General Fund Revenues Not Meeting Forecast

Falling General Fund revenue collections in November led Governor Otter to order a 3% expansion of his earlier holdback order. Agencies will reduce their spending by $114.3 million in the current fiscal year, for a total reduction of 4%. The Governor also is recommending that $12 million of the $20 million appropriated in fiscal year 2009 for a statewide comprehensive aquifer study and $5.6 million from the Permanent Building Fund be reverted back to the General Fund.

The original holdback order, issued in late September, required state agencies to reduce FY 2009 General Fund expenditures by 1% of ongoing appropriations, or $27 million. The Division of Financial Management revised the General Fund revenue forecast in August down from 1.1% growth to a negative 4.9% compared with FY 2008 actual collections. This meant $107.4 million less was available for fiscal year 2009 and resulted in the 1% holdback announcement. Public schools have been included in both holdback orders, with the expectation that the Public Education Stabilization Fund will make up any reductions from the General Fund.

Tax collections through November are $19.2 million less than expected based on the reduced forecast issued in August. This continued decline led the Governor to issue a second holdback order of 3%, which will result ina total of $131.9 million. The order was issued in response to a rapidly slowing economy and continued weakness in sales tax and withholding collections. Although a new forecast will not be released until January with the Governor’s Executive Budget, it is expected to be significantly less than the $2,766.3 million currently forecast.

Compliance with the Governor’s holdback, mandatory for state agencies in the executive branch, is voluntary for elected state officials and for the Legislative and Judicial branches of government. However, the Legislative and Judicial branches have agreed to comply fully with the Governor’s holdback request.

Staff Contact: Cathy Holland-Smith

Note: see stats on FY 2009 General Fund Revenue Collections To Date HERE (page 2)