Nearly a full month after the Legislature’s adoption of the 2009-10 state budget, Governor David Paterson’s Division of the Budget (DOB) today issued its first official financial plan update since January.  The bottom line: New York State’s long-term financial outlook has significantly deteriorated since Paterson unveiled his Executive Budget a little over four months ago.  Due to a combination of falling revenues and added spending approved as part of the 2009-10 budget deal, the state’s out-year budget gaps are more than twice as large as those the governor originally projected in his Executive Budget proposal.

The following table compares the budget gaps projected in DOB’s January Financial Plan update, which assumed adoption of the Executive Budget, with those in the Enacted Budget Financial Plan:

enacted-table-7526883

The projected gap in the fourth year of the financial plan has grown by a whopping $8 billion because (a) DOB’s forecast of General Funds receipts for 2012-13 has been reduced $4.3 billion since January, and (b) projected General Fund disbursements for 2012-13 have risen by more than $3.8 billion.   The large increase in the gap in the final year also reflects the scheduled Dec. 31, 2011, expiration of a $4 billion personal income tax hike enacted with the 2009-10 budget.

The Enacted Budget Financial Plan shows spending in the bellwether State Operating Funds category as rising by only 0.7 percent – a small amount by historical standards, although it should be kept in mind that DOB now projects the Consumer Price Index will fall by 0.2 percent during 2009-10.

However, the underlying expenditure trends in 2009-10 and 2010-11 are inevitably masked by the state’s use of federal stimulus funds to displace state funds in some program categories.  Out of $6.2 billion in stimulus funds that DOB says were used for state deficit-reduction purposes in 2008-09 and 2009-10, it appears at least $2.7 billion will temporarily finance higher spending than the governor originally proposed for purposes normally supported by state revenues.  This figure includes $1.2 billion that Congress required the state to use for school aid restorations, and $1.5 billion that the Governor and Legislature agreed to use to finance increased spending (over the Executive Budget levels) in other areas, including health care.

Counting temporary stimulus funds, the net increase in expenditures normally classified as State Operating Funds will rise by at least 4.2 percent in 2009-10.

The stimulus funds are slated to expire after 2010-11.  As a result, the official projection of State Operating Funds disbursements takes a sharp jump of $9.4 billion, or 11 percent, in 2011-12 – which, as it happens, is also the first fiscal year of the next gubernatorial term.  At that point, spending paid for in part with federal stimulus funds in 2009-10 and 2010-11 will have to be either cut or financed with the state’s own revenues.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Another Hochul To-Do: Timely Financial Reporting

The state will spend a record $212 billion in the current 2022 Fiscal Year, under the budget its elected leaders adopted in April. Read More

Health Research Inc. Turns Over its Payroll Records Despite Claiming To Be Exempt from FOIL

The full payroll records of more than 2,400 de facto state employees are available to the public for the first time after being released by Health Research Inc. Read More

Emergency Billions Pose Opportunity—and Risk—for NYS Schools

New York schools are to post publicly today plans for spending a huge pile of unexpected and unbudgeted cash. Read More

New York’s Medicaid Rolls Kept Pace with a Nationwide Surge During the Pandemic

New York's Medicaid and Child Health Plus programs added three-quarters of a million enrollees during the coronavirus pandemic, roughly matching the pace of a national surge in sign-ups. Read More

New York’s Hospital Industry Ranks Near the Bottom of Two Quality Report Cards

New York's hospitals remain near the bottom of two quality report cards. The state's hospitals received the lowest rate of any state except Nevada and DC. Read More

New York’s Medicaid and Public Health Crises Get Short Shrift in the New State Budget

In spite of an ongoing pandemic and spiraling Medicaid costs, New York's health-care system received surprisingly little attention in the new state budget. On issue after issue, law Read More

Schumer’s First Spending Bill as Majority Leader Tailors Money for New York Medicaid

The pandemic relief bill includes a boost in Medicaid funding that appears to be tailor-made for Senate Majority Leader Chuck Schumer. Read More

A Letter From Washington Shrinks New York’s Budget Gap by $2 Billion or More

In a letter to governors two days after President Biden's inauguration, the U.S. Department of Health and Human Services said that the pandemic-related federal public health emergency "will likely remain in place for the entirety of 2021." Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!