Saturday, January 8, 2011

LFC Releases Budget Recommendation

This is yesterday's news release from the Legislative Finance Committee about the LFC's budget recommendation for the 2012 budget year that begins July 1.

Editors: The LFC budget recommendation will be posted on the committee’s website,, next week.

The Legislative Finance Committee today released a budget recommendation for the 2011-2012 fiscal year that calls for spending $5.39 billion from the state’s general fund, a $187 million increase from the FY11 adjusted spending levels.
While almost every area of state government would be cut, those cuts are offset by increases of hundreds of millions of dollars for Medicaid and tens of millions for public school support, for an overall increase of 3.6 percent increase.
Those two areas of the budget – which make up the bulk of state spending -- have been substantially protected from cuts during the last two years of fiscal crisis through an influx of temporary federal stimulus funds. Those funds are not expected in FY12.
To cut spending throughout state government, the committee’s recommendation assumes lower rates for computer and other services provided by the General Services Department, reduced spending on building space because of the shrinking workforce, and an extension of the temporary shift of retirement contributions from employer to employee.
The committee’s recommendation continues to emphasize public education and access to health care and, with the continuing economic crisis, focuses on programs that demonstrate efficiency and effectiveness. To preserve critical services while cutting spending, the committee recommendation targets savings in contracts and personnel, including eliminating positions vacant for long periods of time and nonessential public information officers, deputy directors, and other managers.
“The committee faced the challenge of building a budget that would address needs far in excess of revenue growth,” LFC Chairman Luciano “Lucky” Varela, D-Santa Fe, said. “State spending on public schools and Medicaid had to take a big jump up to cover the loss of federal funds.”
Projected general fund revenue for FY12 is $186 million more than FY11 appropriations adjusted for cuts made through executive order. With the LFC spending plan, the general fund reserve would be 5 percent, a level considered less than minimally acceptable.
The committee’s general fund recommendation of $3.1 billion for education is an increase of less than a half percent from the FY11 adjusted budget, reflecting an overall increase of $37 million for public schools and an overall decrease of about $29 million for the state’s colleges.
The public schools recommendation includes more than $88 million to replace the disappearing federal funds and assumes program cost reductions of $38.6 million by eliminating funding for one non-instructional professional development day, shifting the employee’s portion of the Education Retirement Board contribution for return-to-work employees from the employer to the employee, and formula adjustments, such as tightening eligibility for small school and small district funding units.
Similar to the recommendation for public schools, the recommendation for the Human Services Department includes an increase in general fund spending mostly to cover the loss in federal stimulus funds. The recommendation places a priority on maintaining the department’s essential services and anticipates the department will find administrative and nonessential program savings in FY12 to continue the most critical functions – Medicaid healthcare coverage, cash assistance and support services for poor families, and substance abuse and mental health services.
The combined recommendation from the general fund for Medicaid is $854.5 million, a $253 million increase from FY11, or 42.2 percent. In addition to replacing federal funds, the recommendation supports enrollment that is at its highest point in state history. However, it also assumes the department will pursue additional cost containment, from provider rate decreases to a redesign of the long-term services waivers.
The legislative session starts Jan. 18.

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