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November 5, 2009



DiNapoli: New York Must Return to Budget Basics and
Align Spending With Revenue

Report Indicates Growing Gaps Require Corrective Action and Fiscal Discipline

New York state faces a cumulative General Fund gap of up to $27.5 billion through fiscal year 2011-12 even as the Governor and the Legislature confront a deficit in the state’s current budget that could exceed $4.1 billion, according to a spending and revenue report State Comptroller Thomas P. DiNapoli released today as part of the state’s “Quick Start” budget process.

“Albany has played roulette with taxpayers’ money for too long,” DiNapoli said. “And now, in the face of the greatest fiscal challenge in our recent history, the game continues. New Yorkers understand you can’t spend more money than you make and they are tired of waiting for the state to learn that simple lesson. Taxpayers deserve better. The state has to stop treating New Yorkers like ATMs.”

DiNapoli’s Report on Estimated Receipts and Disbursements indicates New York’s three-year, cumulative General Fund gap through FY 2011-12 could approach $27.5 billion — which is $3.6 billion higher than the Governor’s estimate for the same period. Based on an analysis of the Enacted Budget and actual revenue and spending results through the first half of the fiscal year, DiNapoli projects the current year gap could reach $4.1 billion if present trends continue and spending is not aligned with revenue.

DiNapoli warned that while there are signs of economic recovery, revenue collections are still declining and may be slow to bounce back due to the state’s reliance on revenue related to employment and consumption, such as personal income and sales and use taxes, which account for 60 percent and 25 percent of New York’s tax base respectively. Additionally, the state went into the recent recession with a structural budget problem due to years of over-reliance on temporary fixes, debt issuances and other gimmicks routinely used to finance recurring spending without regard to long-term implications. While payment delays and temporary loans may allow the state to manage its cash through the year, these are only temporary solutions that postpone the implementation of long-term solutions to the state’s worsening budget gap.

The DiNapoli report also found:

  • More than $11 billion used to close the $17.9 billion fiscal year 2009-10 General Fund gap was either non-recurring “one-shot” or temporary revenue, including nearly $4.9 billion in federal stimulus funding (scheduled to end in FY 2010-11), $1.7 billion in non-recurring actions and $4.5 billion in temporary revenue actions (ranging in duration from three to five years);
  • While the budget included approximately $775 million in recurring revenue and $6 billion in recurring spending reductions, the greater dependence on temporary resources illustrates that the current budget did little to address the state’s long-term structural imbalance, and instead exacerbated the problem;
  • The state faces potentially significant cash flow shortfalls in the months of November and December, which will have to be addressed. Although the Governor has begun to take action to manage these shortfalls, it is unclear what further actions may be taken. For example, due to the state’s worsening cash flow situation, the Governor delayed much of the scheduled October and November School Property Tax Relief Program (STAR) payments to December. This increased the projected December STAR payment to $2.5 billion, exacerbating the cash flow challenge for that month. There is also a significant school aid payment of $1.6 billion due in December;
  • The Governor reversed his earlier decision and has decided not to prepay the state pension payment, costing the state an additional $30 million in interest;
  • Significant structural gaps are projected in each of the next three fiscal years. The Division of the Budget (DOB) is projecting that All Funds spending will approach $152 billion by FY 2012-13 while All Funds revenue will only be $132 billion. DOB projects that General Fund spending growth from FY 2009-10 through FY 2012-13 will be 37 percent, while General Fund receipts growth will be only 3.4 percent over the same period.

Estimates for Receipts and Disbursements
All Funds FY 2009-10 through FY 2011-12
(in millions of dollars)

 

 

To view the report, visit: http://www.osc.state.ny.us/reports/fiscal/quickstartreport110409.pdf.


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