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November 5, 2010

 

DiNapoli: Mounting Current Year Problems Could Drive a Bigger Hole in Next Year's Budget

Report Cites Need for Corrective Action and Fiscal Discipline



Current fiscal year problems are exacerbating next year’s projected deficit, according to a spending and revenue report released today by New York State Comptroller Thomas P. DiNapoli as part of the state’s “Quick Start” budget process.  The report projects that All Funds revenues will be $943 million lower than current estimates and All Funds spending will be $288 million higher in SFY 2010-11, DiNapoli said.

“Before we address next year’s projected fiscal challenges, we have to fix the real crisis we’re in right now,” DiNapoli said.  “This budget was passed three months ago and there are already cracks in the foundation.  We face huge budget problems in the out years.  Letting this year’s problem fester will only make those problems that much harder to deal with.”

DiNapoli’s report notes that the structural imbalance in the state budget poses broad, long-term risks. Significant structural gaps are projected in future fiscal years, with All Funds spending expected to reach $148.7 billion by fiscal year 2012-13, while All Funds revenues are projected to only be $133.9 billion.
 
DiNapoli warned that this year’s revenue collections are still below Financial Plan projections and may be slow to bounce back due to the state’s reliance on revenue related to employment and consumption. Furthermore, spending categories that are typically affected by economic conditions, primarily Medicaid, will continue to grow faster than projected in the Financial Plan.

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 current fiscal year, these are only short-lived solutions that postpone the implementation of long-term solutions to the state’s worsening budget gap.

DiNapoli’s report also found:
  • In SFY 2011-12, the report estimates that All Funds revenue will be $333 million below current Financial Plan projections and All Funds spending will be $597 million above current projections;
  • Nearly $16.7 billion used to balance the fiscal year 2010-11 General Fund budget was either one-shot or temporary revenue, including $4.9 billion in federal stimulus funding (scheduled to end in FY 2011-12), and $7.1 billion in temporary revenue actions (ranging in duration from three to five years);
  • Current projections in the recently released Mid-Year Update to the SFY 2010-11 Enacted Budget Financial Plan remain too optimistic for both spending and tax revenue.  The Comptroller’s report projects that All Funds spending could be $288 million higher and tax revenues could be $943 million lower than currently anticipated in the Financial Plan;
  • Medicaid spending is expected to grow nearly 6 percent for the remainder of the current year and nearly 11 percent in SFY 2011-12; and
  • To meet current year-end projections in the Mid-Year Financial Plan, tax collections will have to grow 7.9 percent for the rest of the year. Thus far, tax collections have grown 5 percent compared to last year.

DiNapoli has proposed and continues to advocate for a series of reforms to address the dysfunctional budget process and solve the state’s chronic long-term structural budget gaps including improved budget transparency, restricting the use of non-recurring revenue, improving plans to close budget gaps, strengthening capital planning and using a binding revenue consensus.

Estimates for Receipts and Disbursements
All Funds SFY 2010-11 through SFY 2012-13
(in millions of dollars)



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