While New York’s short-term fiscal outlook has improved, it still faces challenges with future budget gaps, according to a report released today on the state financial plan.
The state budget projects gaps of $2 billion in the 2014-15 fiscal year and $2.9 billion in each of the following two years, state Comptroller Thomas Dinapoli’s report found. But if temporary measures are allowed to expire (such as higher income taxes on wealthy New Yorkers and a temporary surcharge on utility bills) and the state doesn’t experience “significant economic expansion,” future budget gaps could be $6 billion or more.
“There’s no doubt New York is in a better budget position now than it was a short time ago. Still, without doing more to align recurring spending with recurring revenue, out-year gaps will likely continue,” DiNapoli said in a statement.
“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,” he said.
The state’s financial plan projects an average growth of 4 percent a year in General Fund receipts from 2013-14 through 2016-17, but average annual growth in spending during that time is projected at 5 percent. When non-recurring resources are excluded from the calculations, projected growth in receipts during that time falls to an average of 2.9 percent.
The report also found that targeted tax credits in the budget and new or extended revenue-raising provisions are projected to generate a net gain of $407 million in the current year and nearly $2.2 billion in the 2016-17 fiscal year. The state’s financial plan projects overall spending growth from operating funds will be 1.6 percent this fiscal year.
A second report released today finds that tax revenue growth has been strong in the first quarter of the fiscal year, which started April 1, but the gains are likely to slow down in the coming months. Tax collections through the first quarter were $321 million higher than anticipated. There was growth in all major tax areas, and collections were $2.6 billion, or 15.2 percent, higher than the same period last year, the report said.
Personal income-tax collections in the first quarter were up 21.1 percent from a year ago, but much of the growth was a result of April tax settlements paid by high-income earners. They were able to accelerate salary and capital gains to avoid federal tax changes that took effect in January. The report also found that consumption and use tax collections were up 5.2 percent from the previous year and sales tax collections were 7.6 percent higher. Business tax collections had increased 8.9 percent over last year.