ABEC Annual Conference - Microsoft · ABEC Annual Conference December 9, 2016 JLBC. JLBC 2...
Transcript of ABEC Annual Conference - Microsoft · ABEC Annual Conference December 9, 2016 JLBC. JLBC 2...
ABEC Annual Conference
December 9, 2016
JLBC
JLBC 2
Presentation Summary
Revenues
Spending
Cash and Structural Balances
Revenues
JLBC
JLBC
Fund Source $ in Millions
Sales and Use Tax 4,458.1
Individual Income Tax 4,117.5
Insurance Premium Tax 515.8
Corporate Income Tax 433.5
Other Ongoing 531.4
One-Time Revenues 79.4
Total Revenue 10,135.7
4
’17 General Fund Revenue – Where It Comes From
Sales and Use Tax45%
Individual Income Tax
40%
Insurance Premium Tax
5%
Corporate Income Tax
4%
All Other6%
*
*$663.6 M is distributed to cities
JLBC
Current Expansion Exceeds Historical Average
90
3745
39
24
106
36
58
12
92
120
73
132
0
20
40
60
80
100
120
140
# o
f m
on
ths
Length of US Economic Expansions
Expansion Average
5
Now
’20
Calendar Year
Expansion: time period without 2 consecutive quarters of GDP decline
JLBC
Current Recovery is Weakest in Post WWII Economy- May Permit Longer Expansion
6
JLBC 7
October Forecast vs. Enacted Budget- Both Based on 65% Probability
*Excludes one-time revenues, tax law changes, and urban revenue sharing** Enacted ’17 budget did not include a ’20 estimate
**
JLBC
TPT shifted from contracting to retail in 2015
Magnitude of shift cannot be determined
Contracting decline likely caused by shift
8
’16 Sales Tax Growth by Category
’16 Growth by Category
Retail 5.6%
Contracting (10.0)%
Use 0.8%
Restaurant/Bar 5.5%
Utilities 1.7%
Other 3.3%
Total 2.9%
*Reflects net growth after tax law changes
*
JLBC 9
Sales Tax
Yield: $1.1 billion per 1 cent (non-shared)
What is the dollar value of major sales tax exemptions?
Category Value
Health Care Services $2.1 billion
Professional, Scientific & Technical Services $1.0 billion
Financial Services $976 million
Administrative and Business Support Services $720 million
Prescription Drugs & Medical Oxygen $604 million
Commercial Leases $437 million
Food for Home Consumption $356 million
JLBC 10
DOR reduced its collection/audit staff from 332 FTEs in ’16 to 224 FTEs in ’17
Revenue impact is unknown
78 FTEs and contracted collectors added in ’11 were budgeted to increase revenue by $53 M
DOR says it is focusing on improving voluntary compliance
Will DOR Staffing Decision Reduce Revenues?- Forecast Has Not Been Adjusted
JLBC 11
’20 CIT Projected to be $281 M- Primary Reductions are 2% Rate Cut and 100% Sales Factor
551 535 533 549
986
809
592
413
560
644 662
575
663
571
454
353284 281
0
200
400
600
800
1,000
1,200
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
Co
rpo
rate
Inco
me
Ta
x $
in M
Net Collection
4-Sector Forecast
Statutory Changes
Given taxpayer confidentiality, timing of tax reductions highly uncertain
JLBC 12
Insurance Taxes Surpassing Corporate Taxes- AHCCCS-Related Premiums Built into Federal Reimbursement
-
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
$ in
M
IPT(Non-AXS)
IPT(AXS)
CIT
IPT
JLBC
’18 ’19 ’20
Base Revenue Growth (4.0%/4.4%/5.0%) 401 455 534
One-Time Fund Transfers (79) 0 0
Previously Enacted Tax Legislation (119) (78) (31)
Urban Revenue Sharing (12) (7) (13)
Total 191 370 490
% Change 2.0% 3.8% 4.9%
13
Adjustments Reduce Growth Rate to 2.0% in ’18
$ in M
JLBC 14
Phase-In of $228 M of Enacted Tax Reductions
Corporate Rate Reduction/Sales Factor
Corporate/IPT School Tuition Indexing
Bonus Depreciation Full Conformity
Manufacturing Electricity Exemption
Other
Total
’18
(74)
(12)
(8)
(12)
(13)
(119)
$ in M*
’19
(52)
(15)
(0)
(0)
(11)
(78)
’20
(0)
(18)
(0)
(0)
(13)
(31)
*By ’20, revenue base is $(228) M lower than in ’17
JLBC 15
Current State of Tax Credit Policy- ’16 Actual Credits Taken
Credit IIT CIT IPT
School Tuition Organizations 99 30 26
Public School Extracurricular 46 0 0
Research & Development 12 97 0
Charitable Organizations 37 0 0
Renewable Energy / Solar 5 10 0
New Employment 0 5 4
Other 16 6 4
Total 215 148 34
*Excludes $148 M for IIT paid to other states and $32 M for Prop 301 credit
*
$ in M
JLBC 16
Forecast Reaches Pre-Recession Level in ’18
Excludes balance forward and other one-time revenues. Includes tax law changes and urban revenue sharing.
General Fund
4-Sector Forecast
Spending
JLBC
Baseline reflects changes to active statutory and other funding formulas - no discretionary additions
Continues annual suspension of $493 M of inactiveformulas (including $372 M for K-12)
Continues $931 M in K-12 “rollover” payments
Assumes spending classified as one-time or expiring in ’17 budget does not continue
1818
’17 – ’20 Baseline Spending Projections
JLBC
$9,639
0.0%
$9,887
2.6%
$10,260
3.8%
19
Projected Spending Changes- $200 M In ’18 Statutory Spending Offset By Elimination Of 1-Times
Total Spending
% Change
K-12 – Formula
K-12 – Expiring Statutory Provisions
AHCCCS
DES
Corrections
Universities
DCS
SFB
DPS – Border Task Force Equipment
Counties – Cost Sharing Offset
Capital – $8 M ADOA/$10 M Vets Home
Capital – ADOT Highway Projects
Other
Total Spending Changes
$ in M Above Prior Year
’18
110
(43)
60
22
7
(15)
0
(1)
(15)
(8)
(18)
(87)
(11)
1
’19
134
0
118
27
1
0
0
(35)
0
0
0
0
3
248
’20
167
0
144
30
2
(3)
0
32
0
0
0
0
1
373
JLBC
Public School Funding Overview- ADE Only Versus Total K-12 Resources
State$4,839 M
Federal$1,270 M
Local$4,292 M
General Fund
$4,069 M
Land Trust$220 M
Prop 301$551 M
Federal $1,175 M
Other$67 M
20
K-12 ADE & Local Resources - $10.4 B(’17 Estimated)
ADE Only - $4.1 B GF / $6.1 B Total(’17 Estimated)
Cash and Structural Balance Forecast
JLBC 22
’18 Forecast – Little Discretionary Flexibility
The projected ’18 cash balance is $101 M, but the structural balance is only $24 M
Numbers will shift by January, but expect general theme to be the same
With $460 M Rainy Day Fund, projected cash reserve is $560 M
5.8% of revenues; rating agencies recommend 8-10%
JLBC 2323
General Fund Balance Improves Over Time, But…
9.6610.03
10.52
9.649.89
10.26
9.749.64
7
8
9
10
11
$ in
Bill
ion
s
Base Revenue Cash Balance / One-Time Ongoing Expenditures
’18 ’19
EndingBalance
ExpExp
StructuralBalance
$101 M $146 M
$24 M $146 M
’20
$264 M
$264 M
Exp
Projected ending balances assumed to be allocated as part of the budget process
RevRevRev
JLBC 24
Structural Balance Estimates Are Volatile- Risks of Developing Budget Around ’19 or ’20 Estimates
1% variance in revenue estimates yields $625 M over 3 years
Assumes no discretionary changes in next 3 years
Lower revenues and higher spending reduced projected ’18 balance from $148 M to $24 M in 9 months.
148
325
24
146
0
100
200
300
400
'18 '19
$ M
illio
ns
Jan Baseline Oct FAC
JLBC 25
New Non-K12 Initiatives
Repeal / Replace Affordable Care Act ?
Prop 206 Minimum Wage Impacts ?
University Resident Student Formula 78
$234 M by Year 3
New Tax Reductions ?
$ in M