Legislative fiscal staff outline $376M shortfall, urge scrutiny of ongoing revenue gap

Alan Knudson, fiscal analyst with Legislative Council, told the Senate Appropriations Committee that the agency’s crossover report and budget status show a continuing shortfall and a complex set of special funds that affect budgeting.

The Legislative Council’s “pink book” and budget status report show a July 1 beginning general‑fund balance based on the January revenue forecast of about $1.112 billion and a set of House and Senate changes that together left the committee facing a roughly $376 million general‑fund shortfall at crossover, Knudson said. He added that, while the state is in better shape than in the last session, ongoing spending now exceeds ongoing revenues by about $1.3 billion and the next biennium could face an estimated $800 million gap in ongoing revenue versus ongoing spending if revenues match forecast.

Knudson said the book organizes appropriations by agency and lists, for each main appropriation, the base level, the House changes and footnotes explaining the changes. “For the record, Alan Knudson with the Legislative Council staff,” he said as he began the presentation. The material also identifies miscellaneous (“orphan”) appropriation bills that add funding to agencies beyond their main bills.

Why it matters: the report frames where the Appropriations Committee must find reductions or new revenue in the second half of session. Knudson flagged several legislative changes that reduced projected general‑fund revenues — for example, House action to divert legacy fund earnings and motor vehicle excise tax revenues into special funds — and noted the committee will see updated revenue numbers after a Moody’s forecast briefing scheduled for March 13.

Key figures and context

- Beginning balance (July 1, per January forecast): $1.112 billion. Knudson outlined adjustments and transfers that alter that figure. - Estimated transfer to Budget Stabilization Fund at crossover: $71 million, leaving an estimated Budget Stabilization Fund balance around $985 million after the transfer. - General‑fund revenue adjustments in the first half: roughly $500 million in downward adjustments, including changes tied to property‑tax relief and moving some revenues into special funds. - Ongoing revenue versus ongoing spending: staff estimate ongoing revenues of about $5.2 billion against ongoing spending near $6.4 billion, a structural gap of roughly $1.3 billion. Knudson said the committee would need about $500 million of additional actions in the second half to produce a modest ending balance; otherwise the ongoing imbalance remains substantial.

Knudson also reviewed special funds and the Strategic Investment Improvements Fund (SIF). He said the House appropriations draw from SIF and that the book lists SIF commitments by project; at crossover SIF was roughly $47 million over‑appropriated (down from significantly higher over‑commitments in prior sessions). Knudson noted large recent SIF appropriations for state hospital construction, and that some projects use combinations of SIF, agency capital, and bank financing.

Committee response and next steps

Senator Mather urged the committee to hold a joint hearing where major agencies would present their expectations about federal changes and potential funding risks. Chairman Beckettall said he would raise that request at leadership meetings. Several senators pressed staff about how pending bills and anticipated defeats would be reflected; Knudson explained the weekly budget status report is updated only after final action on a bill, so bills still pending remain on the liability side until they are defeated or amended.

Knudson flagged the Strategic Investment Improvements Fund and the Strategic Investment Fund and showed the committee an inventory of projects that receive SIF funding; he said the committee was “about $47 million over‑appropriated” in SIF at crossover and that prior sessions had higher over‑commitments. He also summarized notable House revenue and appropriation changes by bill number as reported in the pink book.

What the committee asked staff to do: several senators asked for additional detail on line‑of‑credit usage and SIF allocations. Knudson said fiscal staff will provide base‑level blue summaries, worksheets showing the Armstrong (executive) budget versus the House version, and a major trust‑fund analysis after the revised revenue forecast. He also noted Moody’s revenue update is scheduled for March 13 and that the committee will receive a more detailed trust‑fund analysis shortly after that update.

Ending

The committee received the Legislative Council materials for use in division hearings and was told staff will continue weekly updates. Chairman Beckettall directed staff to distribute the detailed lists and worksheets before agency hearings; senators signaled they will press some larger policy questions — including the growing number of special funds and long‑term adequacy — in the weeks ahead.