This week’s update from lobbyist John Tuma:
“An economist is a man who states the obvious in terms of the incomprehensible.”
Alfred A. Knopf
State Budget Forecast Predicts Largest Deficit in Modern History
Those that are not budget wonks need not read beyond this paragraph to understand the magnitude of the problem. The November forecast was released yesterday and it predicts the largest state budget deficit in modern history. If spending and revenue remain the same for the present biennium ending on June 30, 2009, the state will be in the red $426 million wiping away the razor thin reserves the state has in the bank at present. Presently the state’s cash in the bank is only $155 million for the budget reserve and $417 million of excess revenue collections that were calculated last October. The state’s economic forecasters predict that if our revenues and spending remain the same for the next fiscal budget starting in July 2009 and going through June of 2011, we will face a shortfall of $4.847 billion. This budget deficit does not take into account inflation, which the state’s economists estimate would be around $650 million for the future biennium. On top of that, you could add another $650 million to restore the budget reserve to pre-2008 levels and $350 million to restore the cash flow account to historic levels as well. If you include all that, the tab for a complete budget solution is just shy of $6.5 billion. That is approximately 18 percent of our present biennial budget.
Now for you budget wonks. First, what does the forecast mean for this biennium’s program funding? (more…)