The Spending Affordability Committee, composed of members of the General Assembly and three public members, meets annually beginning in the fall to recommend a target for budget growth for each fiscal year based on the current and prospective condition of the state’s economy. The Committee held its first meeting this week with members of the other fiscal committees of the General Assembly to be briefed by the Department of Legislative Services (DLS) on a broad range of economic and fiscal matters affecting the State’s budget.
Based on an initial analysis of revenues and spending by DLS, the State is facing a potential $300 million deficit in the current budget year and a shortfall of almost $600 million in fiscal 2016. The fiscal 2016 budget will be Governor-elect Hogan’s first budget, introduced this January, and debated by the General Assembly during the upcoming 2015 session.
The graph below depicts the shortfall between ongoing revenues and ongoing spending.
Fiscal 2016 General Fund revenues are projected to increase by 3.7%. However, according to DLS’s baseline budget, General Fund expenditures are increasing by 4.7%. The largest drivers of this increase are education aid formulas and debt service.
Other fiscal issues of interest to counties in the briefing document include an overview of State Aid to Local Governments, Retirement and Pensions, and the Transportation Trust Fund. Funding to local governments is estimated to increase by $237 million or 3.4%. Of this amount, 77%, or $182.4 million, would be allocated to public schools. DLS reported positive news regarding the unfunded actuarial liabilities of the retirement and pension system. These liabilities fell by 5.1% and the systems funding ratio increased from 64.6% to 67.7%. DLS also reported that the Transportation Trust Fund closed out fiscal 2014 with a greater than expected fund balance. The fund balance was projected to be $100 million, but the actual close out yielded a fund balance of $255 million. However, gas tax revenues are falling short of initial projections due to falling gas prices. These issues and others discussed by the Spending Affordability Committee will be covered in more depth in subsequent posts to Conduit Street.
An overview of the issues discussed can be found in the bulleted list below.
- Economic Outlook and Revenue Estimates
- General Fund Outlook
- Fiscal 2016 Baseline Forecast Assumptions
- State Aid to Local Governments
- Personnel and Retirement/Pensions
- State’s Debt Policy
- Capital Program
- Transportation Trust Fund
- General Fund Status