State Finishes FY 2008 with Modest Surplus
July 21, 2008
AUGUSTA – Maine has finished the 2008 fiscal year with a modest General Fund surplus of $56 million. The State’s Highway Fund also finished the fiscal year with a small surplus of $2.5 million.
“The year-end surplus is the result of a disciplined budget approach,” Governor John E. Baldacci said. “Maine faced a grim economic picture earlier this year that required the State to make many difficult decisions. That hard work has allowed us to finish the year in a good position. Unfortunately, high energy prices and a still-struggling national economy could further erode revenues in the next fiscal year.”
Together, the Governor and the Legislature closed a $190 million projected revenue shortfall for the 2008-09 biennial budget earlier this year.
Of the $56 million General Fund surplus, $47.4 million was surplus revenue, $7.1 million came from lapsed account balances and $1.5 million from other adjustments.
After all other accounting adjustments, the State will deposit $10 million of the surplus into the Budget Stabilization Fund, which will reach $128.9 million. With the Working Capital Reserve, the State has total reserves of about $169.5 million. When Governor Baldacci took office, the reserve balance was zero.
In addition, $935,000 of the surplus is budgeted for use in fiscal year 2009; the Contingent Account will be replenished with $350,000 and the Loan Insurance Reserve Account will receive $1 million.
The remaining $43.7 million will be used by the Department of Health and Human Services to honor the State’s commitment to hospitals by increasing prospective interim payments (PIP).
“We are building our reserves, which strengthen our overall financial standing, and we are honoring our commitments,” Governor Baldacci said. “As we move forward with the 2010-11 budget, we must remain disciplined and continue to push for a more lean and efficient government.”
Attached is the text of the memo from the State Controller, which informed the Governor of the surplus.
INTEROFFICE MEMORANDUM
JOHN ELIAS BALDACCI, GOVERNOR
REBECCA WYKE, COMMSSIONER
STATE OF MAINE OFFICE OF THE STATE CONTROLLER
STATION 14
AUGUSTA, MAINE 04333
TELEPHONE: 207-626-8420
FAX: 207-626-8422
E-MAIL: EDWARD.A.KARASS@MAINE.GOV
TO: JOHN BALDACCI, GOVERNOR
REBECCA WYKE, COMMISSIONER
JANE LINCOLN, CHIEF OF STAFF
RYAN LOW, DEPUTY CHIEF OF STAFF
FROM: EDWARD A. KARASS, STATE CONTROLLER
SUBJECT: RESULTS OF THE FISCAL YEAR ENDED JUNE 30, 2008
DATE: JULY 21, 2008
CC: OFPR
The State of Maine has closed the Fiscal Year with a very modest surplus. This year, the surplus will be applied to the Budget Stabilization Fund and to continue to meet the State’s obligation to pay down the passed due bills to hospitals. We concluded the fiscal year with revenues over budgeted estimates of approximately $47.4 million. We should not draw any conclusion about the future of Fiscal Year 2009 revenues based on our better than expected Fiscal Year 2008 revenues. In addition, our General Fund cash position at June 30th remains very narrow. Although we did not finish the fiscal year with a robust cash balance in the General Fund, it is a noteworthy accomplishment that for the second consecutive year we did not require any outside cash flow borrowing through a TAN or a temporary line-of-credit to manage our affairs. As a result of our narrow cash position in the General Fund coupled with our plan to advance fund payment to the MePers for Teacher Retirement, there may be a need in the late winter and early spring to rely on temporary cash flow borrowing. However, as long as revenue stays on track, and we fully collect on our tax accruals, I do not foresee the need for a TAN until the commencement of tax season in late January. The borrowing would be for a short duration to assist us with cash flow during the income tax refund season.
After all accounting adjustments, other considerations, and the disposition of surplus approved by the Legislature in Chapter 240, Public Laws 2007, and the various subsequent budget amendments enacted by the Legislature, the State will have $10 million to deposit to the Budget Stabilization Fund (BSF). With the $10 million addition the BSF has total resources of $128.9 million. When the Budget Stabilization Fund and the Working Capital Reserve are combined we have total reserves of approximately $169.5 million. Since Fiscal Year 2002, the Administration has increased reserves each year. Over the past five years we have increased our reserve balance from zero to $169.5 million.
At the end of FY 2008, after all accounting adjustments and budgetary commitments, the State ended up with a Net Unappropriated Surplus of approximately $56 million of which $935,000 is the budgeted balance forward to be used in Fiscal Year 2009. After other adjustments, replenishment of the Contingent Account and the Loan Insurance Reserve Account amounting to $350,000 and $1.0 million respectively, $10.0 million to the BSF, the remainder of approximately $43.7 million is available to be transferred to the Department of Health and Human Services to honor the commitment you made to pay past due bills owed by the State to the hospitals.
Our most recent addition to the Budget Stabilization Fund strengthens the State of Maine’s financial position going forward. Our next initiative should be to be more frugal with our year end balance to eliminate spending beyond our budgeted resources in order to build up a healthy balance in the General Fund Unappropriated Surplus Account to remove the volatility of our General Fund cash position. We must continue to be vigilant to ensure that we expend our resources for those services and purchases which are necessary and add value to state government’s delivery of services to the citizens of Maine while maintaining a balanced checkbook.
Finally, there are many adjusting entries pending our final review for the year end; however, at this time, I believe that these adjustments will not be material.
