DiNapoli: Current Year Problems Bleed Into Next Year
Urges Adoption of a Realistic Budget, Avoid Last Year’s Budget Crisis
New York State Comptroller Thomas P. DiNapoli today cautioned that the state has a significantly larger current year deficit than projected by the governor. DiNapoli said while the governor for the most part avoided gimmicks in his Executive budget proposal, the proposed budget relies on unrealistic revenue projections and other questionable proposals given today’s economic realities.
“I called the budget passed last April a buy-time budget, but it didn’t buy all that much time,” DiNapoli said. “The budget was packed with spending New York could not even sustain in the short-term, creating a mid-year budget crisis. And I’ve already said that the governor’s projected deficit for the rest of this year is far too low.
“This must be a transformative year for New York State. If we can’t learn from last year’s mistakes, we’ll be destined to repeat them over and over again. Even if — and it’s a big if — all the governor’s proposals come to fruition, there’s still a projected $29 billion accumulated gap over the next four years. The fallout from the Great Recession continues and we don’t know where we will end up.
“Families all across New York are facing up to economic reality. It’s time for state government to face that same reality.”
DiNapoli today released an analysis of Governor Paterson’s proposed 2010-11 state budget. He urged the governor and legislature to negotiate a final budget that aligns spending with realistic revenue projections so the state is not again forced to make mid-year cuts. DiNapoli expressed concern that there’s no plan to address the gaps left when $11.3 billion in temporary revenue begins to run out in 2011-12.
DiNapoli’s report found:
- Risks Could Increase Deficit: The proposed budget relies on billions of dollars from revenue and savings assumptions that appear optimistic and may fail to materialize, potentially increasing the size of the projected gaps. For example, Personal Income Tax collections through the first nine months of the fiscal year declined more than 15 percent from collections for the same period last year. To meet the updated projections in the Executive’s proposed budget, collections will have to grow more than 28 percent for the remaining three months. However, preliminary collections for January indicate that Personal Income Tax is likely to end 2009-10 below these updated projections.
- Temporary Funds Used for Recurring Expenses: The General Fund is balanced using $11.3 billion in temporary resources, including federal stimulus funds and the personal income tax surcharge, which begin to disappear in 2011-12. No plans have been developed to address how the state will fill these major gaps.
- Spending Grows Far Faster than Revenue: General Fund spending over the five-year Financial Plan is projected to grow by 33.6 percent while General Fund revenues are projected to grow by only 12.2 percent. Average annual growth in General Fund receipts is projected at 2.9 percent as compared to 7.7 percent for General Fund spending through 2013-14.
- Structural Imbalance Persists: Even if all the proposed savings and revenue actions by the governor were enacted, the projected cumulative deficit totals $29 billion for the period 2011-12 through 2013-14. This could increase if the economy is slow to recover or if other risks come to fruition. Prior to the governor’s proposed actions, the projected cumulative deficit was $60.1 billion through 2013-14.
- State Debt Grows: State debt levels remain among the highest in the nation, and debt service remains the fastest growing major category of state spending. State-Funded debt outstanding is projected to increase by $3.4 billion, or 5.7 percent, in 2010-11, and to $65.6 billion in 2014-15. State-Funded debt outstanding will be $60.4 billion at the end of 2009-10 and will grow to $65.6 billion by the end of 2014-15. State-Funded debt service will reach $5.8 billion in 2009-10 and is expected to grow to $7.6 billion by the end 2014-15, an increase of $1.8 billion, or 30.8 percent over 2009-10.
Click here for a copy of the report.