DiNapoli Warns of ‘Triple Threat‘ of Fiscal Risks
Tax Receipts Below Plan, Projected Budget Gaps, Federal Funding Cuts Are Cause for Concern
State tax collections totaled $36.1 billion through the first half of New York's 2017-18 fiscal year, $386.6 million below the latest projections, largely because of lower than expected personal income tax collections, according to a report recently released by State Comptroller Thomas P. DiNapoli. Tax collections through the first six months declined 2.1 percent, or $767.9 million, from the same period last year.
"New York faces serious fiscal challenges. Projected budget gaps, weaker than expected personal income tax collections and cuts to federal programs combine for a triple threat of budgetary risks," DiNapoli said. "Any federal funding reductions not already assumed in the Financial Plan could force difficult decisions regarding the funding of important programs and services."
The General Fund balance as of Sept. 30 was $6.5 billion. That figure was $21.8 million below the latest Financial Plan projection, released by the Division of the Budget in August, and $3 billion lower than the balance from a year earlier, both of which largely reflected monetary settlement receipts in recent years.
The most recent Financial Plan projected a budget gap of $4.1 billion for the coming fiscal year before any budgetary actions to address the gap. If tax receipts continue to fall below projections, next year's projected gap may grow.
Through September, personal income tax (PIT) collections totaled nearly $22.2 billion, a decline of 5.6 percent, or $1.3 billion, from the same period in state fiscal year (SFY) 2016-17 and were $371.3 million below updated projections from August. PIT collections were $1.1 billion below initial estimates from the Enacted Budget, while overall tax collections were $692.6 million below those projections.
Factors in the year-over-year decline and the lower-than-expected receipts include the timing of refunds in previous years, as well as lower-than-projected estimated payments in the current year.
Taxpayer behavior in anticipation of federal tax law changes may also be influencing collections from estimated payments more than expected. Estimated payments made with requests for extensions to file annual tax returns declined by over $600 million from the same period in SFY 2016-17, and were nearly $1.2 billion lower than anticipated in the Financial Plan Update released in February 2017. Over the first six months of the current fiscal year, quarterly current year estimated payments for the 2017 tax year have declined $87.7 million, or 1.6 percent, from the same period last year. The most recent Financial Plan projects current year estimated payments will increase 13.9 percent, or $1.5 billion, by the end of the fiscal year.
Income tax payments made through withholding represent the largest segment of PIT receipts. Through the mid-year, collections from withholding have totaled just under $16.8 billion, 4.8 percent, or $762.1 million, more than last year. However, the growth rate is lower than the current projected annual increase of 5.2 percent. The level of bonuses paid in the financial sector later in the fiscal year will influence whether this projection will be met.
Through the mid-year, business tax collections totaled $3.6 billion, an increase of $276 million, or 8.2 percent, from the same period in SFY 2016-17. This is largely due to collections from audits, primarily from the bank tax. Total collections through the first half of the year have exceeded initial and updated projections in every month except September. Year-to-date collections are $83.4 million lower than current projections but $422.6 million higher than initial projections.
DiNapoli's report notes that through the mid-year:
- Collections of all consumption and use taxes totaled just over $8.4 billion, representing an increase of $105.3 million, or 1.3 percent, from the same period in SFY 2016-17. Year-to-date collections are $39.8 million lower than current projections and $147.8 million below initial projections;
- Miscellaneous receipts, including gaming revenues, bond proceeds and monetary settlements, totaled $12.4 billion through Sept. 30, representing an increase of $168.6 million, or 1.4 percent, from the same period last year. Through the first half of the fiscal year, miscellaneous receipts are $746.3 million higher than the latest projections and $384.3 million higher than initial projections, both in part due to monetary settlements not anticipated when those projections were issued; and
- Federal receipts totaled just over $28 billion, an increase of $2.1 billion, or 8.2 percent, from the previous year. Federal receipts were initially projected to increase this year by $1.2 billion, or 2.2 percent, from SFY 2016-17. The latest budget update increased that projection by $545 million.
The Enacted State Budget, and the Financial Plan issued by the Division of the Budget (DOB) shortly after Budget adoption, reflect various assumptions about spending and revenues. The Financial Plan is updated quarterly and may be revised to reflect, among other things, current economic and financial conditions. DOB is expected to release the SFY 2017-18 Financial Plan Mid-Year Update soon.
Read the Comptroller's Fiscal Update: State Fiscal Year 2017-18 Receipts and Disbursements Through the Mid-Year, or go to: http://osc.state.ny.us/reports/budget/2017/2017-18-midyear-report.pdf
For access to state and local government spending, public authority financial data and information on 140,000 state contracts, visit Open Book New York. The easy-to-use website was created to promote transparency in government and provide taxpayers with better access to financial data.