1. Missouri Budget Update presented at Nonprofit Services Center 2012 Missouri Budget Forum March 2, 2012Missouri Division of Budget and Planning

2. MISSOURI BUDGET UPDATE March 2012 Economic Data Actual & Projected State revenue update. State spending update. Whats ahead for FY 2012 and FY 2013. 2

3. MISSOURI BUDGET UPDATE March 2012Economic Data Actual & Projected 3

4. Growth in MO Personal Income Q/(Q-4) 10% 8% 6% 4% 2% 0% (2%) (4%) Personal Income (6%) (8%) Wages & Salaries (10%) 2008q1 2010q1 2011q1 2012q1 2013q1 2009q3 2009q1 2008q3 2012q3 2010q3 2011q3 Personal Income growth has been relatively strong in recent quarters, despite lackluster increases in wages and salaries. Growth will likely cool somewhat, but pick up again as employment begins to improve. 4

5. Change in US Total Industrial Production Over Previous Three Months 4% 2% 0%(2%)(4%)(6%)(8%) Jan-07 May-07 Sep-08 Jan-09 May-09 Jan-08 May-08 Sep-10 Sep-07 Jan-10 May-10 Sep-11 Sep-09 Jan-11 May-11 Industrial Production has slowed in the past three months. Inventories of manufacturers and retailers have increased relative to sales, and there have been complications in the global supply chain, leading to fewer orders. 5

6. US & MO Unemployment Rates Seasonally Adjusted Data11%10%9%8%7% US6% MO5%4% 2007q3 2008q3 2009q1 2007q1 2008q1 2010q3 2011q3 2012q3 2010q1 2012q1 2013q3 2011q1 2013q1 2009q3 US Unemployment is expected to remain high, though decline slightly, through 2012. In general, the unemployment rate in MO follows the national trend. 6

7. Inflation (CPI) CPI Q/(Q-4) Core CPI 6% 5% 4% 3% 2% 1% 0%(1%)(2%) 2008q1 2008q3 2010q1 2010q3 2007q1 2007q3 2011q1 2011q3 2009q1 2009q3 2012q3 2013q1 2013q3 2012q1 The lack of consumption or wage growth is keeping inflation subdued, despite the impacts of high gasoline prices earlier this year. There is some evidence that higher energy prices may impact core inflation, the statistic that monetary policy makers generally emphasize. 7

8. MISSOURI BUDGET UPDATE March 2012STATE REVENUE UPDATE Sources of general revenue. General revenue projections. Federal stabilization & relief funds. 8

9. FY 2012 NET GENERAL REVENUE COLLECTIONS ($ in millions) Total $7,300.9 All Other $94.9 1% IndividualCounty Foreign $171.0 Income 3% $4,835.0 66% Corporate $375.0 5% Sales $1,825.0 25% 9

10. NET GENERAL REVENUE COLLECTIONS ($s in millions) 8,0048,000 7,586 7,3017,000 6,7756,000 5,210 5,072 4,8355,000 4,4344,0003,000 1,891 1,931 1,8252,000 1,7321,000 352 459 288 375 186 177 171 181 218 144 95 91 - Individual Sales Corporate CF Ins All Other Total FY 08 FY 09 FY 10 FY 11 FY 12 Est FY 13 Est 10

11. REVENUE COLLECTIONS HOW ARE WE DOING? Consensus forecast for FY12 would require growth of about 2.7% above FY11 actual collections. Positive signs are seen in withholding taxes, biggest source of states income. Growth in FY11 was 3.1%. (Expected to be 3.2% in FY12) Sales tax collections are expected to improve from only 1.0% growth in FY11 to 3.6% growth in FY12. Gaming and cigarette tax revenues projected to fall short. Hurdles: high unemployment rate; continuing housing market flux; European debt crisis; continuing federal budget saga. 11

12. FEDERAL STABILIZATION FUNDS ($s in millions) FY 09 FY 10 FY 11 FY 12 TotalResourcesEnhanced FMAP $432.1 $718.8 $628.3 $49.5 $1,828.7Education $0.0 $530.1 $158.2 $64.9 $753.2General Purpose $0.0 $88.5 $75.6 $3.6 $167.7Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7 Total $432.1 $1,337.4 $1,051.8 $118.0 $2,939.3EstimatedExpendituresEnhanced FMAP $255.8 $639.0 $588.7 $345.2 $1,828.7Education $0.0 $530.1 $158.2 $64.9 $753.2General Purpose $0.0 $88.5 $75.6 $3.6 $167.7Education Jobs $0.0 $0.0 $189.7 $0.0 $189.7Total $255.8 $1,257.6 $1,012.2 $413.7 $2,939.3 12

13. MISSOURI BUDGET UPDATE March 2012STATE SPENDING UPDATE State spending pie. Operating budget summary. 13

14. FY 2013 General Revenue Operating Budget Governors Recommendations ($ in millions) Total $8,029 All Other Elementary & Secondary Education $933Human Services $2,944 12% $2,431 37% 30% Higher Education Corrections & Public Safety $741 $690 Judiciary, Elected Officials, & 9% 8% General Assembly $290 4% 14

15. MISSOURI BUDGET UPDATE March 2012FY 2012 and FY 2013 BUDGET Whats Ahead? How Do We Make It Work? 15

16. FY 2012 AND FY 2013 BUDGETS WHATS AHEAD? Hopeful that core revenue will remain on track with forecast. Continuing economic situation adds uncertainty. Behind now. Legislative issues franchise tax; tax amnesty. Gaming funds projected to fall below appropriations. Recovering and rebuilding from multiple disasters will require significant investment from the state. Federal budget negotiations could lead to significant reductions in federal funds for state programs. 16

17. FY 2012 AND FY 2013 BUDGETS WHATS AHEAD? (continued) Over $600 million in one-time revenue sources in FY2012 budget will not be available in FY13. Continued improvement in economy should lead to better revenue numbers for FY13. Health care cost increases will continue to impact budget. 17

18. FY 2013 BUDGET HOW DO WE MAKE IT WORK? More people working in good jobs! More focused use of tax credits. Improved collections of existing taxes. Reduced spending. 18