State's Fiscal Outlook Improving But Future Gaps Persist
Comptroller Releases Reports on Financial Plan and First Quarter Results
New York State’s short-term fiscal outlook has improved, but long-term structural balance remains a challenge, according to a report on the state financial plan released today by State Comptroller Thomas P. DiNapoli. The Comptroller also released a report on the state’s first quarter fiscal results, finding tax revenue growth has been strong so far, but such gains are likely to moderate in coming months.
“There’s no doubt New York is in a better budget position now than it was a short time ago,” DiNapoli said. “Still, without doing more to align recurring spending with recurring revenue, out-year gaps will likely continue. For years, the state has used one-shots and temporary fixes to pay the bills. This leaves the state more susceptible to disruptive spending cuts and tax increases when unexpected shortfalls arise. While the state is in a reasonably good cash position right now, some of that is a result of temporary measures.”
The state’s Enacted Budget Financial Plan, prepared by the state Division of the Budget, projects budget gaps of $2 billion in state fiscal year (SFY) 2014-15 and $2.9 billion in each of the following two years, which are lower than projections from the executive’s earlier proposed budget. However, if temporary measures are allowed to expire, and barring significant economic expansion, future gaps could reach $6 billion or more, according to the Comptroller’s report.
The Financial Plan projects that General Fund receipts will grow an average of 4 percent annually from 2013-14 through 2016-17. Average annual growth in spending during that period is projected at 5 percent. If nonrecurring resources are excluded, projected growth in receipts over the period drops to an average of 2.9 percent, compared to projected spending growth of 5.1 percent.
Other key findings in DiNapoli’s report include:
- The SFY 2013-14 Enacted Budget provides an increase of 4.9 percent in aid to public schools, or just less than $1 billion, on a school-year basis. The Enacted Budget also provides a variety of targeted tax credits and new or extended revenue-raising provisions that are projected to generate a net gain of $407 million in the current year and nearly $2.2 billion in SFY 2016-17.
- The Financial Plan includes approximately $4.9 billion in temporary resources, not including $5.1 billion in extraordinary federal disaster assistance. Newly authorized temporary resources include a $250 million transfer from the State Insurance Fund (SIF) this year, with further SIF transfers totaling $1.5 billion or more expected in coming years.
- The Financial Plan projects that overall spending growth from State Operating Funds during the current fiscal year will be 1.6 percent, below the projected rate of inflation. If disbursements from SFY 2012-13 and the current year are adjusted to reflect certain nonrecurring prepayments and changes in debt service, projected year-over-year growth would be 2.5 percent.
For a copy of the financial plan report, visit: http://www.osc.state.ny.us/reports/budget/2013/financial_plan0713.pdf
State First Quarter Results
Tax collections through the first quarter of the 2013-14 fiscal year were $321 million higher than projected in this year’s Financial Plan with growth in all major tax areas and $2.6 billion, or 15.2 percent, higher than the same period last year.
Personal income tax (PIT) collections increased 21.1 percent from a year ago. However, much of the growth came from April tax settlements paid by high-income earners who were able to accelerate salary and capital gains to avoid federal tax changes that took effect in January. Of the $2.6 billion increase in tax collections through June 30, almost $2 billion is attributable to estimated tax payments on prior year liabilities. Because of that, the high rate of growth is not likely to continue.
Consumption and use tax collections in the first quarter totaled $3.8 billion, representing an increase of $187.9 million, or 5.2 percent, from the previous year, which is $89.9 million above projections included in the Financial Plan. Sales tax collections have increased $223.4 million, or 7.6 percent, through the first quarter.
Year-over-year collections for business taxes have increased 8.9 percent, or $158.4 million, from last year’s levels. This gain primarily reflects growth in collections from corporate franchise taxes (up $268.5 million, or 38.6 percent), offset by declines in corporate and utilities taxes (down $14.8 million), insurance taxes (down $21.3 million) and bank taxes (down $90 million). Still, business tax collections are $21.2 million below projections.
Through June 30, 2013, All Funds miscellaneous receipts totaled $5.3 billion, which was 10.9 percent, or $524.5 million, higher than collections for the same period in SFY 2012-13. Despite this growth, miscellaneous receipt collections in All Funds were $75.8 million lower than projected through June 30, largely because of the timing of bond proceeds for capital spending. Miscellaneous receipts include an unexpected $250 million nonrecurring settlement with Bank of Japan Mitsubishi UFJ, as well as an additional $250 million transfer from the State Insurance Fund, the first installment of the $1.75 billion that will benefit the General Fund through SFY 2016-17.
For a copy of the first quarter report, visit:
http://www.osc.state.ny.us/reports/budget/2013/2013-14_1st_quarter_review.pdf