I am pleased to present the State of New York’s Financial Condition Report for the fiscal year ended March 31, 2019. New York continues to benefit from a national economic expansion that has lasted for more than a decade, however, economic risks are growing. This report can help New Yorkers better understand the State’s financial and economic condition.
Under generally accepted accounting principles (GAAP), the State reported a General Fund operating deficit of $1.3 billion as of March 31, 2019 (compared to a $2.4 billion operating surplus last year), decreasing the GAAP fund balance to $3.4 billion. This operating deficit is one indicator of the State’s structural budget imbalance.
The State’s General Fund balance on a cash basis was $7.2 billion, a decline of $2.2 billion from the previous year. The Division of the Budget anticipates that the General Fund balance will decline to $6.5 billion at the end of SFY 2019-20 and continue shrinking in succeeding years, as one-time monetary settlement resources are spent down.
Looking forward, the State’s Financial Plan projects spending to outpace revenues over the next three years on average, leading to potential General Fund budget deficits totaling $12.8 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 level of painful spending cuts, significant tax increases, or costly “one-shot” gimmicks should an economic downturn or catastrophic event increase these gaps further.
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 reductions to federal aid for health care and other programs, driven in part by burgeoning federal deficits, could threaten the State’s ability to maintain essential services. I will continue to report on the fiscal impact of federal actions and speak out in defense of our State’s budgetary interests in Washington.
On a GAAP basis, total debt outstanding was $59.6 billion as of March 31, 2019, an increase of $3.4 billion from last year. Debt issuances are expected to rise markedly over the next several years, and debt capacity under the State’s statutory cap is projected to decline to $415 million by fiscal year 2023-24. The cap applies only to debt classified as State-supported and therefore does not encompass all forms of State financing.
The State Capital Plan projects capital spending of $66.8 billion over the next five fiscal years. Transportation is projected to remain the largest functional area of capital spending.
In summary, while the State’s fiscal position is relatively stable, risks are growing. Federal trade policies, financial market volatility and global economic conditions add to uncertainty regarding the direction of the U.S. and New York State economies. Threats to federal funding, structural imbalance between revenues and spending, and shrinking borrowing capacity are among the clearest risks to the State’s finances going forward. I will continue to call on State leaders to increase our rainy day reserves, enact structurally balanced budgets and improve the management of capital spending and debt.
My office produces this report to help residents learn more about the fiscal, economic and social challenges facing New York. I believe a better informed discussion will help our State make sound decisions that create a healthy financial future for all New Yorkers.
Thomas P. DiNapoli