2010-09-10 / Top Stories

DiNapoli Warns Of NYS Budget Problems

In an analysis of the final state budget released on Thursday, New York State Comptroller Thomas P. DiNapoli warned that the 2010-11 Enacted Budget is precariously balanced using $16.7 billion in temporary and non-recurring resources, most of which will disappear within three years. The enacted budget also includes up to $3.4 billion in risky resources that may not be fully realized. DiNapoli cautioned the slowing recovery of the economy could further exacerbate the state’s tenuous financial condition and create a current-year budget gap.

“After months of budget dysfunction and delay, New York is still on the edge of a very steep financial cliff,” DiNapoli said. “The state budget was passed 125 days late, and now there is danger that risky resources will fall short and create a gap in this year’s budget. Close monitoring of the budget is crucial to make sure the state does not fall off that cliff.

“Our report shows that state spending continues to grow much more quickly than revenues. This structural flaw guarantees the state’s fiscal problems will continue year after year until the Governor and the Legislature finally move forward with comprehensive budget reform. I’ve given them a blueprint for reform; it’s up to them to move forward.”

The Division of the Budget’s Enacted Budget Financial Plan projects a cumulative out-year gap of $37 billion through 2013-14. The use of temporary resources to balance the budget increases the potential revenue shortfall the state faces in the out-years. In addition, concerns that the economy will not recover as fast as projected and resources may not materialize as expected could heighten the risk that the state will face even larger gaps than current projections.

DiNapoli’s report on the Enacted Budget found:

Over-reliance on Risky Resources:

Included in the budget are up to $3.4 billion in risky resources that is likely to fail to materialize or come in lower than projected due to overly optimistic estimates and assumptions. Dependence on Temporary Resources for Balance: The Enacted Budget depends on $16.7 billion in nonrecurring or temporary resources for balance. By 2013-14 only $1.6 billion of this revenue is expected to still be available. Temporary resources include federal stimulus funding, temporary taxes and one-shot revenues.

Spending Growth: All Funds spending in 2010-11 is projected to total $135.9 billion, an increase of approximately $9 billion, or 7.1 percent, over 2009-10. When adjusted for delayed payments from 2009-10, All Funds spending increases $4.9 billion, or 3.8 percent.

Out-Year Budget Gaps: Through 2013-14, General Fund spending is projected to grow by $24.3 billion, or 46.6 percent, while revenue is projected to grow by only $8.4 billion, or 16 percent. General Fund disbursements are expected to grow 10.1 percent annually on average, compared to only 3.8 percent annual growth for receipts through 2013-14.

Structurally Unsound: The state continues to rely on temporary federal funds to close its annual budget gaps.

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