Fears of Downgraded Revenue Abound
From this week’s House Republican Newsletter:
On Friday, March 20 at 10 a.m., the Revenue Estimating Conference (REC) will meet to review and revise the general fund revenue estimates for FY 2009 and FY 2010. According to two members of the REC, the estimates for both fiscal years are expected to decrease.
The Code states that if the REC downgrades revenue estimates after the December meeting, the Governor has 14 days to re-submit his budget to ensure it complies with the 99 percent expenditure limitation law.
However, it appears that the House and Senate Democrats will not wait for the Governor to re-submit his budget recommendations. According to the House Appropriations Chair, the budget subcommittees will begin approving individual budget bills next week, with the goal of having them all out by March 27.
The REC projects a decrease of $28.2 million, or -0.5 percent compared to FY 08. Actual year-to-date revenue is off by $60.7 million, or -1.5 percent year-to-date. Combine further decreases in revenue with increases in tax refunds and the state has a perfect storm that could reduce FY 09 net general fund revenue by $100 million or more.
Both David Underwood (private sector member of the REC) and Holly Lyons (legislative appointee of the REC) have said publicly that the estimates are likely to decrease. Unfortunately, with only three months left in the fiscal year, there are not enough available funds to cut. The deficit in FY 2009 will have to be filled with the remaining $99 million in the Economic Emergency Fund (EEF).
The current estimate for FY 2010 is -0.4 percent compared to FY 09. However, if FY 09 is decreased by $100 million and the percentage growth for FY 10 stays at -0.4 percent, it means that FY 10 is decreased by $100 million also. There is a chance that FY 10 could drop below -0.4 percent, which would further compound the problem.
At this point it is unclear how the Democrats intend to close the roughly $800 million budget gap but they have admitted they would use the federal stimulus money to backfill some of the cuts to education (K-12 and higher ed), Medicaid and workforce development in their proposed budget targets.
Republicans again this week expressed an interest in going through the budget line-by-line and finding potential savings. The Democrats have said they were going to do that also but have yet to take Republicans up on the offer to help them craft a fiscally responsible budget.
The fear is that the Democrats will put together a budget in the backrooms of the Capitol without any input from the public or Republicans. If the Democrats change their minds and allow the public input, House Republicans stand ready and willing to help them fix the fiscal mess.