Status of the $1.1 Billion Spending Gap for FY 2011

The Fiscal Services Division of LSA has estimated the spending gap for FY 2011 to be $1.1 billion. The Governor used several tactics to close the gap in his budget recommendations. Now the Democrats are beginning to look at each of those items and approve legislation necessary to set budget targets.

The Governor assumed $341 million in general fund savings from state government reorganization and efficiencies. This included three parts: Executive Order 20, the early retirement package for Executive branch employees and a package of savings that requires legislative approval.

Senate File 2088 (state government reorganization) reduces general fund spending and raising general fund revenue by $61 million, Senate File 2062 (the early retirement bill) reduces general fund spending by $26 million and Executive Order 20 by the Governor combines general reductions and general fund revenue increases to achieve $88 million in savings. The total savings is $175 million.

That means the Democrats are currently $166 million short of the Governor’s goal for general fund savings on those three items. That has to be made up with additional spending cuts or revenue increases.

The Governor used five other tactics to close the spending gap:

  • Appropriating $207.5 million from the Cash Reserve Fund.
  • Making revenue adjustments, including reducing tax credit redemptions by $52.5 million.
  • Not fully funding the built-in and anticipated expenditures and shifting programs typically funded from the General Fund to other funding sources. ($214 million)
  • Reducing the General Fund School Aid appropriation by $170.2 million.
  • Not funding the increase for the collective bargaining costs. ($86 million)

There has not been any public comment by the Democrats on whether they will take funds from the Cash Reserve Fund or only underfund K-12 education by $170.2 million. One way to close the $166 million gap would be to underfund K-12 spending by $336 million. Of course, since the spending authority remains, that would mean many schools would have no choice but to raise property taxes.

House Republicans will be reviewing the Democrats’ budget plan to determine if it does the following:

  • The budget does not spend more than the state takes in
  • Does not raise taxes, including property taxes
  • Proposes real government efficiency and reorganization

In addition, House Republicans will continue to offer budget savings ideas, including the $290 million in reductions offered on Senate File 2088, the State Government Reorganization bill.