The Williams Report: January 2019

BUDGET

Arizona: Gov. Ducey’s Budget Proposal Adds to Arizona Education Spending

Gov. Doug Ducey’s first budget since re-election contains a substantial increase in education spending. Arizona can “guarantee competitive pay for all educators” by granting teachers a 20 percent raise by 2020 and $100 million in new higher education spending, according to State Superintendent of Public Instruction Kathy Hoffman. Gov. Ducey’s budget also calls for $9 million to place police officers in public schools around the state.

California: Gov. Newsom’s Budget Increases State Funding, Freezes Tuition

Newly-elected Gov. Gavin Newsom’s first budget increases public funding to the three California university systems, freezes tuition at public four-year institutions, and offers two “free” years of community college—a key campaign promise. Gov. Newsom’s budget also includes $200 million in expanded Cal Grant funding for low-income students, which student representatives claimed “does not go nearly far enough in addressing the systemic issues” surrounding higher education affordability. 

Connecticut: State Budget Surplus Estimates Rise Again this Month

Office of Policy and Management Secretary-designate Melissa McCaw expects Connecticut to have an operating surplus of $461.9 million this fiscal year. Combined with revised revenue projections showing $197 million more in revenue from last month, Connecticut’s budget reserve is expected to grow to $2.295 billion by fiscal year-end. With a comfortable budget surplus and some of the highest tax rates in the nation, Connecticut has a golden opportunity to cut taxes and encourage economic growth.

Georgia: State Legislature to Consider Gov. Kemp’s $27.5 Billion Budget Proposal

Prior to exiting office, former Gov. Nathan Deal announced Georgia’s tax collections for 2018 exceeded last year’s collections by $517 million—a 4.6 percent increase. Georgia’s revenue growth will help newly-elected Gov. Brian Kemp in his priorities to increase teacher pay and start new school safety initiatives.

Idaho: Lawmakers set cautious revenue figure, start working on state budget

The Idaho Legislature’s Joint Economic Outlook and Revenue Assessment Committee revised newly-elected Gov. Brad Little’s revenue forecast by $93.2 million, bringing Idaho’s year-end balance to $79.4 million. Lawmakers often prefer to be conservative when forecasting revenue, as shortfalls can trigger costly mid-year budget adjustments.

Indiana: Gov. Holcomb’s Budget Proposal Would End Amtrak Line Subsidy

Since taking control of the Hoosier State Line between Indianapolis and Chicago in 2017, Amtrak has received $3 million in state support annually. Localities served by the line claim they were surprised by Gov. Eric Holcomb’s proposal to eliminate the subsidy. An Amtrak spokesman declined to comment as the Indiana budgeting process is still under way.

Kansas: Gov. Kelly’s Budget Plan Increases Spending on Medicaid, Education and State Worker Salaries

Newly-elected Gov. Laura Kelly announced a budget that claims to leave Kansas with $686 million in funds by the end of the fiscal year and includes no tax increases. Gov. Kelly aims to expand Medicaid eligibility, provide a 2.5 percent raise for state employees, and begin repaying bonded obligations. Republicans in the legislature criticized Gov. Kelly’s budget for underestimating proposed costs and overestimating the operating surplus.

Maryland: Gov. Hogan’s $46.6 Billion Budget Focuses Mostly on Education Funding 

Gov. Larry Hogan revealed the first budget of his second term, which expands funding for Maryland public education programs without raising taxes. In addition to restoring $11 million in funding to Baltimore City schools, Gov. Hogan’s budget includes $438 million for school construction, $30 million for school safety, and $1.4 billion for the University System of Maryland in exchange for a 2 percent cap on tuition increases.

Massachusetts: Fiscal Storm Clouds Loom as Gov. Baker Develops Budget

Despite an operating surplus exceeding $1 billion last fiscal year, Massachusetts expects revenues to underperform, as the first quarter of fiscal year 2019 saw $500 million less in revenue than expected. Pressure for increased education and transportation spending is a harbinger of a difficult upcoming budget battle.

Nevada: Gov. Sisolak Takes Advantage of Economic Recovery with his Budget Proposal

Newly-elected Gov. Steve Sisolak announced a biennial general fund budget of $9.3 billion—the highest since the Great Recession. Gov. Sisolak’s budget also assumes total state revenues in excess of $25 billion from a collection of state taxes and federal and state funds, a similarly landmark estimate. The vast majority of Gov. Sisolak’s budget goes towards health care and education—38 and 17 percent, respectively

New Hampshire: State Enters Budget Season with Healthy Balance Sheet

Following tax relief in previous years, New Hampshire expects state revenues to exceed estimates, with $106 million in excess tax revenue alone. The legislature plans to assume only a portion of that windfall in case revenues readjust closer to revenue estimates to protect against a revenue shortfall. The portion of excess revenue spent by the legislature will go towards the general fund and education trust.

New York: Towns at Risk of Losing Nearly $60 Million on State Budget Proposal

Gov. Andrew Cuomo’s proposed budget cuts nearly $60 million of funding for 1,300 local governments across New York to make way for his proposed $175 billion state budget. A spokesman from Gov. Cuomo’s office explained that the cut in funding to local governments can be reversed if the legislature supports new taxes on internet retail sales.

Rhode Island: Governor Releases Proposed $9.9 Billion State Budget, Including Marijuana Taxing 

Gov. Gina Raimondo released details of her $9.9 billion budget that closes the $200 million deficit while spending more on education. Rhode Island would be able to increase state spending and close a budget gap due to higher-than-forecasted state revenues this past Fall. Gov. Raimondo’s budget also grows state taxes through provisions that expand the sales tax to cover more services and require large companies to cover more of their employee’s Medicaid costs. Gov. Raimondo also proposes legalizing recreational marijuana and taxing marijuana sales to generate more revenue.

West Virginia: West Virginia Lawmakers Learn Details of Governor’s Proposed Budget

Gov. Jim Justice announced a $4.675 billion budget—an increase of 1.73 percent from last year. Gov. Justice’s budget does not utilize the state’s $718.6 million rainy day fund, and the state may generate a surplus with revenue forecasted to grow 16 percent faster than spending. The largest line items of Gov. Justice’s budget are education, health programs, and public safety initiatives, which comprise 80.6 percent of the budget altogether.

PENSIONS

Kentucky: Legislature Forms Bipartisan Pension Working Group

Following the state Supreme Court’s reversal of pension reform legislation passed last year, the Kentucky Legislature formed a bipartisan working group to explore fixes to Kentucky’s pension system. Kentucky’s pension system is one of the worst funded in the country. ALEC’s annual Unaccountable and Unaffordable publication finds the Kentucky Retirement System (KYRET) is only 20.9 percent funded as of 2017, due to a variety of factors including insufficient annual pension contributions and overly inflated rate of return expectations for investments

Pennsylvania: From Boom to Bust: A Timeline of PA’s Public Pension Systems

Pennsylvania public pensions began as some of the best in the country when they were established following the First World War, but years of poor policy decisions have resulted in the state retirement system now being one of the worst funded. In ALEC’s 2017 Unaccountable and Unaffordable publication, Pennsylvania only has 28.1 percent of the funds necessary to keep the promise made to public employees.