1. GOPB 2010 GENERAL SESSION BUDGET REVIEW Phillip Jeffery, Deputy Director for the Governor’s Office of Planning & Budget Association of Government Accountants July 15, 2010

3. 2010 GENERAL SESSION BUDGET OVERVIEW o THE ENVIRONMENT: Revenue Downturn o THE CHALLENGES: Pre-Session Budget Situation o THE PRINCIPLES: Responsible Solutions o THE SOLUTIONS: Cuts, One-time “Backfill” o MOVING FORWARD: Upcoming Challenges, Available Tools

4. CONSENSUS REVENUE ESTIMATES Revenue Assumptions Committee (RAC) Economists from: o Governor’s Office of Planning & Budget o Tax Commission o Legislature o State Agencies o Higher Education o Local Government o Private Sector Economic Outlook November 2008

5. CONSENSUS REVENUE ESTIMATES (cont’d)

6. Revenue Estimates Committee o Quarterly CONSENSUS Revenue Estimates Point Estimates in November & February Range Estimates in June & September o Committee Members Include Directors of: Governor’s Office of Planning & Budget Office of the Legislative Fiscal Analyst Tax Commission

8. THE ENVIRONMENT: REVENUE

9. State Budget o FY 2008 $11.5 billion total $5.3 billion General Revenue o FY 2011 $11.6 billion total $4.3 billion General Revenue Revenue Picture o Loss of $1.1 billion or 21% top to bottom

10. 2009 LEGISLATIVE ACTION Working Rainy Day Fund o Utah funded $516 million in capital investment for FY 2009 o Of this amount $346 million is from ongoing revenue sources One-time Funding Sources Available o $418 million Rainy Day Funds o $103 million Student Population Growth Account Federal ARRA Package allowed us to maximize working rainy day fund and save one-time sources for future needs.

11. Revenues dropped $950 million from original FY 2009 projection (about 18%) How Utah dealt with the shortfall o Agency budget reductions $355 million Pub. Ed. held to 6% reduction ($182 M) Higher Ed. held to 9% reduction ($77 M) o Capital funding reductions including buildings & roads of 28% ($134 M) o Structural Deficit of $460 million (10%) funded mostly with ARRA 2009 LEGISLATIVE ACTION

12. THE CHALLENGES: PRE-2010 SESSION BUDGET SITUATION Shortfall and One-time Funding o Additional $177 Million Shortfall in FY 2010 Ongoing Base Budget Reductions ≈ 18% partially backfilled with American Recovery & Reinvestment Act and other One-Time funds o Total One-Time Funding of $460 Million Public Education: $293 Million Higher Education: $66 Million Health & Human Services: $76 Million

13. THE CHALLENGES: PRE-2010 SESSION BUDGET SITUATION (cont’d) New Costs and Resources o New Costs Enrollment Growth Medicaid & Human Services Employee Health & Retirement o One-time Funding Sources Available $418 Million Rainy Day Funds $103 Million Student Population Growth Account $73 Million Additional ARRA anticipated

14. THE PRINCIPLES: RESPONSIBLE SOLUTIONS Governor’s Budget Recommendation Principals o Protect Public and Higher Education o Avoid exacerbating the structural budget imbalance o Retain a responsible Rainy Day Fund balance o Balance the budget with no tax increases

15. THE SOLUTIONS: FY 2010 December Executive Order o Reduced state agency and higher education budgets by $39 million o Instituted a flexible hiring freeze o Delayed IT purchases o Provided other spending guidance

16. THE SOLUTIONS: FY 2010 FY 2010 BUDGET ACTIONS GAP: $177 Million Budget Cuts: $57 Million Rainy Day Funds: $86 Million Restricted Funds, Unallocated, etc: $14 Million Medicaid Lawsuit Settlement: $20 Million $177 Million

17. THE SOLUTIONS: FY 2011 FY 2011 BUDGET ACTIONS GAP: $482 Million Budget Cuts/Funding Shifts: $75 Million Rainy Day Funds: $123 Million Student Population Account: $103 Million ARRA FMAP: $73 Million Tobacco Tax: $43 Million Restricted Funds, Unallocated, etc: $65 Million $482 Million

18. THE SOLUTIONS: FUNDING FOR EDUCATION Public Education o Additional cut could have been as high as $400 Million, limited to $10 Million in non-classroom cuts o Ongoing budget cut of approximately 6% Higher Education o Additional cut could have been as high as $100 Million, limited to $33 Million o Ongoing budget cut of approximately 13%

19. 2010 General Session PENSION REFORM In 2008 Pension lost 30% of its value creating a $6.5 billion dollar gap o Increased contributions $400 million per year for the next 25 years Three Goals o Fully Fund Pension Liability o Meet 100% of obligation to current and retired employees o Remove bankruptcy risk imposed on state

20. 2010 General Session PENSION REFORM (cont’d) SB 43, Post-retirement Employment Amendments SB 63, New Public Employees’ Tier II Contributory Retirement Act o Applies to new employees after July 1, 2011 o Limits State contributions to 10% o Can elect DB or DC plan o Increases years of service to 35 years (25 public safety)

22. MOVING FORWARD 2010 GENERAL SESSION OUTCOMES o Reductions to Public and Higher Education Minimized o Structural Imbalance reduced from $460 Million to $320 Million $210 Million left in Rainy Day Funds Revenue Enhancements like Quarterly Estimated Payments Revenue Growth?

23. MOVING FORWARD, ECONOMIC DEVELOPMENT Economic Vitality o Utah was ranked #1 by the American Legislative Exchange Council as the state most likely to emerge first from the economic recession. o Utah was ranked top ten states for business in 2010 by Chief Executive Magazine.

24. UTAH’S ECONOMIC STIMULUS PACKAGE Home Run Program Utah Science, Technology, and Research Initiative (USTAR) Motion Picture Incentive Energy Development Initiative Transportation Infrastructure

25. EXAMPLE: 1-15 SOUTH Largest Road Project in Nation Agreed upon configuration $1.7 billion

26. GOPB Phillip Jeffery Governor’s Office of Planning and Budget Utah State Capitol 350 North State Street Salt Lake City, Utah 84114 www.governor.utah.gov/gopb 801-538-1027 pjeffery@utah.gov Questions