With lower revenue estimates, the House would also add less revenue to the State’s Rainy Day Fund than the Governor, although it would devote surplus funding to marginally helping pay down the State’s unfunded pension liability. Relative to the Governor’s State Budget proposal, the House proposed adding significantly more funding for Medicaid reimbursement rates. The increases in this proposal reflect an acceleration in inflation that has raised the costs of providing services, the reduced availability of federal COVID-19 funds, and several new initiatives to support Medicaid services, access to child care and food, and significant revisions within the State’s education funding formula. Both proposals would allocate significantly more funds to State services than were approved for the current State Budget biennium in 2021. The House voted to substantially change the Governor’s State Budget proposal. Reducing State revenue could put these key services at risk. If the economy weakens substantially, continuing to provide key public services during the next State Budget biennium will be essential for directly supporting individuals and families as well as for providing economic stimulus. Concurrently, a slowing economy may increase public service needs as more people lose employment or income. However, the corporate profits fueling business tax revenues may decline if an economic slowdown or recession occurs during the next State Budget biennium. These recent revenue increases, primarily driven by a significant upswing in national corporate profits that has accelerated since the start of the COVID-19 pandemic, have provided the State with substantial opportunities to address immediate needs and longstanding challenges. With State finances buoyed following a period of substantial increases in State revenue, State policymakers enter this new period of uncertainty with considerable financial capacity. The next State Budget will fund State-supported services during the upcoming two fiscal years. The Governor’s February 2023 proposal for the next two-year State Budget arrived in an environment of potentially increased overall need for services, particularly with looming economic uncertainty and the end of key federal COVID-19-related fiscal supports for programs and the economy.
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