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A report released Thursday by New York State Comptroller Thomas P. DiNapoli as part of the state’s Quick Start budget process projects a current year shortfall that appears manageable, but finds that out-year deficits are likely to increase. Over the three-year forecast period, revenue and spending could deviate from current estimates by more than $1.5 billion. The report will be revised following the release of the Mid-Year Update to the Financial Plan.

“The current year enacted budget made positive strides in addressing the ongoing structural deficit,” DiNapoli said.  “However, we still face challenges and risks and there is much that could undermine some of the good work of the last year.  Fiscal pressures – particularly on the revenue side – pose a significant challenge, and achieving balance will require an ongoing commitment by state leaders to live within our means.”

DiNapoli’s report notes there remains risk that some of the actions taken in the SFY 2011-12 Enacted Budget to eliminate a $10 billion gap and reduce future spending may not be as effective as projected.  While the structural imbalance has been reduced, variables including global market volatility, lower Wall Street employment and income, high state unemployment and the struggling housing market continue to pose budget risks. Economic uncertainty has the potential to affect the state’s revenue estimates, and makes accurate forecasting more difficult.  The report stressed that close monitoring is critical to ensure that actual results comport with projections.

The Comptroller’s report projects structural gaps in future fiscal years, with All Funds spending expected to reach $137.3 billion by fiscal year 2013-14, while All Funds receipts are projected to only be $134.4 billion.  DiNapoli warned that this year’s revenue collections are currently below Financial Plan projections and may be slow to bounce back due to the state’s reliance on revenue related to employment and consumption.

DiNapoli’s report also found:

• Current projections in the First Quarterly Update to the SFY 2011-12 Enacted Budget Financial Plan, released in August, remain too optimistic for both spending and tax revenue.
• The Comptroller’s report projects that All Funds spending could be $97 million higher than current Financial Plan estimates; even taking into account the spending limits enacted in the 2011-12 Budget for Medicaid and school aid.  All Funds receipts are estimated to be $214 million lower than currently anticipated in the Financial Plan.
• The Comptroller’s report projects that All Funds spending in 2012-13 could be $82 million higher than current Financial Plan estimates; All Funds receipts are estimated to be $546 million lower than currently anticipated in the Financial Plan.
• The Comptroller’s report projects that All Funds spending in 2013-14 could be $75 million higher than current Financial Plan estimates; All Funds receipts are estimated to be $195 million lower than currently anticipated in the Financial Plan.
• While more than 75 percent of the actions taken to reduce the 2011-12 budget gap were intended to be recurring, there is risk that the level of savings anticipated could be difficult to achieve. However, given the enactment of spending limitations in Medicaid and school aid, the most significant risk to the Financial Plan relates to tax collections.

DiNapoli has recommended and continues to advocate for a series of reforms to improve the budget process and solve the state’s chronic long-term structural budget gaps including improved budget transparency, restricting the use of non-recurring revenue, improving plans to close budget gaps, strengthening capital planning and using a binding revenue consensus forecast.

Estimates for Receipts and Disbursements All Funds SFY 2011-12 through SFY 2014-15 (in millions of dollars)

Note: Figures may not add due to rounding.  Actual 2010-11 results reflect adjustments for timing.

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