If the Congressional Budget Office (CBO) is right, Governor David Paterson’s economic and fiscal projections for New York State are not gloomy enough. The CBO expects higher unemployment and a somewhat slower recovery than Paterson’s budget has projected over the next few years, which means the revenue estimates in Paterson’s budget are still too high.
For example, Paterson’s Executive Budget forecasts that national Gross Domestic Product (GDP) will increase by 0.8 percent in current-dollar terms next year. But the CBO’s recently updated economic outlook predicts constant-dollar GDP will shrink by 0.4 percent in 2009.
Congress’ budgeting agency predicts an unemployment rate of 8.3 percent for 2009. Paterson’s budget predicts national unemployment of 7.6 percent.
On inflation, CBO forecasts the consumer price index will rise by just 0.1 percent, which verges on outright deflation. Paterson’s budget forecasts a CPI increase of 1.4 percent. (Inflation of just 0.1 percent would mean that Paterson’s proposed budget—the one Albany interest groups are treating as savage and draconian—actually represents a spending increase even in real terms.)
In the longer term, the CBO forecasts GDP growth of 14.4 percent from 2010 through 2012, while Paterson’s budget predicts economic growth at a slightly stronger 15.2 percent clip for the same period. Compared to the governor’s budget, the CBO also forecasts somewhat higher unemployment and lower inflation lingering through 2012.
What impact would the CBO’s gloomier forecast have on New York State’s financial plan for fiscal year 2009-10? Paterson’s Executive Budget provides the answer (on page 159 of the “Economic and Revenue Outlook” volume):
Should GDP growth for 2009 be weaker than projected, small business and farm income and partnership and S corporation income could also be lower than expected. Statistical evidence suggests that a one percentage point reduction in GDP growth translates into a decline in NYSAGI [New York State Adjusted Gross Income] of about $1 billion and a decline in personal income tax liability of about $50 million.
Using that ratio, the CBO forecast would indicate the state’s NYSAGI estimate should be lowered by $1.2 billion, and the tax liability estimate should be reduced $60 million.
You may also like
Albany Should Listen to Jamie Dimon
In his annual message to shareholders, JP Morgan Chase's chief executive, Jamie Dimon, offered a timely and pointed warning for New York policymakers.
It's worth , with emphasis add Read More
Budget Update Paints Less Alarming Picture of Federal Health Cuts
A new fiscal report from the state Budget Division suggests federal funding cuts will hit New York's health-care budget less severely than officials have previously warned.
A relea Read More
How Immigrants Became a Cash Cow for New York’s Essential Plan
The Hochul administration's move to shrink the Essential Plan in response to federal budget cuts has exposed a surprising reality:
For the past decade, immigrants have been a cash c Read More
How Washington’s Budget Bill Will Affect Health Care in New York
UPDATE: The final version of the federal budget bill omitted a handful of provisions that had been included in earlier drafts. One would have penalized states that use their own money to provide coverage for undocumente Read More
Two Dozen School Districts Are Returning to the Polls for Budget Revotes
Voters in 24 New York school districts return to the polls on Tuesday for school budget revotes. Last month, voters in 96 percent of school districts outside New York City conducting votes approved their school budgets for the upcoming year.
The 683 sc Read More
New York’s Proposed ‘MCO Tax’ Would Generate a Fraction of What Lawmakers Expected
The Hochul administration's proposed "MCO tax" would generate far less than the $4 billion in extra federal aid anticipated by state lawmakers when they approved the concept this spring, according to documents obtained by t Read More
How 1199 Earns its Reputation as Albany’s No. 1 Labor Power Broker
For the fourth time in six years, the president of New York's largest health-care union, George Gresham of 1199SEIU, has won the top spot on the "Labor Power 100" list from City &am Read More
New York Runs Away from the Pack on Medicaid Spending
New York's per capita Medicaid spending jumped 14 percent in 2023, moving it further ahead of the rest of the country, recently released nationwide data show.
In the federal fiscal year that ended last September, New York spent $94.6 billion Read More