The 2015-17 biennial budget process officially got underway in July with the issuance of budget instructions to state agencies. The Governor’s instructions are clear and convey the message that agency requests are to be limited to cost-to-continue or zero increase in current funding levels. Agency requests are due September 15th and are subsequently reviewed by the Department of Administration and ultimately the Governor, in preparing the budget bill for introduction in January of 2015. To the extent there are such initiatives, they will be developed and announced later in the process or unveiled upon bill introduction.

The current two-year budget totals $70.4 billion and provides the base for building the next two-year budget. The largest state budget funding source is General Purpose Revenue (GPR) and makes up $30.6 billion, or 43.5%, of the total. GPR is made up of personal and corporate income taxes, sales and excise and other state tax collections. The balance of the state budget is funded by: Federal Revenue for state purposes ($19.7 billion or 28.1%) Program Revenue derived from state licensing and other fees for certain agency programs or functions ($10.2 billion or 14.5%) Segregated Revenue from fund sources for dedicated purposes, like the segregated transportation fund, ($7.8 billion or 11%) and Bond Revenue ($2 billion or 2.9%). [See chart.]

The Department of Revenue (DOR) recently reported that actual state tax collections came in at $281 million less than was previously estimated for Fiscal Year 2014. The shortfall represents roughly 2% of the $14 billion in tax revenue the state expected to collect in the fiscal year ending June 30, 2014. While Republicans see the lower tax revenue as a positive reflection of the tax relief packages of early 2014, Democrats see the gap as “fiscally irresponsible.”

Legislative Fiscal Bureau Director, Bob Lang, released a memo this week explaining that the $281 million shortfall still left the state with a positive ending balance for FY 14, and, therefore, did not trigger the introduction of a budget repair bill. However, the shortfall reduces the starting balance in FY 15 and amounts to enough to potentially trigger the requirement in FY 2015.The requirement to introduce a budget repair bill is triggered if/when the Department of Administration (DOA) provides notice that general purpose revenue available during a fiscal year is expected to be at least 0.5% short of total GPR appropriations for the same fiscal year.

According to the LFB memo, the revised FY 15 ending balance (June 30, 2015) is estimated to be a negative $115.8 million, which is more than the $79.2 million (0.5%) shortfall that would trigger the requirement to introduce a budget repair bill this fiscal year. With 10 months left of this fiscal year, the need for a budget repair bill is still an open question and subject to a number of variables; including positive or negative trend in future tax collections, actual spending vs appropriations and DOA directed lapses to the general fund, if necessary.