NASBO held its 2012 Fall Meeting October 4-6 in Alexandria, Virginia, just outside of Washington, D.C. The convening provided budget officers from across the country an opportunity to hear directly from a number of leading experts on current issues impacting state fiscal conditions. Below is a brief summary of the presentations made during the meeting. NASBO members with individual user accounts can now access all speaker presentations under the NASBO Member Content tab, Past Meeting Presentations.
Comments from Attendees:
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ECONOMIC DEVELOPMENT AND UNEMPLOYMENT INSURANCE
Sujit M. CanagaRetna, Senior Fiscal Analyst with the Council of State Governments, provided a snapshot of the U.S. economy during and after the recession, discussed platforms for economic development such as manufacturing and energy, and identified specific areas where states are showing positive signs economically, such as the growth of the auto industry in the south. Mr. CanagaRetna also highlighted state-led efforts to expand job training opportunities and bolster their unemployment insurance trust funds.
UPDATE ON GASB ISSUES
Bob Attmore, Chairman of the Governmental Accounting Standards Board (GASB), explained the recent pension accounting reforms adopted by the board. GASB is responsible for developing financial reporting and accounting standards for state and local governments. GASB recently established new rules to change the way states report pension liabilities in an effort to improve transparency. Mr. Attmore also explained the changes to which discount rate is used to discount future liabilities under the new GASB standards. States with underfunded public pensions will likely appear worse under the new discount rule, but the change will not affect the amount currently owed to public employees and retirees.
FEDERAL BUDGET UPDATE
Marcia Howard and Trinity Tomsic from Federal Funds Information for States (FFIS) described potential scenarios during the lame duck session after this November’s elections concerning how Congress could deal with a number of issues, including fiscal 2013 appropriations, sequestration, expiring tax provisions, the federal debt limit, and expiring program authorizations. They also explained what various “grand bargain” options to reduce the federal deficit could include and how they would affect state budgets.
A DISCUSSION OF KEY MEDICAID ISSUES
Cindy Mann, Deputy Administrator Director, Center for Medicaid and CHIP Services, Centers for Medicare and Medicaid Services (CMS), provided an overview of some of the key flexibilities and trends in Medicaid and explained how states are using these flexibilities to improve services and reduce costs. Ms. Mann reported that CMS will be providing templates for waivers and indicated that all state plan amendments and waivers will be online. Ms. Mann reviewed the implications of the Supreme Court decision on the Affordable Care Act and how expansion of the Medicaid program is now voluntary though all other aspects of the Affordable Care Act stand. State budget officers also heard an overview of ways they can better determine the fiscal impact of an expansion. The presentation sparked questions regarding the federal Medicaid matching rate for early expansion states and whether or not a state could expand at a level below the full expansion.
STUDY OF STATE FINANCES
Don Boyd, Executive Director of the State Budget Crisis Task Force and Senior Fellow at The Nelson A. Rockefeller Institute of Government, provided a summary of the Task Force’s key findings as well as a current look at the fiscal situation for states. The Task Force examined fiscal conditions and structural budget challenges in six states. The report identified key budgetary pressures for states as rapid Medicaid growth, federal deficit reduction, public employee retirement promises, revenue volatility attributable to the eroding and narrowing tax bases, local government fiscal stress, and inadequate state budget laws and practices. Mr. Boyd also discussed the next steps of the Task Force.
STATE REVENUE OUTLOOK
Gale Garriott (pictured above), Executive Director of the Federation of Tax Administrators, described the current state revenue outlook. Mr. Garriott noted that state revenue growth is slowing in a number of areas, most notably with sales taxes. However, withholding tax collections remain strong in most states. He also highlighted several pieces of federal legislation that are of concern to state tax officials, including the Digital Goods and Services Tax Fairness Act, the Mobile Workforce Tax Simplification Act, and the Business Activity Tax Simplification Act. Finally, Mr. Garriott discussed the various bills regarding Streamlined Sales Tax currently pending in Congress and their prospects for passage.
NATIONAL ECONOMIC UPDATE
Mark Zandi, Chief Economist at Moody’s Analytics, explained the current state of the national economy and gave budget officers a glimpse into what he expects next for the national economy. Mr. Zandi outlined three major challenges facing the U.S. economy in the near future including the housing market, the Euro zone, and the so called “fiscal cliff”, a term used to describe the automatic federal spending cuts and tax increases that are set to take effect at the beginning of 2013. Mr. Zandi remains optimistic that the housing market will continue to improve and the real estate recovery will quicken once the backlog of foreclosures is absorbed and no longer putting downward pressure on house prices. With the European Central Bank announcement to purchase bonds for countries in fiscal distress in the region, Mr. Zandi expects the Euro zone to remain intact. Mr. Zandi also explained how the conditions are ripe for a compromise between Congressional Republicans and Democrats regarding the fiscal cliff, but that no solution will likely be reached before the Presidential election in November.