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January 20, 2011


DiNapoli: Tax Collections Still Lag Projections; State's Reliance on Payment Delays Continues

Largely because the state delayed a $2.4 billion STAR payment, the General Fund ended December with a cash balance of $3 billion, which is $2.2 billion over projections made in November. If the STAR payment had been made at the end of December as planned, rather than the beginning of January, the General Fund would have ended the month about $231 million below Financial Plan projections, according to the December 2010 Cash Report released today by State Comptroller Thomas P. DiNapoli.

“While there appear to be positive signs in December’s Cash Report, looks can be deceiving,” DiNapoli said.  “The results are due to large delayed payments. Unfortunately, my earlier projections appear to be coming true: revenue and spending assumptions were overly optimistic and are contributing to a larger deficit. The General Fund deficit is on track to approach $1.5 billion by the end of the year and will have to be addressed. Tax collections are not keeping up with Financial Plan projections and spending in certain areas, such as Medicaid and education, appear to be exceeding projections.”

Other findings from the December Cash Report include:

  • General Fund receipts (including transfers from other funds) were $38.2 billion through December 31, were 8.7 percent, or $3 billion, higher than collections from the same period last year.  General Fund receipts were $2.1 billion above updated projections.  However, if the $2.4 billion STAR payment (paid from personal income tax collections) had been made in December as planned, year to date collections would have been $312.5 million below Plan.
  • General Fund tax collections, adjusted for the delayed STAR payment, totaled $26 billion through the first nine months of the fiscal year.  This is an increase of $1.1 billion, or 4.5 percent from the same period last year. Adjusted tax collections were $229.9 million below Financial Plan projections released November 1.  To reach year-end projections General Fund tax collections will have to grow 13.1 percent for the remaining three months of the fiscal year.
  • General Fund personal income tax collections through December 31, adjusted for STAR, totaled $15.1 billion and grew 3.9 percent, or $572 million, from the same period last year. Withholding collections have grown 5.5 percent year-to-date but will need to grow 8 percent to meet year-end projections.  Conversely, estimated payments have grown 8.9 percent through December 31, but will have to increase nearly 29 percent in the last three months.  The Financial Plan anticipated $250 million in capital gains to be realized by the end of the fiscal year, based on the incorrect assumption that the Bush tax cuts would expire.
  • Nonetheless, even if year-end projections are adjusted for this, collections from estimated payments will still have to increase nearly 20 percent in the last three months.
  • Consumption and use taxes increased 7.7 percent to $6.6 billion in the General Fund, which is $28.5 million above projections.  Collections will have to increase 9 percent throughout the rest of the fiscal year to meet year-end projections. Sales tax has grown 8.2 percent for the first nine months of the year, which is a positive sign of consumer behavior from the holiday shopping season.  However, sales tax must increase 9 percent for the next three months to meet year-end projections.
  • General Fund business tax collections through December 31 of $3.4 billion were $117.9 million, or 3.3 percent, below collections for the same period in SFY 2009-10, which is $193.5 million below updated projections.  Business tax collections need to grow 29.1 percent over the next three months to meet current year-end projections.
  • All Funds receipts were $96.2 billion through December 31, 6.5 percent, or $5.9 billion, higher than the same period last year, primarily because of federal receipts, which increased $4 billion, or 12.1 percent.  All Funds receipts were $296.8 million higher than Financial Plan projections for the first nine months, primarily because of federal receipts ($1.1 billion over Plan). Tax collections were $362.6 million below Plan.  Miscellaneous receipts were $438 million below Plan.
  • All Funds tax collections were $42.2 billion through the first nine months of the fiscal year, an increase of 5.3 percent, or $2.1 billion, from the same period last year, primarily from personal income tax collections (up $1.1 billion) and consumption taxes (up $913.8 million).  All Funds Tax collections through December 31 were $362.6 million lower than Financial Plan projections and, to reach year-end projections, will have to grow 9.9 percent for the rest of the year.
  • General Fund spending through December 31 (including transfers to other funds) was $37.5 billion, an increase of .5 percent, or $185.5 million, primarily in local assistance (largely Medicaid and education).  Departmental operations is down 7.6 percent, or $502.4 million, from the same period last year.  General Fund spending was $81.6 million below Financial Plan projections.
  • All Governmental Funds spending increased 3.3 percent, or $3.1 billion, over the first nine months, $2.7 billion below projections, again primarily due to the delayed STAR payment. This year’s spending increase is largely the result of Medicaid and school aid payments that were not made last year and deferred until the first quarter of the current year.  Debt service increased 14.6 percent through December 31 while local assistance spending grew 4.1 percent.
  • The General Fund ended the month of December with a balance of nearly $3 billion, which was $2.2 billion over projections, due to the delayed STAR payment.

The state’s finances are generally broken down by two main categories: General Fund and All Funds. The General Fund is the major operating fund of the state and accounts for all receipts that are not required by law to be deposited into another fund. All Governmental Funds includes General, Special Revenue, Debt Service and Capital Projects funds, as well as funds from the federal government.

To view the December Cash Report, visit: here.



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