1. General Fund Spending Outlook August, 2008 Kristin Dybdal Britta Reitan Alexandra Broat

2. General Fund Spending Projections Break budget into three large components: – Health Care Medical Assistance Basic Care, Long Term Care Facilities & Waivers; General Assistance Medical Care; Chemical Dependency Treatment Entitlements – Education Finance – All Other

3. Compound Growth Rates Using 10-Year Historical Averages* * Education growth rate incorporates aid and levy growth per pupil

4. Implications of Continued Health Care Trends

5. Implications of Continued Health Care Trends Plus CPI Inflationary Increase for Education

6. If trends continue, health care will comprise 2/3 of the general fund budget by FY 2033

7. CBO 75-Year Health Care Projections Projections include Medicare, Medicaid, all other health care spending Without changes, health care spending is on a path that can not be sustained Baseline assumption is that health care system changes will take place so consumption of other goods & services doesn’t decline in real terms Through FY 2033, CBO predicts 4.5% + inflation for Medicaid (minimally, 6.5%)

8. Demographics & Health Care Growth Effect of aging frequently cited as major factor – Share of population covered by Medicare will increase; share of population using LTC services financed by states will increase CBO projects that in case of health care, it is only a modest fraction of projected increase (1/4 of growth through 2030 and declining) Main factor is increase in health care spending for average individual

9. Legislative Decisions Growth in Pupil Units Age Cohort Distribution Special Education Poverty Concentration English Language Learners Technology Factors Affecting K-12 Spending Growth

10. School District Aid and Levy Per Pupil

11. Average Daily Membership 1994-2024

12. All Other Spending Avg. Annual Growth FY 97-07 All Other Spending2.7% Higher Education2.7% Intergovernmental Aids3.3% Health & Human Services2.2% General Government5.0% Public Safety & Corrections4.4% Debt Service & Other5.2% Environmental Resources0.4% Property Tax Recognition Economic & Workforce Dvlpt-0.5% Transportation5.4%

13. Expenditure Growth Rate Scenarios Average Annual Growth Rate FY 1997-2007 Adjusted Growth Rate Assumptions Health Care8.5%6.5% K-12 Education4.8% All Other2.7% Total5.4%4.6%

14. Compound Growth Rates Using Adjusted Assumptions