 SPENDING IS LIMITED BY THE AVAILABLE APPROPRIATION OR THE AVAILABLE MONEY, WHICHEVER IS LESS!

12 Types of Revenue and Their Distribution

13 ARKANSAS REVENUE COLLECTIONS FISCAL YEARS (Millions)

14 107 %

15 TOTAL STATE REVENUE – 2008 $18 Billion General Revenue 31% Trust & Other Non Revenue 15% Federal 24% Cash 21% Special 9%

16 DEDICATED SOURCE GENERAL IMPROVEMENT FUND REVENUE STABILIZATION LAW Three Methods of Funding Available

17 DEDICATED SOURCE Three Methods of Funding Available

18 DEDICATED SOURCES OF FUNDS State Dedicated Tax or Fee (Special Revenue)

19 The Constitution says “…no moneys arising from a tax levied for one purpose shall be used for any other purpose.”

20 SPECIAL REVENUES $ 1.7 Billion

21 DEDICATED SOURCES OF FUNDS State Dedicated Tax or Fee (Special Revenue) Federal Grant-in-aid

22 FEDERAL FUNDS – 2008 $4.2 Billion Health & Human Services 68%

23 DEDICATED SOURCES OF FUNDS State Dedicated Tax or Fee (Special Revenue) Federal Grant-in-Aid Cash Funds

24 DEDICATED SOURCES OF FUNDS State Dedicated Tax or Fee (Special Revenue) Federal Grant-in-Aid Cash Funds Trust Funds

25 TRUST AND OTHER NON-REVENUE FUNDS 2008 $2.7 Billion

26 DEDICATED SOURCES OF FUNDS State Dedicated Tax or Fee (Special Revenue) Federal Grant-in-Aid Cash Funds Trust Funds Non-revenue Receipts

27 DEDICATED SOURCE Three Methods of Funding Available GENERAL IMPROVEMENT FUND

28

29

30 General Revenue Collections Under or Over Maximum Allocations FY "Surplus"

31 GENERAL IMPROVEMENT Governor’s Discretionary Biennium $187.3 M Legislative Biennium $40 M 1/2 Interest Earnings $56.7 M Recovered Fund Balances $11.2 M Excess Old GIF Projects $.6 M Set Aside or Mandatory Obligations $489.9 M General Revenue Allotment Reserve Fund $581.9 M Previous GIF Session Account/Balances Budget Reserve Fund $155.3M

32 DEDICATED SOURCE GENERAL IMPROVEMENT FUND Three Methods of Funding Available REVENUE STABILIZATION LAW

33 ACT 311 of 1945 The Revenue Stabilization Law

34 Governor Ben Laney “Arkansas’ Present System of Tax Allocation and distribution is as archaic as the old tasseled surrey - -complex, confusing, inefficient. The system itself is a burden on the taxpayers.” - Governor Ben Laney, 1945

35 Governor Ben Laney “…I propose as our next step that our archaic and hydra-headed system of over one hundred state funds be forever eliminated,” – Governor Ben Laney, 1945

36 What It Did »Removed the dedication from major broad-based taxes »Provided a fund distribution from a pool to various operating funds »Allowed the legislature to set their funding priorities every two years »Prevented deficit spending »Reduced funding instability due to changing economic conditions »Assured agencies of even cash flow

37 What It Also Did »Permitted the approval or mandate of a program without providing funds to implement it, raising unrealistic expectations »Allowed the Governor to manipulate financing and timing of legislative enacted initiatives »Permitted agencies and the Governor to determine programmatic priorities within funds and disregard legislative intent »Created uncertainty in the agency financial plan for the year

38 What’s this A and B Stuff ?

39 The Steps The Legislature, with consultation with the Governor: Determines the Maximum General Revenue support to be distributed over the next two years Determines the maximum amount each general revenue fund is to receive from general revenues for the next two years Determines the number of priority categories (A,B,C…) Sets the minimum level of support required for each general fund and designate it as “A” Sets the next level of support for each fund and designates it as the next priority (A-1 or B) Continues the steps until the maximum level is reached

40 Revenue Stabilization Law Revenue Flow

41 Can we see an example?

42 Income 56% Insurance 2% Luxury 3% Other 1% Sales/Use 38% General Revenues FY $5,618 Million Plus $4.7 M Transfers Take Out $1,093.2 Million Educational Excellence $298.4 M Public School Desegregation $58.7 M Debt Service $26.2 M Refunds/Claims $497.6 M City/County Tourist Promo $7.2 M Aging Transport $2.1 M Educational Adequacy $26.4 M Central Services & Constitutional Officers $167 M Economic Development Incentive $10.3 M

43 Corr 7% Public School 43% HiEd 16% DHHS 25% GenGov 4% A $4,149,395,153 B $133,266,794 Reserve $176.5 M $4.5 Billion Net Available Other 3% Hi Ed 42% DHHS 15% Gen Ed 2% Corr 22% Other 9% Gen Gov 9% Public Schools 2% Gen Ed 1% Public Schools 100% A1 $70,000,000

44 The legislature does not specify which programs are in which priority. The Governor and his agency heads decide priorities within the funds.

45 For the year the Stabilization looks like this:

46 Revenue Stabilization Law Take all General Revenue collected Add $4.7 Million in Transfers Take out $1,050 Million for Claims, Refunds, Desegregation Costs, Educational Excellence and Processing Fees Distribute $4.1 Billion as follows: 43% to Public Schools 25% to Health & Human Services 16% to Higher Education Institutions 7% to Corrections 4% for General Government 3% to Local Aid and Misc 2% to General & Workforce Education THEN

47 Take Next $70 Million for Public Schools THEN

48 Take Next $133 Million and spread: 42% to Higher Education Institutions 22% for Corrections 15% to Health/Human Services 10% for Misc. Gov’t Functions 9% for General Government 2% to Public Schools Then $176.5 million surplus to General Revenue Allotment Reserve Fund

49 GENERAL REVENUE PROGRAMS

50 GENERAL REVENUE PROGRAMS FISCAL YEAR (Millions) Corrections $ % Gen Ed $99.3 2% General Gov $ % Public School $ % Higher Ed $ % Health/Human Services $ % Other & Local Aid $ %

51 CHANGE IN GENERAL REVENUE DISTRIBUTION FISCAL YEARS

52 EDUCATIONAL ADEQUACY In response to a Supreme Court Decision (“The Lake View Case”), several measures were enacted in the Second Extraordinary Session of the Eighty- Fourth General Assembly, the Eighty-Fifth General Assembly’s Regular Session, First Extraordinary Session of 2006 and the Eighty-Sixth General Assembly’s Regular Session of Over $4 billion, including $696 million for public school facilities and $2.3 million from Educational Adequacy Fund, in additional funding has been allocated for Public Schools through FY2009 over the FY2003 funding level. A new public school formula was enacted that provides: –$5,719 per ADM (Average Daily Membership) in FY2008 and $5,789 per ADM in FY2009 –National School Lunch (NSL) Student Funding: Greater than 90% of enrolled students in the program - $1,448/NSL student 70-90% of enrolled students in the program - $992/NSL student Less than 70% of enrolled students in the program - $496/NSL student –$4,063 per Alternative Learning Environment Student –$293 per English Language Learner Student –Professional Development Funding Equal to $50 times the school districts previous school year ADM $780.5 million allocated for Public School Facilities between FY2003 and FY2009. Additional funding for pre-kindergarten-$46.7 million in FY2008 and FY2009

53 Various student assessment, teacher incentive & other programs New Taxes were enacted to provide additional funding as follows: –7/8% additional Sales & Use tax, including expanding the base to include certain service companies or business practices ($410.5 million in actual collections in FY2008, $423.8 million in FY2007, $404.5 million in FY2006, $372.5 million in FY2005 and $93.4 M collected in FY2004) –Corporate Franchise tax increase ($12.8 million in actual collections in FY2008, $12.6 million in FY2007, $10.99 million in FY2006 and $11.2 million in FY2005) –Tax Amnesty Program ($3.4 million in FY2006) Adopted the “Doomsday Clause” which provides that if the Chief Fiscal Officer of the State determines that there are not adequate resources in the Educational Adequacy Fund and Public School Fund, then all other general revenue funds and fund accounts are reduced by the amount needed. Act 20 of the First Extraordinary Session of 2006 expanded the “Doomsday Clause” to protect the Educational Facilities Partnership Fund Account. In addition to State Foundation Funding, the General Assembly authorized $13.4 million in FY2008 and $14.3 million in FY2009 for a 98% Actual Collection Adjustment appropriation which insures that districts receive the full 98% of the Uniform Rate of Tax that the State Foundation Funding formula assumes is collected. In FY2008, the Department of Education required over $5 million more than the authorized level to insure the 98% actual collection rate. Beyond Adequacy, the General Assembly provided Enhanced Educational Funding of $51 per ADM in FY2008 and $87 per ADM in FY2009.

54 PUBLIC SCHOOL FUND FISCAL YEARS MILLIONS Total $2,090

55 National Arkansas $50,816 $44,493 Source: National Education Association, Rankings of the States, various years; Estimates of School Statistics, various years

56 7.2% increase 14.6% increase 17.4% increase 11.1% increase PUBLIC SCHOOLS BONDED DEBT Statewide Fiscal Year Ending June 30, 2007 FY 2006 FY % increase 6.6% increase 2,450,645,825 2,611,877,943

57 Local Funds $1,382.5 M State Funds $2,371.3M Federal Funds $484.4 M Misc. Funds $265.2 M $4,503,318,463 in 245 Districts 5.9% 10.2% 53% 30.9% Public School Revenue Sources 2007

58 Local School District Funding 2006 NATIONALARKANSAS *For Arkansas Local & Other funding is inclusive of State Uniform Rate of Tax (URT) Funds. (National Center for Education Statistics) Local & OtherStateFederal

59 Tuition & Fees $473 Million Gifts, Grants & Contracts $488.5 Million Sales and Services $278 Million Misc. Funds $103.1 Million 3.8% 10.3% 18.1% 17.3% State Appr. $670.9 Million 24.8 % $2,701,684,356 Hospitals & Clinics $669.6 Million 24.8% Higher Education Institutions Current Funds 2007 Federal Appr. $18.5 Million 0.6%

60 Higher Education Institutions On-Campus Headcount Fall 1996 – Fall 2007 ThousandsThousands

61 Higher Education Institutions Operating Funds from State Sources $799.8 Million Total $709.9 M $67.6 M $22.4 M

62 Higher Education Tuition and Median Family Income Changes from SREB-Southern Regional Education Board

63 X Institutions of Higher Education NWACC UAF NACC ASU-MHBRTC X X OZTC ASUN ASUJ ANC UAFS ATU TECH UACCM UCA PTC ASU-B UALR & UAMS M-SCC RMCC CCCUA OTC X HSU UACC- HOPE SAU-TECH UAM SAU SACC NPCC SEATCUAPB X PCC-UA EACC X UACCB

64 GENERAL REVENUE PROGRAMS FISCAL YEAR $678.8 $58.7 $73.1 $49.1 $47.0 $57.2 $25.0 $53.9 Health Other Admin/County Offices Youth Services Children/ Family Behavioral Health DDS Medicaid/ Misc. Aid Health Human Services 24% $1 Billion

65 MEDICAID EXPENDITURES FISCAL YEARS $ Millions State, Federal & Tobacco

66 CHANGE IN MEDICAID EXPENDITURES FISCAL YEARS % % 69.12% % TOTAL MEDICAID PRESCRIPTION DRUG LONG-TERM CARE HOSPITAL/MEDICAL

67 FEDERAL MEDICAID MATCH RATES % Federal Share

68 Medicaid Recipients for Selected Services 2008 HospitalsMedical Nursing HomesDrugs Home HealthOther (Millions) Total RecipientsTotal Expenditures 359,045 22,225 7, , , ,761 $358 $1265 $14 $702 $712 $411 Recipients may be counted once in multiple groupings (e.g. both Medical and Drugs)

69 Medicaid Recipients for Selected Services 2008 HospitalsMedical Nursing HomesDrugs Home HealthOther Total RecipientsTotal Expenditures 1.1% <1% 16.9% 28.2% 20.4% 33.1% 10.3% 11.8% 20.6% 20.3% <1% 36.5% Recipients may be counted once in multiple groupings (e.g. both Medical and Drugs)

70 GENERAL REVENUE PROGRAMS FISCAL YEAR $ Million Criminal Justice $414.8M $271.3 $3.6 $3.6 $68.6 $61.8 State Police Community Correction Crime Information Center Department of Correction $9.5 County Jail Reimbursement

71 ARKANSAS STATE POLICE TROOP LOCATIONS

72 STATE SUPPORT FOR CORRECTIONS FISCAL YEARS THROUGH (Millions)

73 STATE INMATE POPULATION FISCAL YEARS THROUGH

74 POPULATION AND PRISON CAPACITY FISCAL YEARS THROUGH

75 STATE ADULT CORRECTIONAL FACILITIES Northwest AR Work Release Center North Central Unit Mississippi Co. Work Release Center McPherson Unit Grimes Unit East AR Regional Unit Boot Camp Hawkins Center for Women Wrightsville Unit Texarkana Regional Correctional Center Delta Regional Unit Cummins Unit Varner Unit Ouachita River Correctional Unit- Special Needs Benton Unit Diagnostic Unit Pine Bluff Unit Randall L. Williams Correctional Facility Maximum Security Unit Tucker Unit

76 INMATE DEMOGRAPHICS 2008 AVERAGE AGEMale 36 Years Female 35 Years AVERAGE SENTENCE 9 years 0 months 25 days AVERAGE TIME SERVED2 years 9 months 8 days RACE –White51% –Black46% –Hispanic2.6% –Other0.4% SEX –Male92.2% –Female 7.8%

77 INMATE COST PER DAY FY2008 ADC Inmate Care & Custody$57.13 DCC Residential Services$50.27 Drug Courts$12.75 Probation/Parole $1.64 County Jail Reimbursement$28.00

78 FINANCING STATE PROGRAMS IN Bureau of Legislative Research, 2008


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