On October 2-4, budget officers from 26 states, the Virgin Islands and District of Columbia gathered in Washington, DC for our 2019 Fall Meeting. Below are key takeaways from the meeting along with links to speaker presentations.
Preparing for the Next Recession: A Reflection on the Federal Fiscal Policy Response During the Great Recession
Moderated by Tracy Gordon, Senior Fellow, Urban-Brookings Tax Policy Center
Stan Czerwinski, former Director, Strategic Issues, Government Accountability Office
Tom Mullaney, State Budget Officer, Rhode Island Department of Administration – Budget Office
Ray Scheppach, former Executive Director, National Governors Association, 1983-2011
- Panelists recounted the lead-up to how Congress and the President-elect decided on what federal fiscal relief to provide to states during the Great Recession including the persuasive reasons to lessen the impact on the economy of inevitable state spending cuts that states would have to make.
- The American Recovery and Reinvestment Act (ARRA) passed Congress quickly in early 2009. Given the varying degree of the recession’s impact on different parts of the country, the panel recalled some of the Congressional political support by legislators from parts of the country that were not as hard hit.
- The panel mentioned that the high economic multiplier of grant funds to states was preferable to the alternative of tax cuts and applauded the use of existing federal grant streams to states rather than creating new programs. The increase in federal matching for Medicaid and the State Fiscal Stabilization Fund were the two primary ways that state budgets were supported by ARRA. They prevented massive spending cuts in state budgets. The timing of these ARRA funds aligned with the worst revenue shortfalls of the recession.
- One superlative discussed about ARRA was the level and scope of communication, cooperation and transparency between the federal Administration, the Government Accountability Office (GAO) and the states – from frequent calls with governors and additional layers of continuous contacts with state budget officers, federal agencies, the National Governors Association and the National Association of State Budget Officers. A lot of thought went into the implementation of ARRA which was unique and necessary to make it work.
- Some of the other lessons learned include forward planning for the next recession and getting out ahead of it, try and sound the alarm of the next recession as early as possible, open up channels of communication among the state associations, and the Administration and congressional staff.
Federal Update on Medicaid Issues
Calder Lynch, Acting Deputy Administrator & Acting Director, Center for Medicaid & CHIP Services, Centers for Medicare & Medicaid Services
- Regulations are on the horizon from CMS including addressing states’ financing of the non-federal share in Medicaid and seeking greater transparency for states’ use of supplemental and other provider payments.
- The Centers for Medicare & Medicaid Services (CMS) is focusing on flexibility, accountability, and integrity in the Medicaid program.
- Flexibility is through approving state waivers, including community engagement/work requirements, behavioral health, and social determinants.
- Accountability measures include more robust evaluation of waivers and Medicaid and CHIP scorecards.
Federal Budget Long-Term Outlook for States
Moderated by Marcia Howard, Executive Director, FFIS
Phil Joyce, Senior Associate Dean & Professor of Public Policy, University of Maryland
Teri Gullo, Assistant Director for Budget Analysis, Congressional Budget Office
Maya MacGuineas, President, Committee for a Responsible Federal Budget
- Panelists in this session examined forecasts for federal spending and the effect on states, including the question of “do deficits matter?”
- According to the Congressional Budget Office (CBO), projected net outlays for interest more than double as a share of total federal spending by 2049, potentially crowding out other fiscal priorities.
- The panelists discussed potential impacts on states such as growing uncertainty in the federal budget process, effective responses in a future recession due to growing federal deficits, and how excessive debt is connected to other issues such as disaster response.
- Panelists agreed that action needs to be taken sooner rather than later to address the growing levels of debt, as waiting only deepens the potential consequences.
Federal Budget Update
Marcia Howard, Executive Director, FFIS
- Looking at the 10 largest federal grants to states in fiscal year 2018, Medicaid dwarfs the other nine at $441.4 billion.
- The federal government is currently operating under a continuing resolution through November 21, which extended authorization for the National Flood Insurance Program, TANF and other Health and Human Services programs.
- Risks to states include re-emergence of the budget deficit as a political hot potato, federal shutdowns becoming less unusual, and the limited federal fiscal capacity in a future recession.
States Actions to Improve Workforce Participation & Increase Economic Opportunity
Don Baylor, Jr., Senior Associate, The Annie E. Casey Foundation
David Thurman, Budget Director, Tennessee Department of Finance & Administration
- Don Baylor, Jr. discussed the Foundation’s work towards reducing household debt, particularly in southern states, to help low-income families achieve financial stability, participate in the workforce, and contribute to the nation’s economy.
- Some actions taken by states to reduce household debt include reducing local fines and fees, reinstating driver’s licenses, adopting a bill of rights for student loan borrowers, and implementing bail reforms.
- David Thurman, Budget Director from the Tennessee Department of Finance & Administration, also shared an overview of Tennessee’s recent efforts to increase workforce participation through investments in postsecondary and vocational education.
National Economic Outlook
Dan White, Director & Senior Economist, Moody’s Analytics
- Several indicators show a more likely chance of a recession by the end of calendar year 2020 including the share of metro areas in late business cycle expansion, the yield curve inversion, and the time since the US achieved the four percent full employment mark.
- A number of factors could cause the next recession but they are most concerned about a manufacturing recession and an escalation in the trade war; a canary in the coal mine for the recession could be a decline in sales taxes from consumer purchases.
- States will face varying fiscal shock from a national recession and are encouraged to do stress testing; stress testing is also a way to help set expectations with agencies.
State Centralized Grants Management Systems
Jennifer Butler, Deputy Director, Accountability & Results, Illinois Governor’s Office of Management & Budget
Laurie Petrone, Director of Grants, Rhode Island Office of Management & Budget
Tobacco Settlement and Opioid Litigation Update
Michael Hering, Tobacco Center Director and Chief Counsel, National Association of Attorneys General
Presentation not publicly available.
- Over the past 21 years, $132 billion has been paid out to states through the Tobacco Master Settlement Agreement; payments will continue to states in perpetuity based upon a certain level of cigarette sales in the use.
- There has been a difference between Tobacco Master Settlement Agreement payments due and payments received by states; part of the difference is related to various disputes over payments.
- Opioid litigation continues but the final agreement is unlikely to be anywhere near the size of the Tobacco Master Settlement Agreement; some of the questions concern if the settlement will be used on programs versus going to the general fund, and how states and localities will share in the settlement.