OPM Releases 2021 Deficit Mitigation Plan

Office of Policy and Management (OPM) secretary Melissa McCaw today released a deficit mitigation plan that lays out $200 million in budget adjustments and calls for using $1.8 billion from the budget reserve fund (BRF) to bridge a projected fiscal year 2021 deficit of $2 billion.

State statute requires OPM to issue a deficit mitigation plan if the shortfall reaches 1% of the total $20 billion General Fund budget – which is $200 million.

Here is how OPM proposes to cover the FY21 shortfall:

  • Taking $1.8 billion from BRF.
  • Use $100 million from the Coronavirus Relief Fund to cover Covid-related health and safety costs.
  • Modify or hold off on certain tax relief measures contained in the adopted FY21 budget, totaling $33.2 million.  They include:

— Suspending the transfer of General Fund revenue to the Regional Performance Incentive Account, eff. 12/1/20.

— Maintaining the current 10% Corporation Tax Surcharge for FY 2021.
— Delaying and Extending the Elimination of the Capital Base tax for FY 2021.

  • $30 million in savings through hiring reductions or by not filling vacancies.
  • Reduce spending by $25.3 million through rescissions (largely reductions in state personnel costs).
  • Other minor appropriations adjustments.

Secretary McCaw said the DMP’s tax modifications and appropriations adjustments would need legislative approval to carry out.  Hence, the administration plans to make the adjustments that are within its authority under the DMP, while continuing to monitor the fiscal situation through the fall.  She said the Legislature would not need to take action before the next regular session in January.

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