DiNapoli Releases Preliminary Analysis of
2008-09 State Budget; Calls for Fiscal Restraint
Although the final state budget reflects a reduction in spending from what the Executive proposed in January, the Enacted Budget contains unsustainable spending, risky revenues that may not materialize and one-shot revenues to fill budget shortfalls. The Enacted Budget also authorizes $11.5 billion in additional state debt, according to a report issued today by State Comptroller Thomas P. DiNapoli.
Major findings of DiNapoli’s report:
- All Funds spending projections for the 2008-09 Enacted Budget range from $121.4 billion to $121.7 billion, an increase of more than $5 billion over 2007-08.
- Although the budget is balanced, the report identifies several risks that could result in a budget shortfall this year, including revenue initiatives that may not materialize and tax collections that may be lower than expected due to a weakening economy. Further, absent any new cost-cutting strategies, out-year budget gaps could be as high as $9.5 billion by 2011-12.
- The final budget contains $11.5 billion in new debt, which will be issued over the next several years. None of this new debt is voter approved, nor is the debt tied to any comprehensive plan to address critical infrastructure needs of the state.
“Under the extraordinary circumstances we’ve had in New York in the last several weeks, a final, almost on-time budget that contains less spending than originally proposed is a remarkable achievement,” DiNapoli said. “Unfortunately, transparency was sacrificed for timeliness. Although we’re waiting for the release of the Executive’s Financial Plan with final budget numbers, it’s clear this budget continues New York’s long but not-so-glorious traditions of spending more than the state takes in and borrowing too much.
“The reality is that the economy is in rough shape and the worst may still be around the corner. We must track spending and revenues very carefully. Governor Paterson took an important first step to address the budget’s structural imbalance by telling state agencies to stop unnecessary spending now. All across New York, families are tightening their belts. It’s time for the state to do the same.”
The report also noted the following:
- Increased Reliance on Debt: This budget significantly increases state debt and continues to use debt to fill budget shortfalls, adding to New York’s already high debt burden. The state’s current debt of $53 billion is projected to exceed $67 billion by 2012-13. Debt service payments are estimated to cost the state $7.5 billion annually by 2012-13, a 50 percent increase. New debt issuances of $355 million for racing facilities include $250 million for expansion at Aqueduct. An additional $1.3 billion in new debt is authorized for a variety of economic development programs and $9.3 billion in new debt is included for capital projects at SUNY and CUNY.
- Risks: The Enacted Budget contains almost $1.5 billion in revenue that may not materialize, including the conversion of not-for-profit health insurers to for-profit status, sales tax from Native American retailers and VLT revenues. The economic slowdown could further reduce tax collections from current estimates.
- Non-Recurring Resources: The Enacted Budget utilizes $2.5 billion in one-shots, including $400 million in sweeps from various dedicated funds, such as the Environmental Protection Fund and the Elderly Pharmaceutical Insurance Coverage Fund.
- Off-Budget Spending: The Enacted Budget includes $100 million in new off-budget spending for various housing programs. DiNapoli said his office would provide additional analysis of off-budget spending as well as the Executive’s Financial Plan following its release by the Division of the Budget.
Click here for a copy of the report.