So, here’s a non-surprise: The financial outlook for New York’s state government has deteriorated in the past few months, according to the Mid-Year Financial Plan Update from the Division of the Budget (DOB).
The update says the general fund budget gap for next year has grown by nearly $900 million, to $3.3 billion from the previous projection of $2.4 billion. In addition, a $350 million shortfall is developing in the budget for the current year, which ends next March 31. To the extent that hole is not filled with recurring savings, it will add to next year’s gap.
A good part of the shortfalls can be traced to lower-than-expected receipts from the personal income tax (PIT), the state’s largest single revenue source. The PIT is now expected to fall $175 million short of projections for the current year, and $621 million below forecast for 2012-13. Lower withholding payments on bonuses (mainly Wall Street) bonuses explains a lot of this, the update indicates. Business tax and sales tax projections also have been reduced, bringing all funds revenues a total of $473 million below previous projections for fiscal 2011-12, and over $1 billion below previous projections for 2012-13. Oh, and if the stock market doesn’t recover soon, capital gains tax receipts could slide further.
It should be noted that even after all these adjustments, the financial plan forecasts that all-funds tax receipts next year will be up $755 million, or 1.2 percent.
The Mid-Year Update should have been released two weeks ago, and Gov. Andrew Cuomo didn’t present a persuasive excuse for that delay. Based on a first read-through of the document issued today, it’s even harder to understand why this report needed to be held up. The state comptroller’s monthly cash reports have been charting the likely revenue shortfall, and The Torch has called attention to the gathering fiscal clouds here, here, here and here.
The most interesting new details in the Mid-Year Update concern changes on the spending side. For example, the state has subtracted $133 million from next year’s expected federal reimbursements for services provided by the Office for People With Developmental Disabilities. The reason for the dip: a lower inpatient census. In other words, because OPWDD will be caring for fewer people, the feds will naturally pay less—but New Yorkers will pay more.
In addition, the state’s debt service payments will increase $3 million this year and $32 million next year to pick up slack for the Dormitory Authority’s Secured Hospital Program, through which the state guarantees capital financing for troubled hospitals. That report includes this warning:
The financial condition of most hospitals in the State’s Secured Hospital Program continues to deteriorate. Of the nine hospitals in the program, several are experiencing significant operating losses that are likely to impair their ability to remain current on their loan agreements with DASNY. If recent trends continue and other available funds become depleted, State resources beyond what is currently reflected in the Financial Plan will be needed to meet debt service obligations on outstanding bonds pursuant to the service contracts.
The total Secured Hospital Program debt outstanding is $535 million, and the total “contingent contractual” debt service through the program comes to $79 million a year.