Overview of Governor's FY 2023-24 Budget and School Finance Submission

The Governor's FY 2023-24 Budget focuses on maintaining fiscal sustainability by addressing caseload and inflationary pressures while emphasizing the importance of reserves and saving prepays. Significant investment is made in K12 education, with an average increase per pupil and a strategy to reduce the Budget Stabilization Factor. Various scenarios are presented to ensure balanced finances in the event of economic downturns.

• Governors Budget
• School Finance
• FY 2023-24
• Fiscal Sustainability
• K12 Education

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1. FY 2023-24 Budget & School Finance Submission February 10, 2023

2. Importance of a Multi-Year Look at the Budget The Governor s FY 2023-24 Budget is built in a way which balances for FY 2023-24 and sets a path for the State s future to remain fiscally sustainable. Governor s Budget request: Recognizes that caseload and inflation cost pressures are a driving factor of operating growth -- holds other requests to a minimum to stay at 7%. Maintains the required 15% General Fund reserve and grows the State Emergency Reserve. Saves more than half the prepays for FY 2024-25 year cost pressures. Includes a placeholder for potential impacts of forecast.

3. Caseload and Inflationary Pressures 90% of Requests 3

4. Why 15% Reserves? Previous Recessions Have Exceeded 4

5. Saving Prepays Key to Balancing Beyond FY 2023-24 The utilization of these General Fund prepays is a critical tool in balancing both this year s budget and the next in order to align recurring expenses with recurring revenues and avoid growing the state s structural deficit. For more information, see Attachment 7 to the Budget Letter. 5

6. K12 Education An average increase of $948 per pupil (9.9%) or nearly $21,000 for a classroom of 22 kids, on top of the FY 2022-23 increase of $581 per pupil or almost $13,000 per classroom. Decreases the Budget Stabilization Factor (BSF) by $120 million to a record-low of 2.2% while proposing a sustainable strategy to buy down the BSF by FY 2025-26.

7. K12 Education Total Program increased $450 million in FY 2022-23 largely from BSF buydown Governor s FY 2023-24 submission increases it another $605 million largely from formula increase

8. K12 Education BSF Buydown Baseline Scenario

9. K12 Education BSF Buydown Alternative Scenario - Economic Downturn

10. Discussion More information can be found in Attachment A of the January 17th budget letter. Questions?