Dec 19th 2014 | Posted in Legislation/Policy, State, Trends by Mary Scott Nabers

SPI President & CEO Mary Scott Nabers

SPI President & CEO Mary Scott Nabers

“Rebuilding” is a common word in state government these days. Nationwide, states are tasked with finding more efficient ways for rebuilding transportation, water resources, low-income housing, educational facilities and social service programs. But, nowhere has the term “rebuilding” been used more than in the realm of fiscal rebuilding.

According to the recently released 2014 Fiscal Survey of the States by the National Association of State Budget Officers (NASBO), state officials are responding to the need for fiscal rebuilding, but the progress is moving slowly.

While the NASBO survey indicates there will be a fifth consecutive year of increases in general fund spending in FY 2015, post-recession spending growth will still be below average. Adding additional angst to the fiscal concerns of state officials is the fact that some budget areas, such as Medicaid and higher education, continue to outpace both inflation and general fund revenue growth, putting even more strain on budgets.

While 43 of the states anticipate higher general fund spending in FY 2015, fiscal rebuilding is a long way from reaching pre-recession levels. That translates into even more careful and thoughtful spending.

So, how will states allocate their money in FY 2015? This is interesting…especially since Texas is about to begin a legislative session where spending decisions will be hot topics.

Most recently, thirty-nine states collectively increased K-12 education spending by $11.1 billion. A total of $8.5 billion in increased Medicaid spending was divided among 36 states. Forty states collectively allocated a total of $4.4 billion for higher education costs. Thirty-five states increased corrections spending and a dozen states increased transportation spending.

There have also been budget cuts. For example, public assistance programs experienced a total decline of $590 million in 12 states. Six states enacted budget cuts in K-12 education, seven cut higher education spending, 12 cut corrections funding, seven reduced Medicaid expenditures and eight cut transportation spending. Although only moderate revenue growth is predicted for FY 2015, general fund revenue is expected to increase by 3.1 percent, more than double the gain for FY 2014.

In economically healthier days of state government, most states carried a strong year-end balance. That, added to balances in “rainy day funds,” gave public officials some discretionary funds for emergencies. For the most part, rainy day funds have remained stable since the recession, but due to increased budgetary demands, ending balances have not. In Texas – thanks to increased revenues from a booming oil and gas industry surge – a portion of the state’s growing rainy day fund has been approved by voters to help defray the costs of some of Texas’ transportation and water infrastructure needs. Other states have not been so fortunate.

In the end, according to the NASBO survey, the fiscal rebuilding will almost certainly make public-private partnerships and other alternative funding options extremely attractive to public officials in 2015.

 

Mary Scott Nabers

As President and CEO of Strategic Partnerships, Inc., Mary Scott Nabers has decades of experience working in the public-private sector. A well-recognized expert in the P3 and government contracting fields, she is often asked to share her industry insights with top publications and through professional speaking engagements.