1. Analyst Professional Development Seminar

2. NASBO Staff: Stacey Mazer Brian Sigritz Kathryn White 2 www.nasbo.org Leah Wavrunek Lauren Cummings Brukie Gashaw

3. 3 www.nasbo.org

4. Current Economic and Fiscal Situation for States 4 www.nasbo.org

5. State Fiscal Overview  Fiscal 2016 -- 6 th consecutive annual increase in general fund spending and revenues  Most states: continued stability and slow growth ▫ Less midyear cuts and budget gaps ▫ Most states ended fiscal 2015 with revenues above projections or on target  Common theme in State of States of need to create jobs, grow the economy, and provide opportunity for all to succeed ▫ Many said need to prioritize transportation, education, and workforce training to achieve this goal  Some states are facing difficult budget environments due to various issues  Fiscal improvements over the last several years have not returned states to normal patterns of growth www.nasbo.org 5

6. Major Challenges to State Budgets: 2016+  Revenues and spending have yet to surpass pre-recession highs after accounting for inflation ▫ Revenue growth projected to be modest in fiscal 2016  Future economic growth  Health care costs  Pensions and retiree health care  Infrastructure  Certain states impacted by oil price declines, federal cuts, tax related issues, long-term liabilities, slow economic growth, etc.  Federal uncertainty  Debt service levels around 5%, very manageable www.nasbo.org 6

7. Current Fiscal Situation: Indicators 7 www.nasbo.org

8. Slow Budget Growth Continues www.nasbo.org 8 * Average *38-year historical average annual rate of growth is 5.5 percent *Fiscal 2015 numbers are estimated; fiscal 2016 are recommended Source: NASBO Spring 2015 Fiscal Survey of States

9. States Direct Most New Spending to K-12 and Medicaid www.nasbo.org 9 ($ in Billions) Source: NASBO Spring 2015 Fiscal Survey

10. Fiscal 2015 GF Revenue Below Pre-Recession Peak After Inflation www.nasbo.org 10 Source: NASBO Spring 2015 Fiscal Survey of States; Fiscal 2016 numbers are recommended *Aggregate revenue levels would need to total $772 billon in fiscal 2015 to be equivalent with real 2008 revenue levels.

11. States’ Reserves Haven’t Reached Peak Levels www.nasbo.org 11

12. Midyear Budget Cuts Relatively Minimal in Fiscal 2015 at $2B www.nasbo.org 12 Source: NASBO Spring 2015 Fiscal Survey *Fiscal 2015 midyear cuts are ongoing

13. 13 Critical Challenges www.nasbo.org

14. 14 www.nasbo.org

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16. Higher Education Funding  States to Colleges: Prove You’re Worth It ▫ - July 28, 2015 (Stateline)  More States Grade Public Colleges on Performance ▫ June 23, 2015 (CNBC) www.nasbo.org 16

17. State Severance Tax Revenue as a Percentage of Total State Tax Collections www.nasbo.org 17 % Source: U.S. Census Bureau

18. Federal Issues ▫ Highway Trust Fund ▫ ESEA (No Child Left Behind) ▫ Few or no appropriation bills by Oct 1 ▫ Sequestration ▫ Debt limit ▫ Taxes 18

19. Revenue Issues ▫ Revenues recovering slowly compared to past recession ▫ Greater volatility ▫ April windfall ▫ Gaming becoming limited 19

20. 20 Background on State Spending Trends www.nasbo.org

21. 21 Source: NASBO State Expenditure Report www.nasbo.org

22. Total State Expenditures by Function Estimated Fiscal 2014 www.nasbo.org 22 Source: NASBO State Expenditure Report

23. General Fund Expenditures by Function Estimated Fiscal 2014 www.nasbo.org 23 Source: NASBO State Expenditure Report

24. Federal Funds Expenditures by Function Estimated Fiscal 2014 www.nasbo.org 24 Source: NASBO State Expenditure Report

25. Revenue Sources in the General Fund (Percentage) www.nasbo.org Source: NASBO State Expenditure Report 25

26. Outlook 26 www.nasbo.org

27. State Fiscal Outlook  42 states recommended general fund spending increases in FY 2016, but growth still below average  Revenue growth projected to remain slow in fiscal 2016  Uncertainty remains concerning federal spending decisions and ACA implementation  Tough competition for general funds  Dealing with infrastructure, long-term liabilities  States will continue to make some painful choices www.nasbo.org 27

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29. Decision Making  You make important decisions in the public arena. Public policy decision making shapes our lives in many ways.  Analyze what processes are followed in public policy decision making by government officials at all levels, from elected officials to mainstream managers.  Analyze how the processes themselves impact the outcomes. How are important decisions made? 29

30. Relationships  Critical: your reputation, interaction, building of trust  While sunshine laws and rules governing open meetings are the norm, decisions are often made based on understandings and agreements forged between individuals in informal settings. 30

31.  Don’t let emotions get in the way…

32. Pitfalls of groupthink  In large scale public policy endeavors, the involvement of groups is absolutely essential.  However, as shown with the Challenger launch decision, groupthink can also adversely affect organizational success. 32

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34. 34 www.nasbo.org Scott Pattison (202) 624-8804 spattison@nasbo.org www.nasbo.org