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December 30, 2008

 

DiNapoli Releases Preliminary Analysis of
2009-10 Executive Budget

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Governor Paterson’s Executive Budget proposal uses various cost-saving measures, non-recurring resources and new taxes, fees, charges and assessments to close a $1.7 billion budget deficit in fiscal year 2008-09 and a $13.7 billion gap in 2009-10, according to a report issued today by State Comptroller Thomas P. DiNapoli. DiNapoli’s report found that the governor’s proposal takes positive steps toward aligning spending with available revenues. However, DiNapoli also identified a number of risks to the governor’s proposal that could result in the failure of revenues and savings to materialize, jeopardizing budget balance. DiNapoli also noted the state continues to face long-term structural budget imbalance.

“The governor has struggled to present a balanced budget in the face of an unprecedented financial crisis,” DiNapoli said. “It’s a step in the right direction. But there are risks in the governor’s plan. Many of the proposed revenue raisers and spending reductions may not be enacted or realized. And even though the governor is pushing for more pay-as-you-go capital projects, debt levels are still too high.”

“No one said this would be easy. When you’re dealing with a $15 billion budget gap, there’s obviously going to be a lot of pain. But we can’t spend more than we have. If there are proposals to put something back into the budget, then something else has to come out.”

DiNapoli’s report finds:

  • Spending Continues to Rise Faster Than Revenue: Even with the significant revenue and spending actions proposed in the governor’s deficit reduction plan, General Fund spending is projected to grow an average annual rate of 5.4 percent through fiscal year 2012-13, while revenue will grow by an average of only 3.8 percent.
  • Reliance on Debt Still Too High: While the 2009-10 proposed budget reduces New York’s reliance on debt to meet existing and new commitments, and increases the use of pay-as-you-go financing in future years, the average annual debt issuances of $5.3 billion over the next five years are much higher than the $3.6 billion average for the previous five years. Debt service continues to be one of the fastest growing categories of spending. Annual debt payments are expected to reach $7.6 billion in five years, a 40 percent increase from 2008-2009.
  • Capital Projects: The budget includes $4.9 billion in capital projects that would be financed using public authority bonds in SFY 2009-10. The proposed budget includes increased bond caps that would give public authorities another $3.1 billion in bonding authorizations, smaller than the $6.1 billion increase in the 2007-08 budget, but still high.
  • Out-Year Gaps Remain, but are Reduced Significantly: If proposed revenue and spending actions are taken, the projected deficit for 2012-13 would fall to $5.5 billion from the current projection of $19.6 billion. The total deficit for fiscal years 2010-11 through 2012-13 would fall from a projected $55.3 billion to $11.4 billion.
  • Risks: The Executive Budget includes billions of dollars in new or increased revenue proposals that may be challenging to enact. Some have previously been rejected while others may not produce revenue at the projected levels. These actions also include expected savings from actions that have been proposed in the past, such as facility closures. Additionally, an economic slowdown that is worse than expected could drive up demand for human services, while at the same time reduce revenue.
  • Lack of Reserve Funds: After fiscal year 2009-10, the General Fund may have no unrestricted reserve funds to draw from if needed. The Tax Stabilization Reserve Fund and the Rainy Day Fund have just $1.2 billion, an insufficient amount to compensate for large budget gaps.
  • Local Government: The proposal would cost New York City almost $1 billion. Education aid to the city would be cut by $669 million and state assistance of $328 million would be eliminated. To make up for $400 million in cuts, the budget proposes broadening the sales tax and raises fines and fees. An anticipated $61 million increase in Aid and Incentives for Municipalities (AIM) funding for municipalities outside New York City would be eliminated. Reductions in funding for the Consolidated Highway Improvement Program (CHIPS) and transit aid, as well as the elimination of the STAR rebate program are also proposed. The local incentive grants for local governments would be reduced by $12.7 million.
  • Medicaid: The proposal includes $3.5 billion in Medicaid and health care savings and revenues. However, state-funded Medicaid spending would increase 3.8 percent ($587 million).
  • Education: The proposal would decrease school aid by approximately 3.3 percent ($698 million). However, on a state fiscal year basis, school funding will remain essentially flat. The planned phase in of the Campaign for Fiscal Equity settlement would be extended an additional four years.
  • Higher Education: The governor has proposed a 7 percent increase in SUNY graduate tuition to go along with the previously approved undergraduate tuition increase ($620 SUNY, $600 CUNY). SUNY and CUNY would retain 20 percent of the increased tuition. Base aid to community colleges would be reduced by $65 million.

Click here to view the report.


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