innovative strategies: state efforts to stem the tide of red ink (presentation)
TRANSCRIPT
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8/19/2019 Innovative Strategies: State Efforts to Stem the Tide of Red Ink (Presentation)
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Innovative Strategies:Innovative Strategies:State Efforts to Stem the Tide ofState Efforts to Stem the Tide of
Red Ink Red Ink
Sujit M. CanagaRetnaSujit M. CanagaRetna The Council of State Governments The Council of State GovernmentsSouthern Legislative Conference (SLC)Southern Legislative Conference (SLC)
Presentation Before thePresentation Before theGovernor of AlabamaGovernor of Alabama’’s Commission on Efficiency,s Commission on Efficiency,
Consolidation, and FundingConsolidation, and Funding
Alabama State House Alabama State HouseMontgomery, AlabamaMontgomery, Alabama
November 21, 2003November 21, 2003
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Two Main Parts Two Main Parts
II.. Broad National and State TrendsBroad National and State Trends
II.II. InnovativeInnovative Strategies Adopted by StateStrategies Adopted by State
PolicymakersPolicymakers
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I. Broad Trends:I. Broad Trends:
NationalNational October 2003 Unemployment 6 percentOctober 2003 Unemployment 6 percent
GDP growth in Third Quarter of 2003 =GDP growth in Third Quarter of 2003 =7.2%7.2%
Impressive Productivity Gains; 5% since 2001Impressive Productivity Gains; 5% since 2001
Manufacturing and Construction SectorManufacturing and Construction Sector
GrowthGrowth Rise in Consumer and Business ConfidenceRise in Consumer and Business Confidence
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I.I. Broad Trends:Broad Trends:
NationalNational
Federal Budget Deficits Loom in Upcoming YearsFederal Budget Deficits Loom in Upcoming Years
1992 = $1992 = $--290.4 Billion290.4 Billion 1996 = $1996 = $--107.5 Billion107.5 Billion1998 = $69.2 Billion1998 = $69.2 Billion 1999 = $125.5 Billion1999 = $125.5 Billion
2000 = $125.5 Billion2000 = $125.5 Billion
2001 = $127.1 Billion2001 = $127.1 Billion
2002 = $2002 = $--159 Billion159 Billion 2003 = $2003 = $--374 Billion374 Billion
2004 = $2004 = $--480 Billion480 Billion
In January 2001, CBO predicted a federal budgetIn January 2001, CBO predicted a federal budgetsurplus of $5.6 trillion between 2002 and 2011surplus of $5.6 trillion between 2002 and 2011
In October 2003, CBO announces cumulativeIn October 2003, CBO announces cumulative
deficits totaling $1.4 trillion over the next four yearsdeficits totaling $1.4 trillion over the next four years
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I.I. Broad Trends:Broad Trends:
StateState States have closed a cumulative budget gap ofStates have closed a cumulative budget gap of
$200 billion in last three fiscal years (FY 01$200 billion in last three fiscal years (FY 01through FY 03)through FY 03)
For the current fiscal year, the cumulativeFor the current fiscal year, the cumulative
estimate is a shortfall of $25 billion to $40estimate is a shortfall of $25 billion to $40billionbillion
Florida, Georgia, North Carolina, Virginia in theFlorida, Georgia, North Carolina, Virginia in theSouth have already announced potentially largeSouth have already announced potentially largegapsgaps
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I. Broad Trends:I. Broad Trends:
StateState In prior years, states solved their gaps byIn prior years, states solved their gaps by
Slashing Spending Slashing Spending Tapping Rainy Day Funds Tapping Rainy Day Funds
Deploying Tobacco Settlement MoniesDeploying Tobacco Settlement Monies
Raising Taxes and User FeesRaising Taxes and User Fees
Hiking Cigarette TaxesHiking Cigarette Taxes
Cutting Funds to Local GovernmentsCutting Funds to Local Governments Racking Up DebtRacking Up Debt
Generating Funds via Gaming Generating Funds via Gaming
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II. Innovative StrategiesII. Innovative Strategies
Decoupling From Federal Tax CodeDecoupling From Federal Tax Code Federal tax cuts in 2001, 2003 and 2003 reducedFederal tax cuts in 2001, 2003 and 2003 reduced
state revenues ($10 billion)state revenues ($10 billion) Phasing out the federal estate tax lowered statePhasing out the federal estate tax lowered state
revenues ($4 billion)revenues ($4 billion) Federal bonus depreciation provision reducedFederal bonus depreciation provision reduced
state revenue ($14 billion)state revenue ($14 billion)
Hence, 37 states have already deHence, 37 states have already de--linked the taxlinked the tax
codes from the federal tax codecodes from the federal tax code
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II. Innovative StrategiesII. Innovative Strategies
Introducing Tax Amnesty ProgramsIntroducing Tax Amnesty Programs In 2002 and 2003, 19 states across the countryIn 2002 and 2003, 19 states across the country
including Florida, Kentucky, Missouri,including Florida, Kentucky, Missouri,Oklahoma, South Carolina, VirginiaOklahoma, South Carolina, Virginia
Virginia netted $10 million in amnesty’s first Virginia netted $10 million in amnesty’s firstfour weeksfour weeks
Michigan’s program brought in $30 million inMichigan’s program brought in $30 million in
new revenuenew revenue
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II. Innovative StrategiesII. Innovative Strategies
Raising the Gasoline TaxRaising the Gasoline TaxGasoline Tax in SLC States (As of July 1, 2003)Gasoline Tax in SLC States (As of July 1, 2003)
AL AL – – 16 cents16 cents MOMO – – 17 cents17 cents
AR AR – – 21.5 cents21.5 cents NCNC – – 24.2 cents24.2 cents
FLFL – – 4 cents4 cents OKOK – – 16 cents16 centsGAGA – – 7.5 cents7.5 cents SCSC – – 16 cents16 cents
KYKY – – 15 cents15 cents TN TN – – 21.4 cents21.4 cents
LALA – – 20 cents20 cents TX TX – – 20 cents20 cents
MDMD – – 23.5 cents23.5 cents VA VA – – 17.5 cents17.5 cents
MSMS – – 18 cents18 cents WV WV – – 20.5 cents20.5 cents
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II. Innovative StrategiesII. Innovative Strategies
Creative Financing TechniquesCreative Financing Techniques IllinoisIllinois – – unique pension financing plan by increasingunique pension financing plan by increasing
state’s GO bond authority state’s GO bond authority MississippiMississippi – – switching to variable instead of fixedswitching to variable instead of fixed--raterate
bondsbonds
MichiganMichigan – – closing a property tax loophole statewideclosing a property tax loophole statewide
KansasKansas – – Governor authorized to accelerate propertyGovernor authorized to accelerate property
tax payments or delay tax refundstax payments or delay tax refunds South DakotaSouth Dakota – – Accounting for income in the year Accounting for income in the year
earnedearned
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II. Innovative StrategiesII. Innovative Strategies
Recouping Costs from the EstatesRecouping Costs from the Estates States seeking to recover some of the moneyStates seeking to recover some of the money
spent on nursing home care by Medicaid fromspent on nursing home care by Medicaid fromthe estates of deceased personsthe estates of deceased persons
-- Texas Texas-- ConnecticutConnecticut
II Innovative StrategiesII Innovative Strategies
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II. Innovative StrategiesII. Innovative Strategies
Inventive Steps to Increase FederalInventive Steps to Increase Federal
Funds under MedicaidFunds under Medicaid
States continue to maximize their Federal MedicalStates continue to maximize their Federal Medical
Assistance Percentage (FMAP) Assistance Percentage (FMAP)
-- Use of Upper Payment LimitsUse of Upper Payment Limits
-- Intergovernmental Transfer PaymentsIntergovernmental Transfer Payments
-- Nursing Home Provider TaxNursing Home Provider Tax
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II. Innovative StrategiesII. Innovative Strategies
FloridaFlorida Eliminate outmoded trust funds and channelEliminate outmoded trust funds and channel
funds to general fundfunds to general fund Move to activity Move to activity --based budgeting based budgeting
Service level management analysis of state’s ITService level management analysis of state’s ITservicesservices
SUNTAX, the country’s first, truly integratedSUNTAX, the country’s first, truly integrated
revenue administration system (over $70 millionrevenue administration system (over $70 millionin previously unidentified collections in firstin previously unidentified collections in firstyear)year)
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II. Innovative StrategiesII. Innovative Strategies
Arkansas Arkansas Closed offices of the Revenue and EmploymentClosed offices of the Revenue and Employment
Security DepartmentSecurity Department Implemented new statewide accounting systemImplemented new statewide accounting system
Merged technical institutes with higherMerged technical institutes with highereducation institutionseducation institutions
Implemented PerformanceImplemented Performance--BasedBased--Budgeting Budgeting Provided state services via the InternetProvided state services via the Internet
Authorized the use of state bonds for toll roads Authorized the use of state bonds for toll roads
II Innovative StrategiesII Innovative Strategies
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II. Innovative StrategiesII. Innovative Strategies
North CarolinaNorth Carolina Eliminated IMPACT, a boot camp in favor of communityEliminated IMPACT, a boot camp in favor of community
correction programs (savingscorrection programs (savings -- $4 million)$4 million)
Closed older prisons (savingsClosed older prisons (savings -- $5 million)$5 million)
Disposed of stateDisposed of state--owned surplus real property (revenueowned surplus real property (revenue --$10 million)$10 million)
Consolidated employee death and disability benefit reserveConsolidated employee death and disability benefit reserve
funds (savingsfunds (savings -- $55 million)$55 million) Reduced prison staffing by revising relief formula (savingsReduced prison staffing by revising relief formula (savings --
$4.3 million)$4.3 million)
Implemented “prior approval” and use of generics inImplemented “prior approval” and use of generics in
Medicaid prescription drugs (savingsMedicaid prescription drugs (savings -- $97 million)$97 million) Replaced general funds appropriations for needReplaced general funds appropriations for need--basedbased
scholarships in UNC system with funds from Escheatsscholarships in UNC system with funds from Escheats
(savings $21 million)(savings $21 million) Accelerated the state’s debt collection practices (anticipated Accelerated the state’s debt collection practices (anticipated
collection of $50 million in new revenue)collection of $50 million in new revenue)
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II. Innovative StrategiesII. Innovative Strategies
GeorgiaGeorgia Implemented a process called “redirection”Implemented a process called “redirection”
Established the Georgia Technology AuthorityEstablished the Georgia Technology Authorityto better harness technology in bringing aboutto better harness technology in bringing about
efficiencies and cost savingsefficiencies and cost savings Utilized state funds more efficiently to secureUtilized state funds more efficiently to secure
matching federal fundsmatching federal funds
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II. Innovative StrategiesII. Innovative Strategies
Tennessee Tennessee $23.4 million in potential savings at the$23.4 million in potential savings at the
Corrections Department with the early release ofCorrections Department with the early release ofsome state prisoners and requiring others tosome state prisoners and requiring others to
serve community serve community --based sanctionsbased sanctions
$12 million in new revenue at the Department$12 million in new revenue at the Department
of Mental Health by increasing fees thatof Mental Health by increasing fees that
behavioral health organizations pay per patientbehavioral health organizations pay per patientin the state’s mental health institutionsin the state’s mental health institutions
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II. Innovative StrategiesII. Innovative Strategies
Texas Texas Changed the Permanent School Fund to a totalChanged the Permanent School Fund to a total
return investment strategy (savings $474 million)return investment strategy (savings $474 million)
Closed a loophole in the auto sales tax systemClosed a loophole in the auto sales tax system(savings $176 million)(savings $176 million)
Delayed the Foundation School ProgramDelayed the Foundation School Programpayment without impacting services (savingspayment without impacting services (savings$800 million)$800 million)
Shifted the date by which unclaimed wages andShifted the date by which unclaimed wages andproperty becomes stateproperty becomes state--owned (revenue $13owned (revenue $13million)million)
Sunset provision for every state agency, once inSunset provision for every state agency, once in12 years12 years
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II. Innovative StrategiesII. Innovative Strategies
South CarolinaSouth Carolina MAP Commission appointed by Governor inMAP Commission appointed by Governor in
June 2003 to streamline government June 2003 to streamline government Hundreds of recommendationsHundreds of recommendations
$225 million in savings identified in first year$225 million in savings identified in first year
$300 million in savings thereafter$300 million in savings thereafter
Additional $650 million in savings by eliminating the Additional $650 million in savings by eliminating the
Teacher and Employee Retention Incentive Program Teacher and Employee Retention Incentive Program
Regularly review MalcolmRegularly review Malcolm BaldridgeBaldridge Award program Award program
for ideas on enhancing efficiency in South Carolinafor ideas on enhancing efficiency in South Carolina
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II. Innovative StrategiesII. Innovative Strategies
IllinoisIllinois Statewide centralized “buying club” to purchaseStatewide centralized “buying club” to purchase
prescription drugs for seniors and disabledprescription drugs for seniors and disabledpersons ($150 million in annual savings to thepersons ($150 million in annual savings to the
state)state)
Move to buying prescription drugs for stateMove to buying prescription drugs for state
workers and retirees from Canada ($91 million workers and retirees from Canada ($91 million
in annual savings to the state)in annual savings to the state)
C l i f C i
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Conclusion: Room for CautiousConclusion: Room for Cautious
OptimismOptimism State revenues increased by 9% at the end of theState revenues increased by 9% at the end of the
two quarters that ended in September 2003two quarters that ended in September 2003 State and local spending increased by only 1%State and local spending increased by only 1%
for the same periodfor the same period States will increasingly look to borrowing toStates will increasingly look to borrowing to
meet budget gapsmeet budget gaps – – huge increase from $48huge increase from $48
billion in 1992 to $127 billion in 2002billion in 1992 to $127 billion in 2002
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Thank You Thank You
Innovative Strategies:Innovative Strategies:State Efforts to Stem the Tide of Red Ink State Efforts to Stem the Tide of Red Ink
For more information, please contactFor more information, please contact
Sujit M. CanagaRetnaSujit M. CanagaRetna
404/633404/633--18661866OrOr
[email protected]@csg.org
www.slcatlanta.org www.slcatlanta.org