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.

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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:

• School aid/lottery aid ($1.6 billion on a State fiscal year basis) by imposing a one-time adjustment to formula-based school aid on a wealth-equalized basis ($1.4 billion); extending the phase-in of the Foundation Aid program from seven to ten years; and enhancing the operation of the State’s lottery games and VLT facilities (including increased advertising, the extension of operating hours at VLT facilities, and the enhancement of the Quick Draw game) to increase lottery revenues for financing school aid ($128 million).
• Health Care ($823 million) through cost-containment measures in Medicaid, including eliminating inflation-based adjustments to rates; decreasing managed care premiums; heightening anti-fraud and audit efforts; implementing prior approval for insurance rate changes; and financing a greater share of Medicaid spending through HCRA. Absent the tax increases on beverage syrup and cigarettes, and the imposition of the assessments, further reductions in health care would need to have been proposed.

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.

• Higher Education ($208 million) by reducing State support for SUNY and CUNY senior and community colleges (which will be partially mitigated by the use of ARRA funding) and reducing the TAP program spending by changing eligibility standards and reducing overall grant awards. The savings would be offset in part by new tuition funding for students in certain religious studies programs.
• Local Government Aid ($325 million) primarily by eliminating AIM funding for New York City and Erie County, and by reducing AIM funding to other municipalities by 2 or 5 percent, depending on their reliance on this revenue.
• STAR ($213 million) by reducing the New York City benefit on income above $250,000; limiting the protection against annual declines in the value of the benefit; and eliminating the benefit for homes valued at $1.5 million or more.
• Human Services ($201 million) by reallocating Title XX funding from non-mandated services to pay for State and local Adult Protective/Domestic Violence program costs; stretching the implementation of the planned annual increase in public assistance grants by two years; restructuring the adult shelter program; reducing spending in non-core-mission programs; and rightsizing youth facilities.
• Education/Special Education/Arts ($139 million) by changing the reimbursement method for summer school special education costs from a flat rate to a wealth-adjusted reimbursement rate; using available ARRA funding to help support preschool special education costs; reducing reimbursement under the comprehensive attendance program to non-public schools; reducing funding for grants to the Arts Council; and other measures.
• Mental Hygiene ($46 million) by reducing Medicaid rates; improving audit and recovery efforts; restructuring service coordination; and delaying community bed development for certain programs.
• All other Local Assistance ($59 million) by reducing subsidies to businesses that provide mental health coverage under Timothy’s Law and a wide range of other program reductions.

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.

• Efficiency Measures ($709 million): Include across-the-board reductions in agency operating budgets, targeted personnel management initiatives, and statewide programs to leverage the State’s purchasing power in energy, supplies, and materials. The budget also proposes merging several agencies.
• Wage Concessions ($250 million): The gap-closing plan sets a target of $250 million in savings in 2010-11 from concessions from the unionized workforce. Options under consideration include a salary deferral and delay or reduction of the 4 percent general salary increase for union employees. Any concessions are subject to collective bargaining. The Governor is also rescinding, for the second consecutive year, the general salary increase for the State’s non-unionized “management/confidential” employees ($28 million in 2010-11).
• Pension Amortization/Fringe Benefits ($262 million): Local governments and the State face substantial pension contribution increases over the next six years due to investment losses experienced by the Common Retirement Fund. The budget proposes giving local governments and the State the option to amortize a portion of their pension costs from 2010-11 through 2015-16. Repayment of the amortized amounts will be made over a ten-year period at an interest rate to be determined by the State Comptroller. In addition, the budget proposes requiring employees and retirees to pay a portion of Medicare Part B premiums and giving the State the option of self-insuring all or parts of the New York State Health Insurance Plan.

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:

• Reducing AIM funding for non-calendar year cities on a sliding scale based on the city’s overall reliance on that aid. Municipalities with a higher reliance on AIM received smaller percentage reductions ($32 million).
• Reducing anti-tobacco funding ($10 million).
• Eliminating the 2010 trend (inflation) factor for hospital, nursing home, home care, and personal care providers during the first quarter of the calendar year ($12 million).
• Authorizing nurses to increase the supply of prescription medicine for home care patients from 8 days to 15 days, thus lowering the frequency of necessary visits ($3 million).
• Realizing additional Medicaid and EPIC pharmacy reimbursement as a result of a Federal litigation settlement related to First Data Bank ($19 million).
• Delaying scheduled HEAL NY spending in the current year ($45 million).
• Lowering State subsidies for costs associated with mental health parity coverage by 30 percent ($10 million).
• Reducing funding for managed care quality incentives ($5 million); pay-for performance incentives to health care providers ($4 million); teacher centers ($4 million); mortgage foreclosure assistance ($3 million); a disease management demonstration program ($3 million); cervical vaccines ($2 million); emergency contraception; and new shared services efficiency grants.

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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