REPORT: July 9 Member Meeting

Where Are We Now?
A Look at State Budgets

Joseph R. Crosby

Chairman and CEO
MultiState

Introduction

State of the States’ Finances

Mr. Crosby observed that, despite the ominous predictions about revenue performance, the Senate leaders did the right things: They were patient and waited for real data before taking prudent — but not drastic—actions. So when the dire forecasts proved wrong, they had not compromised the fiscal health of their states. Going forward, Mr. Crosby observed that leaders are remaining cautious, even as finances improve. Many states have scheduled special sessions to decide how to allocate federal funds from the American Recovery Plan and unexpected new revenue.

Senate leaders were patient and waited for real data before taking action. When dire forecasts proved wrong, they had not compromised fiscal health.—Joe Crosby

 

Morgan Scarboro, Manager of Tax Policy & Economist at MultiState, compared state revenues during the first three quarters of FY 2020 and FY 2021. She noted an overall increase in state tax revenue of 12.1%, without considering federal aid. While eight states saw some loss of revenue, only three (Alaska, North Dakota, and Hawaii) had losses greater than 3.5% (see map).

 

How Did State Revenue Compare During the First Quarters of FYs 20 and 21?

Mr. Crosby urged leaders to continue being prudent, using excess funds to pay off debt and invest in pensions and infrastructure.

 

 

 

Discussion

Moderated by

Tom Finneran

Sen. Rodric Bray
Senate President Pro Tempore, Indiana

Early concerns about the pandemic’s impacts induced the Legislature to make 15% cuts across the board for all state services in their two year budget. However, the December 2020 forecast indicated an increase of $150 million added to the $35 billion state budget. By April, 2021, the forecast predicted that an additional $2.4 billion would swell the state’s coffers. Indiana has an automatic taxpayer refund that will likely be triggered by the June 2021 revenue numbers, Sen. Bray reported.

In allocating the excess, the Legislature declined to add more services to the government; they paid debts and invested in capital expenditures directly rather than issue bonds. They added $1 billion to funding for K-12 schools, hopeful that the funds would in part increase teacher pay, which is controlled though the school boards. With forthcoming federal funds allocated for existing projects such as a light rail system, state funds can be diverted to other projects — including $250 million for broadband investments and $500 million for regional cities grants.

Sen. Bray said he is “cautiously optimistic,” because the future is uncertain; for example, inflation could be a coming threat. Therefore, while some legislators have reacted to the excess by proposing permanent tax cuts, he advises continued caution in making changes.

Sen. Don Harmon
President of the Senate, Illinois

After three years of budget impasse and a stalled budget process that threatened to collapse the state’s social services and bankrupt its colleges, the Legislature was able to overcome the governor’s veto and pass a “prudent and responsible” budget. For the first time in more than 20 years, Standard & Poor’s and Moody’s, upgraded the state’s credit rating, and Fitch changed its outlook for Illinois from “negative” to “positive.”. In 2017, the state had $17 billion in unpaid debts. Today, that deficit has been trimmed to $3.5 billion, and debts are being paid on time.

A major challenge for the state is the century-old pensions system. It carries a Constitutional guarantee that the pension funding cannot be diminished. In the 1990s, legislators created a 50-year mortgage schedule to fund the program, but deferred its start for 15 years. Now, for every year until 2045, 25% of the state’s general revenue spending must be allocated to the pension system. Meanwhile, the federal funds coming to the state will be set aside for two years. The takeaway message from the Illinois experience is “Honor your commitments and pay your debts,” Sen. Harmon said.

Sen. Page Cortez
President of the Senate, Louisiana

In 2005, settlements from Hurricane Katrina damages brought two to three years of excess income from insurance payouts and federal funds. As a result, the state’s finances looked great and the income tax was reduced, leading to a $800 million decrease in state revenue. In 2016, this revenue loss was addressed by the addition of a 1 cent sales tax, which then was reduced to half a cent and will be terminated in 2025.

Fortunately, the state’s revenue did not crash during the pandemic, and the state’s American Rescue Plan (ARP) funds were well managed, with investments in infrastructure improvements, such as updating aging water and sewer systems; in shoring up the unemployment insurance trust fund; in teachers’ pay; and in higher education. Additionally, the Legislature determined that one-time funds should be allocated to one-time investments. Sen. Cortez said the Legislature would proceed with caution; nonetheless, currently, state revenues are stable and he is optimistic.

Sen. Chuck Winder
Senate President Pro Tempore, Idaho

Sen. Ron Kouchi
President of the Senate, Hawaii

Sen. Bill Ferguson
President of the Senate, Maryland

Sen. Ty Masterson
President of the Senate, Kansas

Conclusion

The Forum members expressed cautious optimism about the state of the states’ revenues. Many were in agreement that one-time funds should be allocated to one-time projects to avoid incurring new debt. Most of the states are using unanticipated revenue to pay down debt, fund pensions, contribute to education, or finance infrastructure projects.

 

Speaker Biography

Joseph R. Crosby

Chairman and CEO
MultiState

Joe Crosby is the Chairman and CEO of MultiState, a state and local government relations company. He is involved in all aspects of the firm’s efforts to help clients resolve the challenges they face in the state and local government arena, with a concentration on providing strategic counsel, identifying and deploying political assets, and advancing tax policy objectives.

Download PDF of article

 

 

 The Forum Welcomes
New Senate Participants
Sen. Dru Mamo Kanuha
Senate Majority Leader
(Hawaii)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What Really Happened to State Revenues During COVID-19?Read Morgan Scarboro’s revenue report at MultiState here.

 

 

 

 

 

CONTACT US

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2020 Senate Presidents' Forum. All rights reserved.

REPORT: July 9 Member Meeting

Where Are We Now?
A Look at State Budgets

Joseph R. Crosby

Chairman and CEO
MultiState

Introduction

State of the States’ Finances

Mr. Crosby observed that, despite the ominous predictions about revenue performance, the Senate leaders did the right things: They were patient and waited for real data before taking prudent — but not drastic—actions. So when the dire forecasts proved wrong, they had not compromised the fiscal health of their states. Going forward, Mr. Crosby observed that leaders are remaining cautious, even as finances improve. Many states have scheduled special sessions to decide how to allocate federal funds from the American Recovery Plan and unexpected new revenue.

Senate leaders were patient and waited for real data before taking action. When dire forecasts proved wrong, they had not compromised fiscal health.—Joe Crosby

 

Morgan Scarboro, Manager of Tax Policy & Economist at MultiState, compared state revenues during the first three quarters of FY 2020 and FY 2021. She noted an overall increase in state tax revenue of 12.1%, without considering federal aid. While eight states saw some loss of revenue, only three (Alaska, North Dakota, and Hawaii) had losses greater than 3.5% (see map).

 

How Did State Revenue Compare During the
First Quarters of FYs 20 and 21?

Mr. Crosby urged leaders to continue being prudent, using excess funds to pay off debt and invest in pensions and infrastructure.

 

Discussion

Moderated by

Tom Finneran

Sen. Rodric Bray
Senate President Pro Tempore, Indiana

Early concerns about the pandemic’s impacts induced the Legislature to make 15% cuts across the board for all state services in their two year budget. However, the December 2020 forecast indicated an increase of $150 million added to the $35 billion state budget. By April, 2021, the forecast predicted that an additional $2.4 billion would swell the state’s coffers. Indiana has an automatic taxpayer refund that will likely be triggered by the June 2021 revenue numbers, Sen. Bray reported.

In allocating the excess, the Legislature declined to add more services to the government; they paid debts and invested in capital expenditures directly rather than issue bonds. They added $1 billion to funding for K-12 schools, hopeful that the funds would in part increase teacher pay, which is controlled though the school boards. With forthcoming federal funds allocated for existing projects such as a light rail system, state funds can be diverted to other projects — including $250 million for broadband investments and $500 million for regional cities grants.

Sen. Bray said he is “cautiously optimistic,” because the future is uncertain; for example, inflation could be a coming threat. Therefore, while some legislators have reacted to the excess by proposing permanent tax cuts, he advises continued caution in making changes.

Sen. Don Harmon
President of the Senate, Illinois

After three years of budget impasse and a stalled budget process that threatened to collapse the state’s social services and bankrupt its colleges, the Legislature was able to overcome the governor’s veto and pass a “prudent and responsible” budget. For the first time in more than 20 years, Standard & Poor’s and Moody’s, upgraded the state’s credit rating, and Fitch changed its outlook for Illinois from “negative” to “positive.”. In 2017, the state had $17 billion in unpaid debts. Today, that deficit has been trimmed to $3.5 billion, and debts are being paid on time.

A major challenge for the state is the century-old pensions system. It carries a Constitutional guarantee that the pension funding cannot be diminished. In the 1990s, legislators created a 50-year mortgage schedule to fund the program, but deferred its start for 15 years. Now, for every year until 2045, 25% of the state’s general revenue spending must be allocated to the pension system. Meanwhile, the federal funds coming to the state will be set aside for two years. The takeaway message from the Illinois experience is “Honor your commitments and pay your debts,” Sen. Harmon said.

Sen. Page Cortez
President of the Senate, Louisiana

In 2005, settlements from Hurricane Katrina damages brought two to three years of excess income from insurance payouts and federal funds. As a result, the state’s finances looked great and the income tax was reduced, leading to a $800 million decrease in state revenue. In 2016, this revenue loss was addressed by the addition of a 1 cent sales tax, which then was reduced to half a cent and will be terminated in 2025.

Fortunately, the state’s revenue did not crash during the pandemic, and the state’s American Rescue Plan (ARP) funds were well managed, with investments in infrastructure improvements, such as updating aging water and sewer systems; in shoring up the unemployment insurance trust fund; in teachers’ pay; and in higher education. Additionally, the Legislature determined that one-time funds should be allocated to one-time investments. Sen. Cortez said the Legislature would proceed with caution; nonetheless, currently, state revenues are stable and he is optimistic.

Sen. Chuck Winder
Senate President Pro Tempore, Idaho

Sen. Ron Kouchi
President of the Senate, Hawaii

Sen. Bill Ferguson
President of the Senate, Maryland

Sen. Ty Masterson
President of the Senate, Kansas

Conclusion

The Forum members expressed cautious optimism about the state of the states’ revenues. Many were in agreement that one-time funds should be allocated to one-time projects to avoid incurring new debt. Most of the states are using unanticipated revenue to pay down debt, fund pensions, contribute to education, or finance infrastructure projects.

 

Speaker Biography

Joseph R. Crosby

Chairman and CEO
MultiState

Joe Crosby is the Chairman and CEO of MultiState, a state and local government relations company. He is involved in all aspects of the firm’s efforts to help clients resolve the challenges they face in the state and local government arena, with a concentration on providing strategic counsel, identifying and deploying political assets, and advancing tax policy objectives.

Download PDF of article

 

 

 The Forum Welcomes
New Senate Participants
Sen. Dru Mamo Kanuha
Senate Majority Leader
(Hawaii)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What Really Happened to State Revenues During COVID-19?Read Morgan Scarboro’s revenue report at MultiState here.

 

 

 

 

 

CONTACT US

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

 

Tel: 914-693-1818

Copyright © 2020 Senate Presidents' Forum. All rights reserved.

REPORT: July 9 Member Meeting

Where Are We Now?
A Look at State Budgets

Joseph R. Crosby

Chairman and CEO
MultiState

 The Forum Welcomes
New Senate Participants
Sen. Dru Mamo Kanuha
Senate Majority Leader
(Hawaii)
 

Introduction

State of the States’ Finances

Mr. Crosby observed that, despite the ominous predictions about revenue performance, the Senate leaders did the right things: They were patient and waited for real data before taking prudent — but not drastic—actions. So when the dire forecasts proved wrong, they had not compromised the fiscal health of their states. Going forward, Mr. Crosby observed that leaders are remaining cautious, even as finances improve. Many states have scheduled special sessions to decide how to allocate federal funds from the American Recovery Plan and unexpected new revenue.

Senate leaders were patient and waited for real data before taking action. When dire forecasts proved wrong, they had not compromised fiscal health.—Joe Crosby

 

Morgan Scarboro, Manager of Tax Policy & Economist at MultiState, compared state revenues during the first three quarters of FY 2020 and FY 2021. She noted an overall increase in state tax revenue of 12.1%, without considering federal aid. While eight states saw some loss of revenue, only three (Alaska, North Dakota, and Hawaii) had losses greater than 3.5% (see map).

 

How Did State Revenue Compare During the
First Quarters of FYs 20 and 21?

Mr. Crosby urged leaders to continue being prudent, using excess funds to pay off debt and invest in pensions and infrastructure.

 

Discussion

Moderated by

Tom Finneran

Sen. Rodric Bray
Senate President Pro Tempore, Indiana

Early concerns about the pandemic’s impacts induced the Legislature to make 15% cuts across the board for all state services in their two year budget. However, the December 2020 forecast indicated an increase of $150 million added to the $35 billion state budget. By April, 2021, the forecast predicted that an additional $2.4 billion would swell the state’s coffers. Indiana has an automatic taxpayer refund that will likely be triggered by the June 2021 revenue numbers, Sen. Bray reported.

In allocating the excess, the Legislature declined to add more services to the government; they paid debts and invested in capital expenditures directly rather than issue bonds. They added $1 billion to funding for K-12 schools, hopeful that the funds would in part increase teacher pay, which is controlled though the school boards. With forthcoming federal funds allocated for existing projects such as a light rail system, state funds can be diverted to other projects — including $250 million for broadband investments and $500 million for regional cities grants.

Sen. Bray said he is “cautiously optimistic,” because the future is uncertain; for example, inflation could be a coming threat. Therefore, while some legislators have reacted to the excess by proposing permanent tax cuts, he advises continued caution in making changes.

Sen. Don Harmon
President of the Senate, Illinois

After three years of budget impasse and a stalled budget process that threatened to collapse the state’s social services and bankrupt its colleges, the Legislature was able to overcome the governor’s veto and pass a “prudent and responsible” budget. For the first time in more than 20 years, Standard & Poor’s and Moody’s, upgraded the state’s credit rating, and Fitch changed its outlook for Illinois from “negative” to “positive.”. In 2017, the state had $17 billion in unpaid debts. Today, that deficit has been trimmed to $3.5 billion, and debts are being paid on time.

A major challenge for the state is the century-old pensions system. It carries a Constitutional guarantee that the pension funding cannot be diminished. In the 1990s, legislators created a 50-year mortgage schedule to fund the program, but deferred its start for 15 years. Now, for every year until 2045, 25% of the state’s general revenue spending must be allocated to the pension system. Meanwhile, the federal funds coming to the state will be set aside for two years. The takeaway message from the Illinois experience is “Honor your commitments and pay your debts,” Sen. Harmon said.

Sen. Page Cortez
President of the Senate, Louisiana

In 2005, settlements from Hurricane Katrina damages brought two to three years of excess income from insurance payouts and federal funds. As a result, the state’s finances looked great and the income tax was reduced, leading to a $800 million decrease in state revenue. In 2016, this revenue loss was addressed by the addition of a 1 cent sales tax, which then was reduced to half a cent and will be terminated in 2025.

Fortunately, the state’s revenue did not crash during the pandemic, and the state’s American Rescue Plan (ARP) funds were well managed, with investments in infrastructure improvements, such as updating aging water and sewer systems; in shoring up the unemployment insurance trust fund; in teachers’ pay; and in higher education. Additionally, the Legislature determined that one-time funds should be allocated to one-time investments. Sen. Cortez said the Legislature would proceed with caution; nonetheless, currently, state revenues are stable and he is optimistic.

Sen. Chuck Winder
Senate President Pro Tempore, Idaho

Sen. Ron Kouchi
President of the Senate, Hawaii

Sen. Bill Ferguson
President of the Senate, Maryland

Sen. Ty Masterson
President of the Senate, Kansas

Conclusion

The Forum members expressed cautious optimism about the state of the states’ revenues. Many were in agreement that one-time funds should be allocated to one-time projects to avoid incurring new debt. Most of the states are using unanticipated revenue to pay down debt, fund pensions, contribute to education, or finance infrastructure projects.

 

Speaker Biography

Joseph R. Crosby

Chairman and CEO
MultiState

Joe Crosby is the Chairman and CEO of MultiState, a state and local government relations company. He is involved in all aspects of the firm’s efforts to help clients resolve the challenges they face in the state and local government arena, with a concentration on providing strategic counsel, identifying and deploying political assets, and advancing tax policy objectives.

CONTACT US

Senate Presidents’ Forum

579 Broadway

Hastings-on-Hudson, NY 10706

Tel: 914-693-1818

Copyright © 2020 Senate Presidents' Forum. All rights reserved.