I am pleased to present the State of New York’s Financial Condition Report for the fiscal year ended March 31, 2018. While the national economy continues to expand and our fiscal condition is relatively stable, challenges loom on the horizon.
Federal grants, one of the State’s primary revenue sources, make up more than one in every three dollars in the State budget. The potential for substantial cuts to federal aid, particularly for health care, could threaten the State’s ability to maintain essential services. I will continue to report on the fiscal impacts of federal actions and to speak out in defense of our State’s budgetary interests in Washington.
As of March 31, 2018, the State’s General Fund cash balance was $9.4 billion, the highest in recent history. But this cushion is expected to shrink: the State’s Financial Plan anticipates that more than $3.9 billion, or 42 percent of this figure, will be used in the 2018-19 fiscal year. That Plan also projects spending to outpace receipts over the next three years, leading to potential General Fund budget deficits totaling $17.9 billion before gap-closing actions.
I have called for the State to bolster its statutory “rainy day” reserves, which could be drawn upon to help reduce the need for painful spending cuts, significant tax increases, or costly “one-shot” gimmicks should an economic downturn occur. Unfortunately, no deposits to those reserves have been made since 2015, and none are projected this year.
As of March 31, 2018, the State reported $56.3 billion in debt outstanding in accordance with GAAP, billions of which was issued without creating a corresponding State capital asset. Debt capacity under the State’s statutory cap on debt outstanding is projected to decline to only $49 million in SFY 2020-21, and the Division of the Budget anticipates reductions in planned capital spending at a time of pressing need for investment in essential infrastructure. I will continue to call for improvements to the State’s capital planning and debt management efforts.
The State reported a General Fund operating surplus of $2.4 billion in its March 31, 2018 GAAP Basis Financial Statements, increasing the fund balance to $4.7 billion. However, New York’s overall net position, a broader measure of financial condition, declined by $236 million to $28.7 billion. The State’s net position continues to be negatively impacted by high levels of debt and growing unfunded other post-employment benefits (OPEB) liabilities.
The State’s financial condition is always influenced by economic trends, and challenges remain in this area as well. New York’s employment and population gains in recent years have lagged national averages, and trends within the State vary considerably among regions. In the 10th year of the current national economic expansion, we need to keep working hard to promote prosperity for all New Yorkers.
In summary, while the State’s fiscal position has improved somewhat, risks remain on the horizon. Threats to federal funding, unfunded liabilities for certain post-employment benefits such as health insurance, and shrinking borrowing capacity could all harm the State’s finances going forward. That is why I will continue to call on State leaders to bolster our reserves, enact sound budgets and manage capital spending and debt prudently.
My office produces this report to help residents learn more about the fiscal, economic and social challenges facing New York. It is my hope that an informed discussion will help our great State make sound decisions that create a healthy financial future for all New Yorkers.
Thomas P. DiNapoli