The Post’s Fred Dicker reports today that Paterson administration budget officials now believe New York State’s 2008-09 budget gap will be in the neighborhood of $7 billion, up from a projected $5.5 billion in the wake of the Legislature’s August special session.
It will be surprising if the figure stays as low as $7 billion, though. As of early July, the state’s financial plan was still forecasting that net personal income tax receipts would increase, from $38.17 billion in 2008-09 to $39.76 billion in fiscal 2009-10. In the wake of the ongoing turmoil on Wall Street, probably the best-case scenario over the next two years would be a repeat of the trend in state revenues between 2001-01 and 2002-03, when personal income tax receipts dropped 16 percent. Applied to the current revenue base, that would be a loss of $6 billion over the next two years — a period when baseline expenditures are headed rapidly in the opposite direction.
That drop in New York state and city tax revenues earlier in this decade — brought on by a combination of the bursting of the Wall Street bubble, the 9/11 attacks and a relatively mild and brief national recession — was concentrated almost entirely among top-bracket taxpayers, investors and Wall Street types. A broader and deeper recession would make the revenue hit much, much larger.
The message for Gov. Paterson and the legislative leaders with whom he’ll be meeting Friday: don’t wait. Get to work on deep and permanent budget reductions now, before it’s too late.