On the $456 Shortfall
After saying earlier that they would come up with a projection that contained a "worst case scenario," the Consensus Forecasting Group predicted Friday that state resources would fall $456 million short of the prediction they made last January.
What does this mean?
First, it means that they predict that the current revenue increases we have seen in the first four months of the fiscal year (over 2% increase in sales tax receipts, over 6% increase in personal income tax receipts including a 2.8% increase in withholding) will reverse. Where they had predicted state revenues would increase $191 million in FY 2009, they are now predicting a decrease of $265 million.
Second, the current $34 million increase in revenues versus FY 2008 will become a $265 decrease, meaning that revenues will be $299 short over the next eight months. This will require a 5.2% decrease versus FY 2008 in order to meet the "worst case scenario." In the last 30 years, there is only one time state revenues actually decreased year-to-year. In 2001-2002, the state experienced a 1.4% decrease.
We entered FY 2009 with $357 million in appropriated reserves and the beginning balance, but the "Rainy Day Fund" isn't considered available to deal with a potential shortfall, because $70 million of these reserves are already budgeted to be spent in FY 2009, and $193 million are budgeted to be spent in FY 2010.
