On October 7 the Revenue Estimating Conference (REC) met and revised the estimate for FY 2010 and established the initial estimate for FY 2011. The REC lowered the general fund revenue estimate for FY 2010 by $415 million and in response, the Governor ordered a 10 percent across the board cut on October 8.
The REC consists of Richard Oshlo (Governor’s appointee), Holly Lyons (Legislature’s appointee) and David Underwood (private sector representative, appointed by the other two members).
The previous estimate for FY 2010 was $5.843, or -1.4 percent compared to actual adjusted FY 2009. The new estimate is $5.438 billion, or -8.4 percent compared to FY 09. This is $415 million lower than the estimate used to create the FY 2010 budget.
When the ending balance is taken into account, the budget is $315 million short for FY 2010 – meaning it is $315 million out of balance. Also by law the Governor is required to refill the $45.3 million taken from the EEF to balance the FY 09 budget.
On October 8, the Governor issued Executive Order 19, which authorizes a 10 percent across the board cut to general fund spending for the Executive branch. (He cannot, by law, cut the Judicial or Legislative branches although it is expected both branches will be cut by the Legislature in January.)
This is a reduction of $565 million, well above what is needed to balance the budget. The Governor said that if the REC does not lower the estimates again in December, he would be open to backfilling certain areas like public safety, human services or education.
The Governor says he will direct schools to use their reserves first but even if this happens, property taxes will be raised to refill the reserves.
Without a reduction in the K-12 spending authority (currently 4 percent above FY 2009), this means a potentially huge increase in property taxes. The Governor says he will direct schools to use their reserves first but even if this happens, property taxes will be raised to refill the reserves.
The initial estimate for FY 2011 is $5.412 billion, or -0.4 percent compared to the new estimate for FY 2010. The spending gap will be impacted by the across the board cut, which is probably one reason why the Governor enacted such a large cut in FY 2010.
The major reason such a large across the board cut is even necessary is because of the huge spending increases approved by legislative Democrats and signed by the Governor. Their stubborn refusals, despite warnings from legislative Republicans, to deal with declines in revenue over the last two years is a key reason for the budget crisis the state finds itself.
House Republicans are committed to a line-by-line review of the budget and will continue to suggest budget savings ideas in order to balance the budget without raising taxes.