1. State Fiscal Roundtable National Association of Legislative Fiscal Offices Arturo Pérez Fiscal Affairs Program National Conference of State Legislatures

2. Overview  The state fiscal situation is growing increasingly dire.  The current revenue situation is nearly unprecedented, at least in recent decades.  To date, states have reported a total estimated budget gap of $348.3 billion (FY 2008 through FY 2012).  States are bracing for prolonged fiscal problems.

3. U.S. Business Cycle Downturns 1929-2009: Duration in Months Source: National Bureau of Economic Research

4. FY 2010 Revenue Outlook Rhode Island Delaware Source: NCSL survey of state legislative fiscal offices, April 2009. Stable n = 1 Concerned n = 28 Pessimistic n = 21 Optimistic n = 0 No response n = 1 Puerto Rico

5. How Bad is the Revenue Situation?  Florida reports that annual revenues today compare to FY 2001 levels and are not expected to return to peak levels (which occurred in FY 2006) until FY 2013.  Colorado reports that annual revenues today are similar to amounts collected in FY 2005.  In Kansas, general funds revenues are coming in at FY 2006 levels.

6. Year-Over-Year Percent Real Change in Major Taxes Four-Quarter Average of Percent Change Source: The Nelson A. Rockefeller Institute of Government. State Revenue Report, July 2009.

7. FY 2010 Highest Budget Gaps as a Percentage of General Fund Budget Rhode Island Delaware Source: NCSL survey of state legislative fiscal offices, April, June and July 2009. 5% to 9.9%, n = 5 1% to 4.9%, n = 5 Less than 1%, n = 1 More than 10% = 35 Not applicable or not reporting, n = 5 Puerto Rico

8. FY 2009 Net State Tax Changes by Type of Tax Type of TaxDollars (in millions)Percent of Total Personal Income $10,601.443.5% Corporate Income $1,387.45.7% Sales and Use $6,163.025.3% Health Care $1,544.06.4% Tobacco $1,589.36.5% Motor $1,807.67.4% Alcoholic Beverage $179.70.7% Miscellaneous $1,066.34.4% Net Change $24,348.7100% Source: National Conference of State Legislatures, 2009.

9. Net State Tax Changes by Year of Enactment Source: NCSL survey of legislative fiscal offices, various years

10. Use of Spending Cuts as Percentage of Actions To Close FY 2010 Budget Gaps (preliminary) Rhode Island Delaware Source: NCSL survey of state legislative fiscal offices, July 2009. Used spending cuts to close FY 2010 budget gaps, n = 24 Puerto Rico 44.7% 43.0% 17.0% 3.9% 40.0% 20.8% 19.1% 19.5% 58.0% 32.0% 23.7% MD - 28.0% NJ- 38.7% 22.7% RI- 48.7% 36.7% VT- 25.0% 26.6% 45.1% 45.5% 100.0% WV-100.0% 48.0% 40.0%

11. Rhode Island Delaware Source: NCSL survey of state legislative fiscal offices, July 2009. Used ARRA funds to close FY 2010 budget gaps, n = 25 Puerto Rico 96.7% 88.0% 28.6% 26.0% 54.0% 33.0% 3.0% 60.0% 45.5% 43.0% 57.3% 64.3% 68.4% 30.0% 29.0% 30.2% MD - 47.0% NJ- 27.3% 27.1% RI- 40.3% 39.2% VT- 62.0% 61.4% 43.4% 21.0% Use of ARRA Funds as Percentage of Actions To Close FY 2010 Budget Gaps (preliminary)

12. Federal Outlays for Major Provisions of ARRA Affecting State and Local Governments ($ in billions) Source: Congressional Budget Office

13. 43 states 45 states 42 states 33 states 26 states 1 state 20 states* 44 states* 46 states* 24 states** 9 states*** State Budget Gaps FY 2002-FY 2012 (projected) No estimate * Includes Puerto Rico ** 31 states and Puerto Rico forecast FY 2011 gaps. The amount shown for FY 2011 indicates the 24 states that provided gap estimates. *** 15 states forecast FY 2012 gaps. The amount shown for the FY 2012 indicates the nine states that provided gap estimates. Source: NCSL survey of legislative fiscal offices, various years Amount After Budget Adoption Amount Before Budget Adoption Projected Amount (expected to grow)

14. Current and Past Recession Budget Gap Numbers Past RecessionCurrent Recession YearAmount (in Billions) YearAmount (in Billions) 2002 $37.22008$12.8 2003 $79.02009$113.2 2004 $83.72010$142.6* 2005 $37.02011$58.5** 2006 $26.92012$21.1** Total$263.8Total$348.2* Past Recession: March 2001 to November 2001 (8 months). Current Recession: Began December 2007 to present (19 months and counting) *Preliminary figure (expected to increase) ** Projected figure (expected to increase) Source: NCSL survey of state legislative fiscal offices, various years.

15. Projected Budget Gaps FY 2008 to FY 2012 Rhode Island Delaware Source: NCSL survey of state legislative fiscal offices, various years. *Includes Puerto Rico Projecting 3 years of budget gaps, n= 17 Projecting 4 years of budget gaps n,= 18* Puerto Rico Projecting 5 years of budget gaps n,= 4

16. Conclusion  The states are facing a "cliff" once ARRA funding ends.  State governments will face severe budgetary problems at least 12-24 months after the US recession ends.  Lawmakers' endurance to resolve massive budget gaps will be tested in the coming years.

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