This morning, Budget Secretary Mary Soderberg offered an overview of the administration’s proposed 2010-11 budget. The budget includes an overall increase of $1.15 billion (4.1%) over last year, after accounting for federal ARRA funds. Spending increases are proposed in education, healthcare, aging and long term living, public welfare, corrections, probation and parole, and debt service. 42% of the overall proposed budget is devoted to education spending.
The budget also begins to address “future budgetary challenges” including the pending 2012-13 state pension spike by creating a new Stimulus Transition Reserve Fund. The fund will be generated through a variety of revenue reform measures, including cutting the sales tax rate from 6% to 4% and eliminating 74 exemptions. In addition the new budget proposes adopting a single sales factor for income apportionment, a reduction in the Corporate Net Income Tax from 9.99% to 8.99%, and a removal of the cap on net operating losses. The Vendor Sales Tax Discount would be eliminated, and the tobacco tax would be extended to cigars and smokeless tobacco. The initiative also calls for a severance tax on natural gas. The money from the fund would not be available for use until 2011-2012.
Both for 2010-11 and going forward, the budget relies on several assumptions, including an anticipated 3-quarter extension in enhanced Medicaid funding from the federal government to help offset the projected deficit in 2011-2012, and the success of a third application to toll I-80 which would generate $472 million in revenue for the state.
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