The House Appropriations Subcommittee on Current Fiscal Conditions, chaired by Rep. Aycock, met Wednesday, October 17th for about an hour to discuss several items of interest for the upcoming legislative session, including conversations related to the Rainy Day Fund and the impact of reversing the FSP August payment delay.
Paula Griffin from the Comptroller’s Office first discussed the need for the state to take out $9.8 billion in tax revenue anticipation notes. Due to the timing imbalance of state revenues and expenditures (mostly first quarter payments to school districts), the state has had to take out a TRAN every year since 1986 as a cash management tool. These notes are competitively bid and the state’s interest rate after this most recent sale was 0.225%. The one item of note during this conversation, a topic that has been discussed in several other legislative sessions, was the possibility of “smoothing” school district payments so that there is less front-loading during the first quarter of the fiscal year. Rep. Aycock was quick to point out the state’s interest rate and whether or not schools could fair as well if the cash-flow burden was pushed to the district level.
Jennifer Schiess from the Legislative Budget Board discussed the history and mechanics of the Foundation School Program August payment deferral. As she described, this budget management tool shifts the final biennial payment of the FSP into the next fiscal biennium to achieve a one-time savings to the state budget. This deferral has been adopted twice. The first adoption during the 78th Legislative Session deferred the August 2005 payment (approximately $800 million in savings). This deferral was reversed during the 80th Legislative Session. The second adoption of the deferral occurred during the 82nd Legislative session and will defer the August 2013 payment. The estimated cost savings to the state during the 2012-13 biennium is approximately $1.9 billion. The important item of note during this conversation was whether or not the one-time budget management tools, like the FSP payment delay, will be reversed within the 2012-13 supplemental bill at the start of next session. Rep. Pitts commented that with the $4.7 billion Medicaid shortfall, the $1.9 billion FSP payment delay, the $800 million tax speed-up provisions, and the potential for several other items with additional costs in the hundreds of millions, it is possible that the supplemental bill could use much of the surplus that has accrued due to better than forecasted sales tax receipts.
Phillip Ashley, also from the Comptroller’s office, gave a brief overview of the Economic Stabilization Fund (Rainy Day Fund). The take away from this conversation is that by the end of fiscal year 2013 there will be approximately $8.1 billion in the fund. While an official estimate of the ending balance for 2015 will not be available until the January Biennial Revenue Estimate is released, there is some talk of the Rainy Day Fund reaching almost $12 billion by the end of fiscal year 2015, funding that could be available for use during next legislative session.
Attached are the copies of the presentations from the meeting.
Moak, Casey & Associates would also like to mention that beginning Monday, we will be providing daily updates related to the school finance court case.