Presentation for Connecticut Alliance for Basic Human Needs 11/18/2016 The State Economy, The State Budget and The State of our Children Derek Thomas | Fiscal Policy Fellow Ray Noonan| Associate Policy Fellow Presentation for Connecticut Alliance for Basic Human Needs 11/18/2016

Agenda – Presentation for CABHN The Recovery Has Left Too Many Families Behind Long-term economic trends New data – 1-year trends And They Aren’t Being Prioritized in State Budget Budget trends – spending Budget trends – revenue Looking Forward – Building on Our Strengths Policy recommendations Resources and upcoming research

The Recovery Has Left Too Many Families Behind Unemployment: has recovered for whites and college-educated workers, but not for workers of color and the less-educated Wages: have increased for the top 10% of earners over the last 15 years, but the middle class has experienced a 2% cut Gap between blacks, Latinos, and whites has widened since pre-recession Poverty: rates for blacks and Latinos still 14.4% and 18.9% higher than whites. child poverty (14.5%) higher than pre-recession levels and didn’t change last year Jobs Swap: share of low-wage work has increased by 20% while the share of high-wage work decreased by 13%

Spending on Children’s Budget – Short Term Source: Connecticut Voices analysis of Office of Fiscal Analysis budget books

Spending on Children’s Budget – Short Term 1.4% Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on estimated growth of 0.5 and 0.12%

Spending on Children’s Budget – Short Term BEA Total Personal Income, 2008 – 2015. 2016 and 2017 based on OPM estimates

Spending on Children’s Budget – Trends Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on estimated growth of 0.5 and 0.12%

Spending on Children’s Budget – Trends BEA Total Personal Income, 2008 – 2015. 2016 and 2017 based on OPM estimates

Spending – Non Children’s Budget Trends Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on estimated growth of 0.5 and 0.12%

Spending – Non Children’s Budget Trends BEA Total Personal Income, 2008 – 2015. 2016 and 2017 based on OPM estimates

General Fund Spending Trends Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on est. growth of 0.5 and 0.12% *To ensure comparability with prior years, this analysis includes the federal share of Medicaid in “General Fund” beginning in 2014. For example, in 2017, total Medicaid spending is nearly $5.964B, but $3.5B was backed out to remain under the spending cap (known as Net Funding). We add that back in, and then we estimate what share of that is spent on children, meaning while the state GF is ~$18B, ours is ~$21.6B. We estimate that of the $5.964B, $1.267B is spent on children.

General Fund Spending Trends Data labels denote share of total general fund Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on est. growth of 0.5 and 0.12% *To ensure comparability with prior years, this analysis includes the federal share of Medicaid in “General Fund” beginning in 2014. For example, in 2017, total Medicaid spending is $6.2B, but $3.72B was backed out to remain under the spending cap (known as Net Funding). We add that back in, and then we estimate what share of that is spent on children, meaning while the state GF is ~$18B, ours is ~$21.5B. We estimate that of the $6.2B, $1.3B is spent on children.

General Fund Spending Trends

Revenue Trends BEA Total Personal Income, 2008 – 2015. 2016 and 2017 based on OPM estimates

Revenue Trends Inflation adjusted using CPI-AUC seasonally adjusted, annual averages 2008 – 2015. 2016 and 2017 based on estimated growth of 0.5 and .12%

Revenue Trends BEA Total Personal Income, 2008 – 2015. 2016 and 2017 based on OPM estimates

The Cost of an Inequitable Tax System Revenue gained if rates were equal: $2,056,986,667 Source: Institute on Taxation and Economic Policy

OFA Out Year Current Services Projections Looking Forward   OFA Out Year Current Services Projections FY 18  FY 19   FY 20   Approp. Revenue Surplus/ (Deficit) General $19,132.2 $17,858.9 $1,273.3 $19,739.2 $18,311.3 $1,427.9 $20,368.9 $18,838.7 $1,530.20 Special Trans. $1,643.8 $1,648.6 $4.8 $1,742 $1,696.2 $45.8 $1,841.2 $1,749.2 $92 Other Approp. $233.3 $239.9 $6.6 $236.5 $3.40 $3.4 TOTAL $21,009.2 $19,747.4 $1,261.9 $21,717.5 $20,247.4 $1,470 $22,446.3 $20,827.8 $1,618.80

Building an Equitable and Sustainable Revenue System Sufficiency and Equity A balanced approach includes new revenue, rather than a cuts-only approach Reform property tax to address “municipal gap”, reduce regressivity, and equalize school funding Transparency and Accountability Reform tax expenditures- all areas of Connecticut’s budget should be evaluated and subject to routine public scrutiny Return to current services budgeting to ensure transparency and accountability Reliability: Maintain a Robust State Budget Reserve Fund To offset volatility in income tax

Resources – Fiscal & Economic Security Annual Reports State of Working CT: http://www.ctvoices.org/publications/state-working-connecticut-2016 Poverty, Health and Income – Review of American Community Survey 1-Year Data: http://www.ctvoices.org/publications/ACS-2015-data Children’s Budget: http://www.ctvoices.org/publications/impact-final-fy-2017-budget-children-and-families Recent Reports Reviewing Tax Expenditures – Improving Transparency and Accountability in Over $7 Billion of Off-the-Books Public Spending: http://www.ctvoices.org/publications/reviewing-tax-expenditures-improving-transparency-and-accountability-over-7-billion-boo Revenue Options are Crucial to Maintaining Public Investments that Promote Prosperity: http://www.ctvoices.org/publications/revenue-options-are-crucial-maintaining-public-investments-promote-prosperity Restoring Connecticut's Earned Income Tax Credit Makes Sense: http://www.ctvoices.org/publications/restoring-connecticuts-earned-income-tax-credit-makes-sense Mapping Disparities by Race and Place (American Community Survey 5-Year Data): http://www.ctvoices.org/publications/mapping-disparities-race-and-place Policy Primer: Reforming Our Property Tax System: http://www.ctvoices.org/publications/policy-primer-reforming-our-property-tax-system

Presentation for CABHN CONTACT INFORMATION Derek Thomas, Fiscal Policy Fellow dthomas@ctvoices.org 203-498-4240 (x114) Ray Noonan, Associate Policy Fellow rnoonan@ctvoices.org 203-498-4240 (x113) FIND US Website: http://www.ctvoices.org/ Twitter (@CTVoices): https://twitter.com/CTVoices Facebook: https://www.facebook.com/CTVoicesforChildren/ Tableau: https://public.tableau.com/profile/connecticut.voices.for.children