General Fund Fiscal Outlook l d l l k Presentation to the New Mexico Tax Research Institute December 15, 2011 David Abbey Director N.M. Legislative Finance Committee
Overview • New Mexico kept its “head above water” during the last 4 years. ‐ No required furloughs or layoffs No required furloughs or layoffs ‐ Maintained class sizes and school year ‐ Maintained Medicaid eligibility and most benefits ‐ Kept courts, parks, museums and MVD offices open Kept courts parks museums and MVD offices open ‐ Balanced budget, adequate reserves, top bond rating • • After falling $1 2 billion or 20 percent in 2 years revenues recovered in After falling $1.2 billion or 20 percent in 2 years, revenues recovered in FY11 and FY12 to ‐ date. • FY13 revenue outlook suggests steady, but moderate growth consistent with a slow economic recovery. with a slow economic recovery. • FY13 “new money” is $250 million, almost 5 percent of spending. • Challenge is not to go back to old spending practices, but to invest in programs that will yield better results. p g y 2
One-Time Funds Supplanting General Fund (million dollars) $6 300 $6,300 $6,100 $5,900 $5,700 $5,500 $5,300 $5,100 $4,900 $4 900 $4,700 $4,500 FY07 FY08 FY09 Op Bud FY09 FY10 FY11 Post FY12 Approp FY13 Solvency Solvency Sanding & Forecast w/EO /EO 2 d Sti 2nd Stimulus l General Fund Federal Funds Other State Funds Recurring Revenue Source: LFC calculations. • Recurring revenue fell by over 20% from FY08 to FY10. • FY12 spending is down 10.9% from the peak. • FY13 revenue is projected to be 7% below the peak appropriation in FY09. 3
Total Appropriations Including Temporary Funds pp p g p y (Dollar amounts in millions) FY12 Appropriation Change From FY11 Change From FY09 Post- Change From FY09 Post Adjusted OpBud Solvency Category: $ Change % Change $ Change % Change Public Schools P bli S h l $ $ (63 2) (63.2) -2.6% 2 6% $ $ (223 8) (223.8) -8.6% 8 6% Higher Education $ (45.8) -6.0% $ (146.3) -17.0% Medicaid* $ 15.9 1.6% $ 10.0 1.0% Other Other ( (47.3) ) $ $ -3.3% 3.3% $ $ (303.6) (303.6) -17.9% 17.9% Total $ -2.5% $ (663.7) (140.4) -10.9% Source: LFC calculations. 4
Total New Mexico Employment p y 840.0 Actual Forecast 820.0 obs usands of Jo 800.0 780.0 Thou 760.0 740.0 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Source: FOR-UNM forecasting service. • • Little growth seen in FY11 Little growth seen in FY11 • Growth average 1.2% per year for next 5 years • Previous high not reached for 5 more years • In October 2011, New Mexico employment increased by 4,900 jobs, or 0.6%, over October 2010 5
New Mexico Oil & Natural Gas Prices $140 $14 History $120 $12 c feet Forecast $100 $10 housand cubic $80 $8 $/barrel $60 $6 $40 $40 $4 $4 $/th $20 $2 $0 $0 Oil Price ‐ left axis Natural Gas Price ‐ right axis Source: Consensus revenue estimating group December 2011 Consensus forecast: • Oil Price (bbl): $86.75 FY12, $87.75 FY13 • Gas price (mcf): $5.20 FY12, p ( ) , $5.60 FY13 • $1/bbl: $4 million for General Fund • $1/mcf: $92 million for General Fund 6
Taxable Gross Receipts by Quarter p y 13.5 20% 13.0 15% 12.5 10% 12.0 12 0 5% $ billions 11.5 0% 11.0 ‐ 5% 10.5 10 5 ‐ 10% 10.0 ‐ 15% 9.5 9.0 ‐ 20% Taxable Gross Receipts (left axis) Year over Year Growth in TGR (right axis) Source: NM Taxation & Revenue Department, RP-500. • Taxable gross receipts (TGR) has grown 12 percent in the last 6 months. • Growth rate turned positive in the first quarter of FY11 for the first time in 2 years Growth rate turned positive in the first quarter of FY11 for the first time in 2 years. • The level of TGR is less than 1 percent below the peak level in the fall of 2009. 7
Table 1 D December 2011 Consensus General Fund Recurring Revenue Outlook b 2011 C G l F d R i R O tl k (Dollar amounts in millions) FY11 (Prelim) FY12 FY13 Post session estimate Post-session estimate $5 164 $5,164 $5 413 $5,413 $5 638 $5,638 December 2011 consensus $5,402 $5,533 $5,688 Annual amount change $604 $130 $156 Annual percent change p g 12.6% 2.4% 2.8% Source: Consensus revenue estimating group. • FY11 grew by 12.6 percent from FY10. FY11 grew by 12.6 percent from FY10. • About 4 percent of FY11 growth is due to legislated tax increases. • Growth is expected to average about 2.5 percent annually from FY12 to FY14. • “New money,” defined as FY13 revenue less FY12 appropriations is projected to New money, defined as FY13 revenue less FY12 appropriations is projected to be $250 million. 8
Public School Outcomes are Persistently Disappointing Disappointing FY10 Actual FY11 Target FY11 Actual FY11 Rating Measure Percent of fourth-grade students who achieve proficiency or above on Percent of fourth grade students who achieve proficiency or above on 51% 74% 46.5% standards-based assessments in reading Percent of eighth-grade students who achieve proficiency or above on the 61% 72% 53.3% standards-based assessments in reading Percent of fourth-grade students who achieve proficiency or above on the 45% 67% 44.4% standards-based assessments in mathematics Percent of eighth-grade students who achieve proficiency or above on the standards-based assessments in mathematics standards-based assessments in mathematics 39% 39% 63% 63% 40 8% 40.8% Percent of recent New Mexico high school graduates who take remedial 47.1% 40% Not Reported courses in higher education at two-year and four-year schools Current year’s cohort graduation rate using the four-year cumulative 66.1% 80% 67.3% method Annual percent of core academic subjects taught by highly qualified 99.5% 100% 97.1% teachers, kindergarten through twelfth grade Overall Program Rating 9
New Administration Drew Attention to School Funding Formula Issues h l d l • PED’s evaluation of 80 ‐ day to 80 ‐ day enrollment data revealed a spike in units despite only a 1 percent increase in student k d l d enrollment, “suggesting potential inconsistencies or error in the data provided and intentional gaming of the system to receive additional funds. – Sec. Skandera receive additional funds ” Sec Skandera • PED identified 34 districts and 28 charter schools for review that sho ed ann al gro th in special ed cation membership that showed annual growth in special education membership, related services staff, or teacher training and experience index units that exceeded annual statewide growth by more than 200 percent 200 percent. • Results of reviews have not yet been released by the department department. 10
LFC and LESC Joint Evaluation of Funding Formula d l • NM’s funding formula is too complicated and NM s funding formula is too complicated and difficult to administer. • The combination of unclear statutes rules and The combination of unclear statutes, rules, and weakening management and oversight undermine the fair and effective allocation of undermine the fair and effective allocation of resources. • Report outlines findings specific to: Special Report outlines findings specific to: Special Education, Ancillary FTE, T&E Index, School Size Adjustment Units, At ‐ Risk Index, Bilingual Units j , , g 11
For Example For Example Photo 1. Lovington ’ s Freshman Academy (marked with a red X) sits adjacent to two Lovington High School Buildings (marked with green checkmarks). Generated an additional $584 thousand in size adjustment funding in FY11 12
Early Childhood Learning Initiatives y g • Secretary ‐ Designate Skandera’s focus on social Secretary Designate Skandera s focus on social promotion appropriately evolved into focus on early childhood education and improving early early childhood education and improving early math and reading proficiencies. • Currently New Mexico funds several programs • Currently, New Mexico funds several programs aimed at early childhood education with a history of demonstrated success including history of demonstrated success, including prekindergarten and kindergarten ‐ three ‐ plus. 13
Higher Education Funding Issues Higher Education Funding Issues • A task force of institutional, executive and legislative leaders and staff proposed a draft formula last September. • The HED delivered a revised formula and budget request g q - Funds statewide outcomes, including increased certification and degree procurement, especially for priority workforce areas and by financially at-risk students -Funds workload based on completed coursework, not enrollment -Maintains budget stability near FY12 operating levels • The revised formula moves the state in the right direction to fund outcomes. 14
Higher Education Funding cont. Higher Education Funding cont. • Additional funding is needed to guarantee success in FY13 g g • Change in direction may not go far enough • No components in place to ensure budget stability over time -For example, the tuition credit and waivers are gone for FY13 For example the tuition credit and waivers are gone for FY13 • More work may need to be done during the 2012 interim - develop better data, strengthen statewide outcomes and performance targets, establish mission-specific measures 15
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