FIVE YEAR FINANCIAL PLAN
EXECUTIVE SUMMARY

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.


Explanation of Gap-Closing Plan

As noted above, the gap-closing plan consists of two parts, the Executive Budget proposals and the recurring impact of the DRP. This section describes the gap-closing actions proposed in the Executive Budget. It is followed by a summary of the estimated effects of the DRP.

2010-11 Executive Budget Actions

The 2010-11 gap-closing actions are organized into three general categories: (a) actions that reduce current-services spending in the General Fund on a recurring basis (“Spending Control”); (b) actions that increase revenues on a recurring basis (“Revenue Actions”); and (c) transactions that increase revenues or lower spending in 2010-11, but that cannot be relied on in the future (“Non-Recurring Resources.”)

The sections below provide details on the actions that are recommended for 2010-11 under each category. Additional information on the Budget recommendations for major programs and activities appears in the sections entitled “2010-11 All Funds Financial Plan” and “Out-year Projections” herein.

A. Spending Restraint

The Executive Budget gap-closing plan for 2010-11 focuses foremost on actions that reduce the growth in State spending on a recurring basis. Actions to restrain spending account for 75 percent of the gap-closing plan and will affect most activities funded by the State. The following table summarizes the recurring spending actions in the General Fund by major function or activity.

COMBINED GENERAL FUND AND HCRA GAP-CLOSING PLAN FOR 2010-11
SPENDING CONTROL
SAVINGS/(COSTS)
(millions of dollars)
  2010-11 2011-12 2012-13 2013-14
Spending Control1 4,870 5,340 5,358 6,184
 
Local Assistance 3,639 3,899 3,784 4,433
School Aid/Lottery Aid 1,625 1,549 1,450 2,054
Gap Elimination Adjustment 1,497 641 0 0
Delay Foundation Aid Phase-In 0 688 1,193 1,791
Lottery Aid 128 149 149 149
Other 0 71 108 114
 
Health Care 823 1,188 1,170 1,170
Medicaid Fraud/Audit Recoveries 300 300 300 300
Eliminate Automatic Medicaid Rate Increases 99 120 120 120
Reduce Managed Care Premiums 61 75 75 75
HCRA Financing 249 421 423 423
Public Health/Aging 24 70 72 72
Other 90 202 180 180
 
Higher Education 208 210 213 214
SUNY Community College Base Aid 107 75 75 75
CUNY Senior College 48 64 64 64
HESC (primarily TAP) 53 71 74 75
 
Local Government Aid 325 329 330 322
School Tax Relief Program 213 250 267 288
Human Services/Labor/Housing 201 201 193 223
Education/Special Education  139 38 45 46
Mental Hygiene 46 59 45 36
All Other Local Assistance 59 75 71 80
State Operations 1,221 1,404 1,496 1,651
State Agency Operational Reductions 709 743 704 734
Workforce Savings 250 125 0 0
Fringe Benefits/Pension Amortization 262 536 792 917
Bonded Capital Spending Reductions 10 37 78 100
1 Net of new funding initiatives.

Local Assistance

Local assistance spending includes financial aid to local governments and non-profit organizations, as well as entitlement payments to individuals. State Operating Funds spending for local assistance is estimated at $53.7 billion in 2010-11, a decrease of $83 million (-0.2 percent) from the current year. The most significant gap-closing actions in local assistance include the following:

In other public health activities, savings would result from modifying the payment rates, eligibility standards, and operation of the EI program; eliminating reimbursement for optional services provided through the GPHW, and eliminating General Fund support for programs that are not related to DOH’s and SOFA’s core mission.

State Operations

The cost of operating State government includes (a) salaries, (b) pensions and other fringe benefits, and (c) non-personal service expenses, including utilities, rents, medical supplies, and other expenses.10 State Operating Funds spending for these purposes is expected to total approximately $20.4 billion, a slight decrease from 2009-10. After actions, personal service and non-personal service expenses are projected to decline by $453 million, but this is nearly offset by growth in fringe benefit costs of $437 million.

The Executive Budget recommends $1.2 billion in savings from efficiency measures in State agencies, wage concessions, most of which must be negotiated with the unions representing State employees, and controls to slow the growth in fringe benefit costs.

The State workforce subject to Executive control is expected to total 131,90611 at the end of 2010-11, a reduction of approximately 600 from the estimated total for 2009-10. The projected decline mainly reflects recommended rightsizing of certain youth facilities, agency consolidations, and the continuation of statewide hiring controls.

Capital Reduction Program

The gap-closing plan recommends reducing planned capital projects spending financed with debt by $1.8 billion over a five-year period, beginning in 2010-11. The reductions are expected to provide over $130 million in annual debt service savings when fully implemented. The capital reductions will help the State maintain sufficient debt capacity.12 Without the Capital Reduction Program, projections show that the State’s cap on debt outstanding would have been effectively breached by 2012-13.

B. Tax and Fee increases

The Executive Budget recommends $1.1 billion in tax and fee increases. More than 80 percent of the increased revenue will be earmarked to finance existing health care spending. The “health care” taxes include an excise tax on syrup for soft drinks and other beverages, an increase in the cigarette tax, and an assessment on health care providers. The table below summarizes the specific proposals.

COMBINED GENERAL FUND AND HCRA GAP-CLOSING PLAN FOR
2010-11 - REVENUE ACTIONS
(millions of dollars)
  2010-11 2011-12 2012-13 2013-14
Revenue Actions 1,070 1,653 1,388 1,227
Tax Actions 799 1,305 1,073 942
Syrup Excise Tax 465 1,000 1,000 1,000
Cigarette Tax 210 205 201 197
Sale of Wine in Grocery Stores 92 51 6 5
Informational Returns for Credit/Debit Cards 0 0 35 83
Film Credit 0 0 (168) (292)
Empire Zone Replacement program 0 0 (50) (100)
Other Tax Actions 32 49 49 49
Medicaid Provider Assessment 216 235 235 235
Work-Zone Cameras for Speed Enforcement 25 71 38 23
Civil Court Filing Fees 31 44 44 44
All Other Revenue Actions (1) (2) (2) (17)
Tax Audit and Recoveries 221 221 221 221

The gap-closing plan would also permit grocery stores to pay a franchise fee in order to sell wine. Tax credits extended to the film industry and as part of a new Empire Zone program would result in additional costs to the Financial Plan, beginning in 2012-13. (See “2010-11 All Funds Financial Plan” herein for a complete summary of all revenue actions included in the 2010-11 Executive Budget.)

C. Non-Recurring Resources

The Executive Budget relies on $565 million in non-recurring resources in 2010-11. The largest item in this category is the use of the TANF Emergency Contingency Fund to pay for expenses that would otherwise be incurred by the General Fund in 2010-11. The Emergency Contingency Fund is a one-time ARRA authorization. Accordingly, it is not expected to be available in future years. The following table itemizes the non-recurring actions in the Executive Budget.

COMBINED GENERAL FUND AND HCRA
GAP-CLOSING PLAN FOR 2010-11
NON-RECURRING RESOURCES
SAVINGS/(COSTS)
(millions of dollars)
  2010-11
Non-Recurring Resources 565
Federal TANF Resources 261
Physician Excess Medical Malpractice Payment (Timing) 127
Lottery Investment Flexibility 50
School Aid Overpayment Recoveries 32
Available Fund Balances/Resources 95

Other non-recurring resources include altering the timing of a planned payment under the Physician’s Excess Medical Malpractice program; investing a portion of lottery prize fund receipts in AAA-rated municipal bonds instead of U.S. Treasury bonds, subject to market conditions, to realize a one-time benefit due to differences in market rates; and recovering excess aid payments made to school districts in prior years.

D. 2009-10 Deficit Reduction Plan

DOB estimates that the DRP approved on December 2, 2009 will generate savings of $2.7 billion in 2009-10, and recurring savings in the range of $700 million to $875 million. The following table summarizes the DRP. It is followed by an explanation of specific actions.

2009-10 DEFICIT REDUCTION PLAN SUMMARY
SAVINGS/(COSTS)
(millions of dollars)
  2009-10 2010-11 2011-12 2012-13 2013-14
Total Deficit Reduction Plan Savings 2,745 692 811 876 854
Administrative Actions : 803 360 385 385 385
Agency Operational Reductions 454 360 385 385 385
Medicaid Fraud Targets 150 0 0 0 0
Debt Management 100 0 0 0 0
All Other 99 0 0 0 0
Legislative Actions: 1,942 332 426 491 469
Spending Controls 1 629 427 426 491 469
Health Care 153 177 161 201 201
Transportation 157 0 0 0 0
Mental Hygiene 112 57 55 53 32
Education/Arts 38 39 42 43 43
Local Government Assistance 32 32 32 32 32
Higher Education Aid 21 36 36 36 36
Tier V Pension 0 6 20 40 60
All Other 116 80 80 86 65
School Aid – Federal ARRA 391 0 0 0 0
Tax Penalty Forgiveness Program 250 0 0 0 0
Battery Park City Authority Resources 200 0 0 0 0
Regional Greenhouse Gas Initiative/EPF 100 0 0 0 0
Aqueduct Franchise Payment 200 (145) 0 0 0
Fringe Benefit Dividends 50 50 0 0 0
Statewide Wireless Network 50 0 0 0 0
Workers’ Compensation Board 46 0 0 0 0
Dormitory Authority Resources 26 0 0 0 0
1Includes spending reductions in other State Funds that reduce General Fund costs through transfers from the accounts where savings are realized.

Administrative actions taken with the DRP included reductions of up to 11 percent of agency operating budgets; enhanced activities by the State Office of the Medicaid Inspector General to eliminate waste, fraud, and abuse; debt service savings achieved through refundings, the use of Build America Bonds, and the relatively low interest rates on the State’s variable rate bonds; additional revenue expected from an increased assessment on utilities enacted in 2009-10; and the use of other available resources.

The enacted DRP approved a 12.5 percent reduction to remaining, undisbursed local assistance spending in the current fiscal year for various programs, including transit aid, mental hygiene, health care and aging (excluding Medicaid), education and arts (excluding school aid), certain social services programs, and higher education (excluding TAP). In addition, targeted local reductions included:

Other actions include the use of $391 million in ARRA funding for school aid; authorization of a tax amnesty program for the final quarter of 2009-10; the planned receipt of $200 million in excess revenues from the Battery Park City Authority (subject to agreement with New York City and the Authority); a planned franchise payment from the bidder who wins VLT development rights at Aqueduct; transfers of $90 million in RGGI proceeds and $10 million from the EPF; the use of earned dividends to offset employee health and dental insurance costs; and Tier V pension reform savings.

E. Projected Closing Balances

DOB estimates the State will end 2009-10 with a General Fund balance of $1.4 billion, including $1.2 billion in the rainy day reserves. This assumes that the deficit for 2009-10 is carried forward into 2010-11 and that the DRP actions planned for the current year are achieved in their entirety.

After gap-closing actions, the year-end balance for 2010-11 would remain unchanged for the State’s principal reserve funds. The only expected increase is for the Community Projects Fund, which finances discretionary (“member item”) grants allocated by the Legislature and Governor. This expected increase is the result of $214 million in deposits authorized in prior years and scheduled for 2010-11, offset by $166 million in projected spending in 2010-11. The following table summarizes the projected balances.

GENERAL FUND ESTIMATED CLOSING BALANCE
(millions of dollars)
  2009-10 2010-11 Change
Projected Year-End Fund Balance 1,373 1,421 48
Tax Stabilization Reserve Fund 1,031 1,031 0
Rainy Day Reserve Fund 175 175 0
Contingency Reserve Fund 21 21 0
Community Projects Fund 73 121 48
Reserved for Debt Reduction 73 73 0

10 The Financial Plan tables presentation includes three separate Financial Plan categories: Personal Service, Non-Personal Service and General State Charges (Fringe Benefits).

11 Full-time equivalent positions (“FTEs”)

12 Under the Debt Reform Act of 2000, State-supported debt outstanding issued after April 1, 2000 is limited to 4 percent of personal income, starting in 2010-11.

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