Inside208

State Reaches Revenue Consensus as Precursor to Finalizing Budget

Posted on May 20, 2016 by Dene Westbrook

The House and Senate Fiscal Agencies met with officials from Treasury this week to conduct the annual May Consensus Revenue Estimating Conference.  As a follow-up to the January revenue conference that established the basis for the Governor’s original budget presentation, this week’s conference is used as the baseline for final decision-making by Legislative leaders and the Governor on the current year budget and the FY 16-17 budget scheduled to begin October 1st.

As reported in many news stories this week, the state’s sales and corporate income tax revenues have been running below what was estimated in January for the current year while Medicaid and other human services caseload costs are running higher than expected.  The potential impact on the current and upcoming proposed budgets have been reported to be in the $400 million range, subject to numerous line item and policy adjustments that could alter that impact. The overall consensus is that the proposed spending levels in next year’s state budget will need to be scaled back, but whether any reduction would be proposed for statutory revenue sharing payments is yet to be determined.  Early comments from legislative leaders are that they will look to reduce proposed increases from the Governor’s original proposal before looking at line items like revenue sharing.  The League continues to advocate aggressively to protect the existing payment level and urge the Legislature to find ways to improve the funding level in this critical item.

The continuing weakness in sales tax collections will have an impact on Constitutional payments to communities around the state for the remainder of this year.  According to the Consensus Estimate for sales tax revenue, the current projection for Constitutional revenue sharing is a 0.7% decline in FY 2015-16 relative to FY 2014-15.  Because these payments track with actual sales tax collections, the impact on forthcoming Constitutional payment from Treasury will adjust according to the revenue received.

For FY 2016-17, the Consensus projection is for a 1.7% increase relative to FY 2015-16, but that number will be revised at least two more times based upon the January 2017 and May 2017 revenue estimating conferences.

Chris Hackbarth is director of state affairs for the League. He can be reached at chackbarth@mml.org and 517-908-0304.

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