On April 4-5, members from 26 states gathered in Philadelphia to discuss the current status and trends for state budgets. Below are brief summaries of each session along with links to speaker presentations.
FEDERAL ISSUES AFFECTING STATES
Marcia Howard, Executive Director, Federal Funds Information for States
Marcia Howard gave an overview of fiscal year 2020 spending and notable deadlines over the next year. She noted that most of what happens in federal spending is on autopilot as mandatory spending, with her presentation focused on the $639 billion in domestic discretionary spending that affects states. Two big deadlines facing Congress this year are passing fiscal year 2020 appropriations by September 30 and raising the debt ceiling; the debt ceiling was reinstated in March and it is projected that action will need to be taken by late summer/early fall. Howard also highlighted programs expiring in 2019 and 2020 affecting states, including Temporary Assistance for Needy Families (TANF) and surface transportation.
NATIONAL ECONOMIC OUTLOOK
Dan White, Director of Government Consulting & Public Finance Research, Moody’s Analytics
Dan White outlined the key economic trends including the timing and characteristics of the next recession. Mr. White forecasted a recession by late calendar year 2020 that would be focused on the financial sector, based on warning signs such as the tight labor market and differences between long-term and short-term interest rates. Other topics discussed in the session included how states are preparing for the next downturn by building up reserve funds and the varying impact of the next recession across the country.
EARLY EDUCATION FUNDING STRATEGIES IN THE STATES
W. Steven Barnett, Senior Co-Director, National Institute for Early Education Research
Nicholas Moore, Education Policy Advisor, Alabama Office of the Governor
Dr. W. Steven Barnett provided an overview on the state funding landscape for preschool. His presentation examined key research findings on the benefits of early childhood education, state spending trends and enrollment statistics, and various revenue sources used by states to fund preschool. He also looked at preschool funding distribution models and key considerations to make when choosing a funding approach. Nicholas Moore then shared Alabama's experience with designing, implementing and expanding the state's First Class Pre-K Program. He provided details on how the program is structured and funded, as well as the success it has had thus far in improving student outcomes.
STATE DEBT, BOND RATINGS & TRENDS
Sussan Corson, Senior Director/Analytical Manager, States & Transportation Group, U.S. Public Finance, S&P Global Ratings
Sussan Corson said that the ratings outlook for most states is stable and that there were less downgrades in 2018 than the prior two years. However, states still face a number of risks including pent-up demand for increased spending while preparing for an economic slowdown, increased fiscal volatility, continued Medicaid cost growth, the emerging use of bond covenants and voter-approved tax caps, and the possibility of natural disasters. States must also contend with pension funding and demographic challenges.
SPORTS BETTING & GAMING: RECENT STATE EXPERIENCES
Ranjana Madhusudhan, Chief Economist, New Jersey Office of Revenue & Economic Development
Greg Thall, Special Advisor to the Budget Secretary, Pennsylvania Office of the Budget
Ranjana Mudhusudhan and Greg Thall talked about their state’s experiences with gaming since the U.S. Supreme Court ruled in favor of sports betting last May. Sports wagering became legal in June in New Jersey and is currently offered in casinos and racetracks (both on-site and online); over $14M has been generated in taxes from sports wagering so far in fiscal 2019. Pennsylvania authorized sports wagering in 2017 pending approval of the federal government. In fiscal 2019, sports wagering, iGaming, and fantasy contests are expected to generate $24.1 million in tax revenue, representing a small share of the state’s overall gaming revenue.
ONLINE SALES TAX – STATE UPDATES
Richard Cram, National Nexus Program Director, Multistate Tax Commission
Britta Reitan, State Budget Director, Minnesota Management & Budget
Richard Cram said that most states have adopted a threshold similar to South Dakota since the U.S. Supreme Court in June ruled in favor of South Dakota’s law requiring the collection of sales taxes from businesses without a physical presence if they have more than 200 transactions or over $100,000 in sales in the state. Cram also said that states have been careful not to do retroactive enforcement. Britta Reitan said that Minnesota enacted a law in 2017 permitting the collection of online sales taxes pending the overturning of Quill v. North Dakota, and that the Minnesota Department of Revenue started communicating with remote sellers the day of the Supreme Court’s decision in South Dakota v. Wayfair, and has established a robust FAQ website and is providing webinars to sellers.
DIRECTOR ROUNDTABLE: BUDGET OFFICERS’ REACTIONS & LESSONS FROM THE FEDERAL GOVERNMENT SHUTDOWN
Moderated by John Hicks, Executive Director, NASBO