Given recent revenue trends, it should come as no surprise that the state’s first-quarter financial plan update is forecasting a  $2.1 billion deficit for the current fiscal year.   But some of the financial details released by the Division of the Budget (DOB) today are getting even more worrisome.

For example, DOB expects to be scraping the bottom of its cash drawer before the end of the year.  From page 12 of the plan:

DOB projects that the General Fund will end the months of November and December 2009 with negative cash balances of $1.2 billion to $1.4 billion, absent the implementation of potential cash management actions, and will return to a positive month-end balance in January 2010. The Enacted Budget authorizes the General Fund to borrow resources temporarily from other funds for a period not to exceed four months. The current forecast projects that the General Fund will continue to have periodic negative cash balances during the year. The amount of resources that can be borrowed by the General Fund is limited to the available balances in the State’s Short-Term Investment Pool. DOB will continue to closely monitor and manage the General Fund cash flow during the fiscal year.

The state last dipped into reserves to cover cash shortfalls in 2002, but on a much smaller scale.   The projected cash flow problems for 2009-10 appear to be the largest, in relative terms, since the severe fiscal crisis of the early 1990s.

However, on a more positive note, DOB is also saying that the state will end the year with a cash balance of $1.378 billion, including the $1 billion Tax Stabilization Reserve Fund, unchanged from the Enacted Budget Plan.  Governor Paterson is promising to deliver a Program to Eliminate the Gap (PEG) in early fall, including “substantial reductions in local assistance and State Operations spending, as well as other measures to achieve a balanced budget in the current year.”

Hmm.  It’s difficult to see how truly “substantial” reduction in local assistance and state operation spending could occur without a mid-year reduction in school aid or more employee headcount reductions than the governor has planned to date.

Meanwhile, as revenues continue to drop, state operating funds spending has actually grown by $106 million since the budget was enacted, as shown by the table on page 4 of the financial plan update.

Stay tuned.

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 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

Empire State’s new budget is a bridge to nowhere

Looking ahead to an uncertain post-pandemic recovery, New York’s newly enacted state budget for fiscal year 2022 raises spending by staggering amounts that—barring an unlikely rapid return to peak 2019 economic activity in New York City—can't possibly be sustained for more than a few years. The budget is a mid-2020s fiscal disaster in the making: an incomplete bridge over a deepening river of red ink. 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!