Looking at Savings

The state will likely have to withdraw some money from its savings accounts just to pay for everything that was included in last year’s budget.  And it could take a bigger withdrawal to cover next year’s needs. Legislative Finance Division Director David Teal presented his review of the budget the governor introduced in December.  Here’s where to find his official report.

This year’s revenue decline reflects surprisingly less oil production and lower oil prices than expected at the end of last year’s session.  Teal told the committee to expect the shortfall to be $160-million “plus or minus a couple of hundred million.”

Two points to consider when thinking about the shortfall.  First:  Teal said this is not a gloom and doom review.  The state has some $16-Billion in savings,  so we’re talking about one percent of our reserves right now.  Second:  the governor has left only a minimum amount of money on the table for the legislature to spend when writing next year’s budget.  Teal said adding anything more than $263-million to next year’s spending will put them in negative-spending terrain.

The question might arise comparing the review alongside the governor’s budget.  Teal explained why he does not agree with the governor plan that shows some half-billion dollars for lawmakers to add to the budgets.  Teal points out what changed:

—      the administration said “oops”  on about a hundred million dollars that should have been included;

—      the December budget did not include salary increases that will come from union contracts still being negotiated;

—       there’s no increase planned for the per/student education funding, which might come up;

—      the governor set aside $45-million for supplemental budget increases likely to come up where the average supplement in recent years has been about $85-million.

Second:  The legislature usually adds a lot more to the budget in capital projects – enough to double the governor’s requested capital projects.

The Finance Committees will have to make some difficult decisions this year – basically whether to cry poverty — putting at risk the business and economy of the entire state — or to use some of those reserves, drawing closer the date they could run out.

Sub-committees are beginning their reviews of departmental and agency budgets.


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