The REC met this morning and as expected, downgraded revenue estimates for both FY 09 and FY 10.
FY 2009 was decreased by $130 million compared to the December estimate. The estimated ending balance after the deappropriations bill was $30 million so the Legislature will need to make up at least $100 million through transfers or reductions in spending. One idea suggested by the Governor’s appointee was reducing the Medicaid spending in FY 09 and replacing it with federal stimulus dollars.
FY 2010 was decreased by $270 million compared to the December estimate. ($130 million of the amount is carried forward from FY 09.) That means that the joint budget targets released by the Democrats a few weeks ago are now $270 million more than revenue will allow them to spend. The Governor now has 14 days to resubmit his budget and the Democrats will have to adjust their budget targets reflecting the new estimates.
The bottom line is that the Democrats have a $1.1 billion spending gap to deal with over the next 15 months. It remains to be seen how the majority party reacts. It is very likely some cuts will be made while backfilling those cuts with federal stimulus funds. Tax increases remain an option for Democrats to help them balance the budget.