As we are getting ready to announce the revenue figures, which will guide our budget work this upcoming session, a familiar poem came to my mind:
T’was the night before Christmas (revenue announcements) and all through the House (and Senate as well),
Not a creature was stirring except for a mouse (aka Fiscal Analyst).
The stockings (budget requests) were all hung by the chimney (EAC chairs offices) with care,
In hopes that St. Nicholas soon would be there.
It is our plan to announce the new revenue figures on December 7th.
These ‘revenue figures’ are the joint consensus figures of the Governor’s Office and Legislature. There will be one time figures (the surpluses less the shortfall from FY 15 that ended June 30, 2015), plus the projections of where we are in the FY 16 budget that began July 1, 2015 and ends June 30, 2016), and ongoing amounts which is what our experts agree will be the growth from July 1, 2016 to June 30, 2017.
Now don’t mix these up or combine them. They are very different pots of money, specifically in how we can spend them. One time moneys spent for ongoing programs result in a structural imbalance which then results in ongoing programs running out of money after a year. Good uses for one time money include buildings, equipment, repairs and upkeep to buildings, and certain technology. These figures will be adjusted the middle of February after we see the tax collection from the year-end collections.
We also need to differentiate between education funds: Income tax, which must be spent on higher and public education, and General Funds (sales tax) that can be spent on anything including public and higher education. That will result in about 1/3 of the money we finally spend which will include federal money, fees, and restricted revenue, like the gas tax.
There are some things we already know:
There will be no need to make an additional payment into retirement for the “big system”. About 5 years ago when the stock market dropped and we came to grips with the unfunded liability of our retirement plan, we began a course to bring the fund, which was about 76% funded up to full funding within 20 years without cutting any benefits earned or were being earned at the time of the change. We have now reached a point where we are 86% funded and well on our way to reaching 100% before the 20 years.
We also know that there will be no increase for costs of dental insurance for public employees. The bad news: Health insurance for public employees and high education institutions will go up over 7%, or a cost of about $17M of ongoing general and education funds.
Public Ed costs are covered by the WPU and set on a local district basis because each district is free to negotiate their benefit package from the moneys given them.
Other costs we know: Growth in Medicaid costs (the normal growth in users and the normal growth in the costs of services delivered and nothing to do with expanded Medicaid which has been so hotly debated) of $18.0 M to finish this year (negative general fund) and $38.0 M ongoing for next year (negative to general fund).
The growth in students for public ed is slower (only 9,700) but due to unexpected growth in enrollment last year will cost $17.0 M one-time to finish this year and $90.0M for next year. If the growth weren’t there, that would equal over a 3% increase in the WPU. I know that if we don’t fund growth the value of the WPU must drop because the money allocated to fund the WPU stays the same and the number of students covered grows makes the share less per student. My concern is that all that money will not be needed to cover the growth in students. If a district 500 students and grows by 10 students, the fixed costs will remain the same because such a small number will not require an addition class room or teacher. I would like to show the growth money shown as growth in those districts where the increase in students really will require additional staff and space, and the rest be noted as an increase in the WPU money that will be available for the district without the growth to use as needed.
A 1% increase in the WPU will cost about $28.0M and a 1% increase in salary for all other public employees (including Higher Ed) will be about $22.0 M. We have a commitment to build a prison and we want to avoid bonding for the first phase (next year) and that will take about $117.5M one time of General Funds. We have a commitment to Justice Reform to reduce the people going to prison for non-violent treatable offenses and that will take about $16.0M on-going general fund. I heard from Public Ed that they have a technology plan that was reduced to $50.0M on-going and $50.0 M one time to implement. That will come from Education Funds.
Last year we tried something new to help us better handle our funds that have a tendency to ebb and flow. Our staff pointed out that from the new revenue from last year, about $115.0M was above trend revenue from an expanding economy. If we ignore this advice and just spend the money, it creates a problem when the economy slows or contracts, and we face shortfalls. With that money already built into on-going budgets, we can choose to cut ongoing money from current budgets or raise tax.
I hope the Governor’s staff and our staff can agree to a trend number and then take that from the ongoing revenue and use the money for one time spending. If the revenue is not sustained long-term, we can move this ongoing money now being used each year for one time projects into ongoing programs and find one time money to fund where we have used this ongoing money if that spending is still needed.
At the beginning of the session, we plan on asking each appropriations subcommittee to review their budgets and requests. Their first goal is to fund any new requests from their current budgets. Things change and everything must be judged on current need and effectiveness. Even if we have as much new money as we were told last session to begin this session, it will not be enough to fund the big items that are staring at us.
Our success in budgeting has been mainly the result of our state employees who have been very good at finding new ways of doing things and to keep Utah’s record as the best-managed State.