The state Office of Financial Management (OFM) has prepared a new “Four-Year Outlook” projecting the paths of state revenue and spending out through the end of the 2015-17 biennium assuming that the policies embedded in the 2012 supplemental state budget are maintained.

Under this assumption, OFM projects NGFS+ spending (i.e. spending from the general fund–state, educational legacy trust and opportunity pathways accounts combined) to increase from $31.1 billion in the current biennium to $33.8 billion in 2013–15 (8.7% biennial growth) and then to $36.0 billion in 2015–17 (6.5% growth).

Based on the official June forecast, NGFS+ revenue net of the required transfer to the budget stabilization account is pegged at $31.2 billion for the current biennium and $32.8 billion for 2013–15 (4.9% growth). Based on historical revenue growth averages, OFM assumes $35.8 billion in revenue for 2015–17 (9.2% growth).

For 2013–15 projected revenues are $1.1 billion less than projected expenditures (close to what I suggested in April), while for 2015–17 the gap is $271 million. By the end of 2015–17, the combined deficit in the three NGFS+ accounts would be $1.3 billion, although this would be offset in part by a balance of $862 million in the budget stabilization account.

The OFM analysis identifies an additional spending item that would significantly widen the gap, continued implementation of HB 2776 (the basic education bill), which might add $1.1 billion to 2013-15 spending and $2.7 billion to 2015–17 spending. In its decision earlier this year in the McCleary case, the state Supreme Court ruled current state funding for basic education to be constitutionally inadequate. Continued implementation of HB 2776  is seen by some to be necessary to satisfy McCleary.

Here is a biennial balance sheet:

A balance sheet with annual detail detail and explanatory notes is available from OFM here.