Comptroller DiNapoli Warns Of Potential For
Higher Current-Year Deficit
Even though the General Fund ended October $185.3 million over mid-year projections, there is still significant risk that the 2010-11 deficit could exceed projections due to optimistic year-end revenue targets and heightened spending pressures, according to the October 2010 Cash Report released today by State Comptroller Thomas P. DiNapoli.
“General Fund tax collections will have to grow more than 10 percent for the rest of the year to meet year-end projections,” DiNapoli said. “Based on current trends, the General Fund deficit could approach $1 billion by the end of the fiscal year, if corrective action is not taken. It is time to take off the rose-colored glasses and face the grim economic reality. We cannot allow this year’s problems to fester. Doing so will only make these problems that much harder to deal with.”
Other findings from the October Cash Report include:
- General Fund receipts (including transfers from other funds) of $28.7 billion through October 31 were 1.2 percent, or $345.6 million, higher than collections from the same period last year. General Fund receipts were $183.1 million above updated projections.
- General Fund tax collections totaled $21.3 billion through the first seven months of the fiscal year. This represents an increase of $907.8 million, or 4.5 percent, and is $139.6 million over Financial Plan projections released November 1. However, to reach year-end projections tax collections will have to grow more than 10 percent for the remaining five months of the fiscal year.
- General Fund personal income tax collections through October 31 totaled $13.4 billion and grew 7.2 percent, or $898 million, from the same period last year. Withholding collections have grown 6.1 percent year-to-date but will need to grow an additional 6.6 percent over the next five months to meet year-end projections. Likewise, estimated payments have grown 11.2 percent through October 31 but will have to increase 20 percent for the remainder of the year. Most of that growth is expected to come from capital gains realized before the end of the fiscal year as a result of the expectation that the Bush tax cuts will be allowed to expire. If Congress extends or amends the federal tax cuts, there will be additional risks to this year’s financial plan.
- Consumption and use taxes increased 5.8 percent to nearly $5 billion in the General Fund but will have to increase 11.1 percent throughout the rest of the fiscal year to meet year-end projections. Sales tax has grown 6.1 percent for the first half of the year, which may be a positive sign of taxpayer behavior going into the holiday shopping season but also reflects the expiration of the sales tax exemption on clothing. Sales tax must increase nearly 12 percent over the next five months to meet year-end projections.
- General Fund business tax collections through October 31 of $2.1 billion were $419.7 million, or 16.5 percent, below collections for the same period in SFY 2009-10, which is $67.2 million above updated projections. Business tax collections need to grow almost 30 percent over the next five months to meet current projections for year end.
- All Funds receipts of $72.7 billion through October 31 were 6.3 percent, or $4.3 billion, higher than the same period last year, primarily because of federal receipts which increased $2.9 billion, or 11.5 percent. All Funds receipts were $24.3 million higher than Financial Plan projections for the first seven months, primarily because of tax collections ($171.2 million over plan). Miscellaneous receipts were $142.7 million below plan.
- All Funds tax collections of $31.8 billion through the first seven months of the fiscal year represent an increase of 5.5 percent, or $1.7 billion, from the same period last year, primarily from mobility tax collections, which didn’t begin until November 2009, and personal income tax collections. Although All Funds Tax collections through October 31 were $171.2 million higher than Financial Plan projections, to reach year-end projections tax collections will have to grow 7.7 percent for the rest of the year.
- General Fund spending through October 31 (including transfers to other funds) of $28.8 billion represents a decrease of 1.1 percent, or $323.5 million, primarily in state operations (down 9.5 percent, or $502.8 million, from the same period last year). General Fund spending was $2.5 million below plan.
- All Governmental Funds spending increased 2.9 percent, or $2 billion, over the first seven months, although this is $177.7 million below projections. This year’s spending increase is primarily the result of Medicaid and school aid payments that were not made last year and deferred until the first quarter of the current year. Capital spending decreased 3.3 percent through October 31 while local assistance spending grew 5.7 percent.
- The General Fund ended the month of October with a balance of nearly $2.3 billion, which was $185.3 million over projections.
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.
Click to view the October Cash Report