New York state’s projected deficit for the next fiscal year is expected to grow to as much as $3.5 billion as a stalled economic recovery cuts Wall Street jobs and shrinks bonuses, Governor Andrew Cuomo’s office said.
The gap for fiscal 2013 was projected at $2 billion when the current $131.7 billion budget was approved in March. It’s now estimated to have widened to between $3 billion and $3.5 billion, according to the Budget Division’s mid-year update released today by Cuomo’s office. The division also forecast a $350 million shortfall in the current year.
State officials will use the updated revenue forecast and spending projections to start the budget process for next year.
“With the prospect of a weak bonus season on Wall Street even more negative pressure is being placed on the state’s receipts outlook,” the Budget Division said in a statement.
New York joins California and Florida in reporting revenue below forecasts in the past month. U.S. states are projecting combined budget gaps of $31.9 billion in fiscal 2013, according to the National Conference of State Legislatures in Denver. Unlike most states, where fiscal years begin July 1, New York starts its budget April 1.
Volatility in the national economy, the Greek debt crisis and questions about how both would affect Wall Street earnings caused the mid-year update to be delayed past its Oct. 31 deadline, Morris Peters, a spokesman for the budget division, said in a telephone interview this month.
Short of Targets
Comptroller Thomas DiNapoli said last month that revenue is likely to fall short of targets as Wall Street bonuses shrink and banks shed thousands of jobs. Tax collections for the first half of the fiscal year were off by $391.9 million, DiNapoli said Oct. 19. In 2010, the finance industry accounted for 23.5 percent of wages paid by businesses while making up 5.3 percent of jobs, he said.
Bank of America Corp., the biggest U.S. lender by assets, said Sept. 12 it will eliminate 30,000 jobs in the next few years under a project to remove about $5 billion in annual costs. Goldman Sachs Group Inc. said in July that it will cut about 1,000 positions after its second-quarter drop in trading revenue was bigger than analysts estimated.
Cuomo closed a $10 billion gap in the 2012 fiscal year budget without raising taxes. The 53-year-old Democrat used the threat of firings to get concessions from the state’s two largest public-worker unions as part of a push to save $450 million in employee costs.
New York’s general-obligation bonds have returned 7.77 percent this year, compared with 8.11 percent for other issuers with AA ratings, according to Barclay’s Capital Index. Two other states led by first-term Democrats, California and Illinois, are outperforming New York in the 12 months through June 30, according to the Bloomberg Economic Evaluation of States Index.
The current fiscal year budget gap also was closed with the help of a 10 percent cut to all agency budgets. In an Oct. 31 letter, Budget Director Robert Megna told agency chiefs to cut their costs by an additional 2.5 percent as they plan for next year.
Cuomo said last month he expects to increase education and health-care spending by 4 percent in fiscal year 2013.
Cuomo also has said he won’t support a new tax on residents who earn more than $1 million annually, which Assembly Speaker Sheldon Silver said he will introduce. During the last budget cycle, the Manhattan Democrat pushed Cuomo to extend a surcharge on individuals who earn more than $200,000, which is set to expire on Dec. 31. However, Cuomo and Senate Republicans, who hold a majority, opposed the plan.
Cuomo may call the Legislature back for a special session this year if the “range of options” he’s considering in closing the current year’s $350 million gap would best be done with lawmakers’ approval, the governor said on WCNY’s “The Capitol Pressroom” radio show today.
“We may be making such dramatic changes to the budget the Legislature passed that fairness dictates we do it in consultation with the Legislature,” Cuomo said. The decision to call lawmakers back will be made in the coming weeks, he said.