Perhaps the biggest news story of the week is the release of the Senate leadership’s budget proposal. Yesterday, the Budget and Tax Center provided an overview of what the budget pays for. Today, we took a close look at how it’s paid for.
How the state will raise the billions of dollars that fuel the state budget gets relatively little scrutiny compared to the rest of the budget. But because the Senate budget this year includes tax cuts for the rich, dramatically reducing resources to pay for vital services, it’s more important than ever to examine how the state will make up for the tax cut’s $770.2 million price tag in the next biennium.
Here’s what’s important for you to know about how the Senate pays for its FY2014 budget:
- The state expects to receive $20.5 billion in base revenues. $19.6 million will come in from taxes, primarily from the state income tax, sales tax and corporate income tax, and $837.5 million will come from other non-tax sources. But, the Senate budget’s spends $20.6 billion, leaving the state approximately $119.2 million short. This number increases when you account for the new $50 million Medicaid shortfall (as reported today by Tim Boyum).
- The state loses hundreds of millions due to tax cuts. By linking their tax cut for the wealthy to their budget proposal, the Senate would reduce resources by $217.1 million in FY2014, and $553.1 million in FY2015. This tax cut plan is not true reform as it would result in a tax shift, requiring low-and middle-income families to pay more while the highest income families pay less.
- The Senate uses funds left over from this year. The Senate budget includes $269.5 million in unspent funds from this fiscal year, money they anticipate being returned by state agencies, a revenue surplus from this year and various other sources (see the chart below).
- The budget borrows from the Highway Fund. The Senate proposal transfers $218.1 million from the Highway Fund, which is one of the state’s two major sources of transportation funding. Most of this money is to support the State Highway Patrol, which was shifted to the Justice and Public Safety section of the budget in 2011. This transfer is reflected in the non-tax revenues section of the availability statement.
- The Senate uses budget gimmicks and increase fees. They raise $176.2 million by scrounging up revenue from a wide variety of sources, including fee increases and repeals and transfers of special fund set-asides for conservation, clean elections, economic development and others.
- The budget leaves money unspent. There is an unspent General Fund balance of $106.4 million.
The General Fund availability statement is summarized in the chart below.