FIVE YEAR FINANCIAL PLAN
EXECUTIVE SUMMARY

Introduction |  Financial Plan At-A-Glance |  Executive Budget Gap-Closing Plan At-A-Glance |  Update on Budget Gaps (Before Actions)
Executive Budget Financial Plan |  Explanation of Gap-Closing Plan |  Other Matters Affecting the Financial Plan

Entire Five-Year Financial Plan (PDF, 3.60MB)

The Financial Plan provides greater detail about the budget, including revenue initiatives, savings initiatives, reserves, debt, and more.

Executive Budget Financial Plan

A. Summary

The Executive Budget gap-closing plan (the “gap-closing plan” or “plan”) would fully eliminate the 2010-11 budget gap, including the $500 million deficit carried forward from 2009-10, and reduce the gap in 2011-12 by more than half, from $14.3 billion to $6.3 billion.5 The table below summarizes the gap-closing plan.

GENERAL FUND BUDGETARY BASIS SURPLUS/(GAP) PROJECTIONS
SUMMARY OF CHANGES FROM REVISED CURRENT-SERVICES THROUGH EXECUTIVE BUDGET RECOMMENDATION
(millions of dollars)
  2010-11 2011-12 2012-13 2013-14 1
REVISED CURRENT-SERVICES ESTIMATE (BEFORE ACTIONS) (7,418) (14,311) (18,331) (20,713)
Approved Deficit Reduction Plan (Dec. 2009) 692 811 876 854
State Agency Reductions 360 385 385 385
Aid to Localities Reductions 427 426 491 469
All Other Actions (95) 0 0 0
Executive Budget Recommendations 6,726 7,214 6,967 7,632
Spending Control: 4,870 5,340 5,358 6,184
Aid to Localities Reductions 3,639 3,899 3,784 4,433
State Agency Reductions/Fringe Benefits 1,221 1,404 1,496 1,651
Bonded Capital Reductions of $1.8 B (Debt Service Savings) 10 37 78 100
Tax/Fee Changes 1,070 1,653 1,388 1,227
Tax Audits/Recoveries 221 221 221 221
Non-Recurring Resources 565 0 0 0
BUDGET SURPLUS/(GAPS) AFTER ACTIONS 0 (6,286) (10,488) (12,227)
1. Gap estimate for 2013-14 is published for the first time in the 2010-11 Executive Budget.

The plan would, if enacted in its entirety:

The plan does not count on Congressional approval of additional Federal aid for states, either through an extension of FMAP or in other forms, which at this point remains speculative. It also does not advance any proposals to close the budget gaps with deficit borrowing, which would likely have an immediate adverse impact on the State’s credit rating and add to the long-term budget imbalance.

B. Composition of the Gap-Closing Plan

Nearly 95 percent of the gap-closing plan is comprised of recurring actions that help lower the budget gaps in future years. Under the proposed plan, the combined four-year gap (2010-11 through 2013-14) is cut in half, declining from $61 billion to $29 billion. The chart below summarizes the shares of the gap-closing plan by broad category.

Composition of Gap-Closing Plan

Reductions to current-services spending total over $5 billion9 in the State Operating Funds ($5.6 billion in the General Fund) and constitute 75 percent of the gap-closing plan. The proposed reductions affect nearly every activity financed by State government, ranging from aid to public schools to agency operations to capital expenditures. (See “2010-11 Gap-Closing Plan — Spending Control” herein.)

The gap-closing plan includes $1.1 billion in tax and fee increases. These include a new excise tax on syrup used in soft drinks and other beverages ($465 million), a $1 per pack increase in the cigarette tax ($210 million), and an assessment on health care providers ($216 million), all of which are earmarked to help pay for existing health care expenses. The plan would also permit grocery stores to pay a franchise fee to sell wine ($92 million). In addition, audit and compliance activities are expected to increase the tax base by approximately $221 million annually. (See “2010-11 Gap-Closing Plan – Tax and Fee Increases” herein.)

Non-recurring resources, which comprise less than 8 percent of the actions proposed in the Executive Budget, total $565 million. Importantly, this is less than the annual growth in savings achieved by recurring gap-closing actions which grow in value by approximately $1.2 billion from 2010-11 to 2011-12. As a result, the non-recurring actions have no adverse effect on the gap in 2011-12 because they are more than offset by the growth in recurring savings. (See “2010-11 Gap-Closing Plan – Non-Recurring Resources” herein.)

C. Impact on Budget Gaps

The gap-closing plan provides for balanced operations in the General Fund in 2010-11. The gap for 2011-12 would be reduced by more than half, declining from $14.3 billion to $6.3 billion. Future gaps would total $10.5 billion in 2012-13 (a reduction of $7.8 billion from current-services levels) and $12.2 billion in 2013-14 (a reduction of $8.5 billion from current-services levels).

These budget gaps, which remain relatively high by historical standards even after the substantial reductions recommended in the gap-closing plan, are significantly affected by the expected end of extraordinary Federal stimulus aid for Medicaid, education, and other governmental purposes. ARRA is expected to provide approximately $4.4 billion in Federal aid in 2010-11 for expenses that would otherwise need to be paid for with State resources or eliminated. If extraordinary Federal aid were to be extended at levels comparable to 2010-11, the budget gaps would total approximately $1.7 billion in 2011-12, $6.2 billion in 2012-13, and $8.0 billion in 2013-14, assuming the gap-closing plan is enacted as proposed. (See “Outyear Budget Gaps” herein.) However, in DOB’s view, the fiscal outlook for the Federal government makes it unlikely that aid will be continued at such levels.

HYPOTHETICAL IMPACT OF ARRA EXTENSION ON GENERAL FUND BUDGET GAPS
(billions of dollars)
  2011-12 2012-13 2013-14
EXECUTIVE BUDGET GAPS ( 6.3) (10.5) (12.2)
FMAP Extension (2010-11 Est. Benefit) 3.4 3.4 3.4
State Fiscal Stabilization Relief 1.2 1.2 1.2
GAPS WITH HYPOTHETICAL ARRA EXTENSION 1 (1.7) (5.9) (7.6)
1. For illustration only. The Financial Plan does not assume extension of ARRA.

Governor Paterson has asked Lieutenant Governor Ravitch to develop a plan to eliminate the structural imbalance within four years. The Lieutenant Governor has assembled a working group of fiscal experts to develop and evaluate options to help bring the long-term growth in spending in line with receipts.

D. Impact on Spending

State Operating Funds spending, which excludes Federal operating aid and capital spending, is projected to total $79.9 billion in 2010-11, an increase of $745 million (0.9 percent) over the revised estimate for 2009-10. Compared to the current-services forecast, State Operating Funds spending would be reduced by approximately $5 billion. The proposed growth is approximately $840 million below the level that would be permitted under the Governor’s proposed spending cap. The Executive Budget proposal would hold spending growth, by all standard measures, to less than 2 percent. The table below summarizes the annual change in spending.

TOTAL DISBURSEMENTS
(millions of dollars)
Before Actions After Actions
2009-10 Revised 2010-11 Base Annual $ Change Annual % Change 2010-11 Proposed Annual $ Change Annual % Change
State Operating Funds 79,182 84,917 5,735 7.2% 79,927 745 0.9%
General Fund * 48,731 53,898 5,167 10.6% 48,304 (427) -0.9%
Other State Funds 25,455 25,151 (304) -1.2% 25,765 310 1.2%
Debt Service Funds 4,996 5,868 872 17.5% 5,858 862 17.3%
All Governmental Funds 133,172 139,741 6,569 4.9% 133,958 786 0.6%
State Operating Funds 79,182 84,917 5,735 7.2% 79,927 745 0.9%
Capital Projects Funds 7,975 9,070 1,095 13.7% 8,858 883 11.1%
Federal Operating Funds 46,015 45,754 (261) -0.6% 45,173 (842) -1.8%
General Fund, including Transfers 54,129 60,162 6,033 11.1% 54,522 393 0.7%
State Funds 84,639 91,367 6,728 7.9% 86,149 1,510 1.8%
* Excludes transfers.

The annual spending growth in State Operating Funds is affected by the rapid annual increase in debt service and fringe benefits, which are difficult to control in the short term due to existing constitutional, statutory, and contractual obligations. Together, these costs are projected to increase by a total of $1.3 billion in 2010-11. Debt service on State-supported debt is projected to increase by $844 million (17.1 percent) in 2010-11, with approximately 35 percent of the growth due to the “restructuring” of certain transportation-related debt in 2005 that deferred substantial debt service costs until 2010-11. Spending on fringe benefits is projected to increase by $437 million, an increase of 9.9 percent. Growth in fringe benefits is principally due to increases in the State’s annual contribution to the State Retirement System and the cost of providing health insurance for active and retired State employees. Pension costs are expected to increase by $374 million (32.7 percent) in 2010-11, even with the amortization in 2010-11 of contributions in excess of 9.5 percent, as proposed in the gap-closing plan.

CAUSES OF STATE OPERATING FUNDS SPENDING GROWTH
(millions of dollars)
  2009-10
Revised		 2010-11
Proposed		 Annual $
Change		 Annual %
Change
Total 79,182 79,927 745 0.9%
Debt Service 4,922 5,766 844 17.1%
Fringe Benefits 4,436 4,873 437 9.9%
Personal Service 10,874 10,483 (391) -3.6%
Non-Personal Service/Fixed Costs 5,144 5,082 (62) -1.2%
Local Assistance 53,806 53,723 (83) -0.2%

 

In contrast, spending for local assistance and agency operations, two areas of the budget that are responsive to immediate cost reduction efforts, decline by $536 million (-0.8 percent) from 2009-10 levels, assuming the Executive Budget is enacted in its entirety. Annual spending declines for personal service by $391 million (-3.6 percent), non-personal service by $62 million (-1.2 percent) and for local assistance by $83 million (-.02 percent).

The following table summarizes the major sources of annual change. It is adjusted to account for the impact of ARRA funding on Medicaid and school aid, and other significant cash-basis transactions that affect annual change (see notes to the table).

STATE SPENDING MEASURES: BEFORE AND AFTER BUDGET ACTIONS
(millions of dollars)
Before Actions After Actions
2009-10 Revised 2010-11 Base 1 Annual $ Change Annual % Change 2010-11 Proposed Annual $ Change Annual % Change
Local Assistance: 53,806 57,599 3,793 7.0% 53,723 (83) -0.2%
School Aid 2 20,385 21,468 1,083 5.3% 19,939 (446) -2.2%
School Aid Without ARRA Funding 21,578 22,386 808 3.7% 20,815 (763) -3.5%
ARRA Funding (1,193) (918) 275 -23.1% (876) 317 -26.6%
STAR 3,419 3,421 2 0.1% 3,208 (211) -6.2%
Other Education Aid 1,606 1,608 2 0.1% 1,475 (131) -8.2%
Medicaid (incl. administration)3 10,984 12,581 1,597 14.5% 11,892 908 8.3%
Medicaid Without Enhanced FMAP 14,139 15,464 1,325 9.4% 14,775 636 4.5%
Enhanced FMAP (3,155) (2,883) 272 -8.6% (2,883) 272 -8.6%
Public Health/Aging/Insurance 2,090 2,355 265 12.7% 2,123 33 1.6%
Higher Education 2,822 2,633 (189) -6.7% 2,411 (411) -14.6%
Higher Education 2,522 2,633 111 4.4% 2,411 (111) -4.4%
2008-09 CUNY Payment Deferral 4 300 0 (300) -100.0% 0 (300) -100.0%
Mental Hygiene 3,285 3,517 232 7.1% 3,472 187 5.7%
Social Services 3,084 3,393 309 10.0% 2,964 (120) -3.9%
Local Government Assistance 1,085 1,094 9 0.8% 769 (316) -29.1%
Transportation 4,010 4,448 438 10.9% 4,398 388 9.7%
All Other 1,036 1,081 45 4.3% 1,072 36 3.5%
State Operations: 20,454 21,542 1,088 5.3% 20,438 (16) -0.1%
Wages/Fringe Benefits 15,310 16,112 802 5.2% 15,356 46 0.3%
Personal Service: 10,874 10,938 64 0.6% 10,483 (391) -3.6%
Executive Agencies 5,204 5,425 221 4.2% 5,106 (98) -1.9%
Exec. Agencies – Retroactive Settlements5 320 0 (320) -100.0% 0 (320) -100.0%
SUNY 3,400 3,293 (107) -3.1% 3,162 (238) -7.0%
Judiciary 1,539 1,547 8 0.5% 1,547 8 0.5%
Legislature 170 165 (5) -2.9% 165 (5) -2.9%
Department of Law 126 118 (8) -6.3% 115 (11) -8.7%
Audit & Control 115 116 1 0.9% 114 (1) -0.9%
Collective Bargaining Reserve 0 274 274 100.0% 274 274 100.0%
Fringe Benefits: 4,436 5,174 738 16.6% 4,873 437 9.9%
Pensions 1,145 1,736 591 51.6% 1,519 374 32.7%
Health Insurance 2,788 3,056 268 9.6% 3,010 222 8.0%
All Other Fringe Benefits 503 382 (121) -24.1% 344 (159) -31.6%
Non-Personal Service/Fixed Costs 5,144 5,430 286 5.6% 5,082 (62) -1.2%
Debt Service 4,922 5,776 854 17.4% 5,766 844 17.1%
TOTAL STATE OPERATING FUNDS 79,182 84,917 5,735 7.2% 79,927 745 0.9%
Capital Projects (State Funded) 5,457 6,449 992 18.2% 6,222 765 14.0%
TOTAL STATE FUNDS 84,639 91,366 6,727 7.9% 86,149 1,510 1.8%
Federal Aid (Including Capital Grants) 48,533 48,375 (158) -0.3% 47,809 (724) -1.5%
TOTAL ALL FUNDS 133,172 139,741 6,569 4.9% 133,958 786 0.6%
1. Includes the value of recurring savings from the December 2009 Deficit Reduction Plan.
2. State fiscal year basis. ARRA funding represents State-financed gap-closing benefit. Spending from Federal Funds will differ.
3. Department of Health Medicaid spending only, excludes other State agency spending. FMAP benefit represents State Medicaid costs financed by the Federal government beyond the normal 50 percent matching rate.
4. A payment of $300 million to CUNY scheduled for 2008-09 was deferred to 2009-10 as part of the 2008-09 Deficit Reduction Plan.
5. Retroactive payments for NYSCOPBA , PBA and BCI labor settlements ($258 million, $42 million and $20 million, respectively) for contract years 2007-08 and 2008-09.

5 The gap-closing plan consists of two parts: the Executive Budget proposals introduced on January 19, 2010 and the recurring value of the DRP approved in December 2009.

6 State Operating Funds combines activity in the General Fund, State-financed special revenue funds, and debt service funds and is intended to measure the portion of the State budget that supports operations (as distinct from capital) and that is financed by State resources (as distinct from Federal aid).

7 The proposed cap would limit State Operating Funds increases to the average of inflation over the past three years (2 percent in 2010-11)

8 Revised spending estimate for 2009-10, including the impact of the DRP. Agency operations include fixed costs.

9 Includes value of the DRP. See “Explanation of the Deficit Reduction Plan” herein.

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