New caseload forecast is expected to reduce state spending by $528.3 million over three years; this could mean the state budget is back in balance over four years

By: Emily Makings
1:22 pm
November 13, 2020

The Caseload Forecast Council (CFC) adopted a new caseload forecast on Tuesday. This caseload forecast will feed into the maintenance level (the cost of continuing current services) for the governor’s budget proposal.

Generally, caseloads are lower than the CFC expected in the June forecast. In June, the CFC had assumed that the state would reopen and be back to normal in July 2020; now they assume that normal will return in July 2021. Additionally, the unemployment rate was higher in June than it is now. The November forecast assumes that the enhanced federal Medicaid match—and its maintenance of effort requirements—will be in effect until February 2021.

Compared to the February forecast (on which the current budget is based), the Office of Financial Management (OFM) estimates that the November caseload forecast (and per capita impacts) will reduce general fund–state spending by $276.8 million in FY 2021 and by $251.5 million in 2021–23.

Some notable points:

  • Public school enrollment declined by 3.4 percent from SY 2019–20 to SY 2020–21, “due to concerns about COVID-19 and remote/hybrid schooling.” Special education enrollment is down 10.4 percent over last year. Altogether, the reduced caseloads for K–12 education programs are expected to reduce spending over three years by $1.112 billion.
  • The Temporary Assistance for Needy Families (TANF) caseload for FY 2021 is now expected to be 19.2 percent higher than estimated in February. This new forecast is estimated to increase state spending by $78.6 million over three years.
  • Medicaid caseloads are also up compared to February: 5.3 percent for adult caretakers and children; 20.7 percent for low-income adults; and 1.9 percent for aged, disabled and other. Altogether, Medicaid caseloads are expected to increase spending by $175.1 million over three years.

In the table below, I’ve added the cost estimate of this caseload forecast to our adjusted balance sheet. This balance sheet is based on the unofficial June outlook from the Office of Program Research, adjusted to account for the September revenue forecast, the October collections report, estimated savings undertaken by the governor, and estimated savings to the state from the enhanced federal Medicaid match (assuming it remains in effect through FY 2021).

With all these adjustments, the unrestricted ending balance would be negative $2.183 billion in 2021–23. The rainy day fund could cover that and leave $274 million in reserves.

There are a number of caveats here, however. These are just my best estimates, based on public information. It’s not yet clear how much the governor’s savings initiatives will actually save through 2021–23. It’s also not clear to me if there is any double counting between the cost estimates for the caseload forecast and the enhanced Medicaid match.

Still, the caseload forecast is promising news for state budget writers. We’ll have more information next week, when the November revenue forecast is adopted.

Categories: Budget.