Comptroller DiNapoli Says Current Budget Gap is Growing
Cash Report at End of First Half of Fiscal Year Shows Perilous Imbalance
New York State Comptroller Thomas P. DiNapoli said the state faces a growing cash deficit in its current budget as monthly revenue collections for the State of New York last month again fell short of projections, according to the September Cash Report released today. DiNapoli said the current deficit could reach $4.1 billion if present trends continue without action. DiNapoli warned that the State may need to borrow from the Short Term Investment Pool (STIP) sooner than expected to meet its General Fund cash flow needs.
“I said in April that this was a ‘buy time’ budget, and now time is up,” DiNapoli said. “This budget simply has not held together. Most New Yorkers understand they cannot spend more than they make. The state needs to adopt that kind of common sense. If we stay on the current path, New York will run out of cash. This situation must be addressed.
“New York is still feeling the effects of the recession and while there are some encouraging signs in the economy and the stock market appears to be recovering faster than expected, we can’t count on the windfall profits the state has relied upon in the past. The state’s revenue base has changed, employment is down, and we just can’t depend on Wall Street to generate the revenue needed to paper over the state’s structural budget gaps as it had before this downturn.
“The Division of Budget projects a $3 billion deficit in the current budget. But based on current trends, the end-of-year gap could be more than $4 billion if no action is taken. The spending promises made in the spring are not sustainable in the face of falling revenue. The tough decisions that should have been made in April will be much harder now that half the fiscal year has passed, and we can’t just push the problem off until next year.”
DiNapoli’s September Cash Report indicates total General Fund tax revenue was $18.1 billion, $634.5 million below projections for the first half of the year and $3.6 billion less than the same period last year, primarily due to weak Personal Income Tax collections. While the General Fund ended the first half of the year $710 million over Financial Plan projections, that difference is primarily attributable to the timing of certain payments.
DiNapoli said that in the absence of a solution to this year’s deficit, the State may face a deficit of nearly $9 billion in 2010-11 fiscal year. Additionally, the State cannot rely on new federal revenues or increased taxes as an easy solution to the State’s long-term budget imbalance.
The DiNapoli report made specific findings, including:
- Through September 30, General Fund receipts, including transfers from other funds, of $25.2 billion were $621.8 million below Financial Plan projections and nearly $4.2 billion lower than last year for the same period.
- Total tax collections through September 30 were $18.1 billion, down $3.6 billion, or 16.7 percent, from last year and $634.5 million below projections for the first half of the fiscal year. Year to date General Fund Personal Income Tax collections were $11.1 billion, roughly $605.7 million below projections updated in July.
- Year-to-date consumption tax collections were $4.1 billion, nearly $298 million below collections from the same period last year and $33.6 million below projections. Within this tax category, sales tax collections within the General Fund are $321.2 million or 7.9 percent lower than last year.
- Year-to-date business tax collections were $2.4 billion, $3.1 million lower than collections for the same period last year, and $40.8 million below Plan through the first six months. Offsetting these shortfalls, miscellaneous receipts were $1.7 billion, $667 million above collections from last year, and $202.3 million higher than projected. This includes $602 million collected from utilities from the temporary utility surcharge enacted in the 2009-10 budget. Other factors in the positive variance include $43 million in higher than anticipated abandoned property receipts and $33.5 million from settlements for auction rate security cases and insurance companies.
- General Fund spending, including transfers to other funds, was $24.7 billion, $1.8 billion, or 6.7 percent, less than last year through September 30. The decline in spending was mostly due to costs for general state charges (down $602.1 million primarily due to the timing of payments) and Medicaid (down $1.1 billion – reflecting federal stimulus Medicaid payments made from other funds). These declines were offset by increases in education spending (up $703.2 million) and other health and environment spending (up $212.5 million). Including transfers, General Fund spending was more than $1.3 billion below projections.
- All Governmental Funds receipts through September 30 of $58.7 billion were $2.4 billion below projections and $660.1 million higher than last year for the same period, primarily due to federal receipts. Total tax collections were nearly $27.3 billion, down $5.1 billion, or 15.9 percent, from last year and $738.7 million below projections. Federal receipts increased by nearly $3.6 billion from last year, but were nearly $1.9 billion lower than projected. Miscellaneous receipts through September 30 were $10.7 billion, $2.2 billion higher than collections for the same period last year, primarily due to the receipt of public authorities’ bond proceeds to reimburse the state for capital spending that has already occurred and $602 million in new utility assessment revenue. Miscellaneous receipts were $183.4 million higher than projected.
- All Governmental Funds spending through September 30 was $59.6 billion, $2.7 billion, or 4.8 percent, more than last year for the same period, primarily due to increases in Medicaid spending ($3.5 billion or 21.8 percent), and education ($930 million or 7.3 percent). These increases were offset by lower spending for general state charges ($908.3 million), transportation grants ($542.2 million), non-personal service spending ($387.2 million) and other social services spending (down $332.1 million). All Funds spending was $2.6 billion below projections.
The state’s finances are generally broken down by two main categories: General Fund and All Governmental 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. DiNapoli’s monthly cash report compares state finances against the same time period last year and the state’s current year Financial Plan.
To view the report, visit: http://www.osc.state.ny.us/finance/finreports/cash/monthly/september09.pdf.