$800M Budget Squeeze Looms With 2015 Road Funding Plan

 

Hard Hit to the General Fund

The roads plan REDUCES General Fund (GF) revenues by $806 million in budget year 2021 alone, because of diversion of GF and the expansion of the Homestead Property Tax Credit.

Additional REDUCTIONS in GF revenues will occur if and when GF growth triggers a rate reduction in the individual income tax. This has the long-term impact of capping GF growth, even as the costs of providing the most basic services increase.

Potential Budget Impacts:

    • Health and Human Services: Medicaid/human services account for the largest portion of the state’s General Fund at 42%, which means it will have the biggest bull’s-eye on it when budget cuts have to be made. Some of the programs that help our most vulnerable would be negatively affected.
    • Postsecondary Education: Cuts—or lacking sufficient increases—to higher education and community colleges would mean higher tuition and fees for students, making it difficult for many of our residents to attend college. Lawmakers could also shift some of these costs to the School Aid Fund, resulting in less money available for K-12 education.
    • Statutory revenue sharing that supports local communities and public safety has been cut by 58% since 2000, and as legislators have grown comfortable with it, it’s an area ripe for future cuts. Additionally, statutory revenue sharing is vastly underfunded. It’s not enough to merely hold it harmless, which is difficult to do when diverting $600 million for roads.
    • As lawmakers look for cuts, and as cuts become difficult, some may suggest looking at small revenue enhancements. One of the fears is that the Earned Income Tax Credit, one of the state’s most effective tools for encouraging work, reducing poverty and building economic security, could be targeted as it has in the past. This would raise taxes on about 780,500 families, who are raising over 1 million children.