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NYS Division of the Budget: Andrew M. Cuomo, Governor; Robert L. Megna, Budget Director Division of the Budget Home Page

NYS Division of Budget

Andrew M. Cuomo, Governor
Robert L. Megna, Budget Director

2010-2011 Financial Plan Mid-Year Update – Executive Summary

Revisions to the 2010-11 Financial Plan

DOB has made a number of substantial revisions to the General Fund receipts and disbursements forecasts contained in the Enacted Budget Financial Plan. The revisions are based on a comprehensive review of operating results to date, updated economic data, and other information. The following table summarizes the Mid-Year revisions and displays the impact on General Fund operating projections over the forecast period. It is followed by a discussion of the major revisions. Certain revisions displayed on the table are reclassifications of receipts and disbursements projections that have no net Financial Plan impact (e.g., Mental Hygiene). In other cases, revisions may affect both receipts and disbursements and need to be considered together to understand the Financial Plan impact. For instance, revisions related to reductions in State agency operations included in the Enacted Budget Financial Plan and allocated to agency budgets for the first time in this Mid-Year Update affect both receipts and disbursements. (For example, a reduction to State agency operations funded by a special revenue fund is displayed as a transfer of resources from the special revenue fund, thereby increasing General Fund receipts.)

GENERAL FUND FORECAST FOR 2010-11 THROUGH 2013-14
SAVINGS/(COSTS)
(millions of dollars)
  2010-11 2011-12 2012-13 2013-14
ENACTED BUDGET SURPLUS/(GAP) ESTIMATE 0 (8,177) (13,461) (15,563)
Total Receipts Revisions (162) (750) (983) (1,069)
Forecast Revisions: (88) 60 (86) (157)
Tax Forecast Revisions (278) (105) (339) (405)
Personal Income Tax* (300) (302) (322) (323)
Sales/Use Taxes* (94) 80 (1) 0
Business Taxes 69 117 (16) (82)
Other Taxes* 47 0 0 0
18-A Assessment  (40) (28) (28) (28)
Mental Hygiene  73 139 226 240
Workers Compensation Assessment Surplus 65 0 0 0
Debt Management 43 0 0 0
Allocation of Agency Operational Savings  33 62 52 44
All Other  16 (8) 3 (8)
Other Adjustments (No Net Financial Plan Impact) (74) (810) (897) (912)
Mental Hygiene Accounting Reclassifications (168) (810) (897) (912)
Allocation of FMAP Contingency Savings 94 0 0 0
Total Disbursement Revisions (153) (99) (200) (600)
Forecast Revisions (227) (909) (1,097) (1,512)
Medicaid/HCRA (368) (725) (859) (827)
Program Costs/Caseload Increases (732) (800) (841) (887)
HCRA/Other Medicaid (125) (135) 21 (89)
Medicare Part D Clawback 223 38 0 0
FMAP Reestimate/State/Local Share Reconciliation 300 208 0 0
Federal Health Care Reform (34) (36) (39) 149
Human Services 156 151 149 146
School Aid 12 (109) (156) (354)
Lottery Aid (83) (11) (63) (68)
Higher Education 2 (100) (166) (169)
Transportation/Motor Vehicles 74 64 94 115
Public Safety/Criminal Justice (10) (25) (33) (71)
Judiciary 0 132 13 (129)
Fringe Benefits 8 (12) (65) (53)
Health Insurance (40) (75) (125) (125)
Pension (1) 22 45 57
All Other Fringe Benefits 49 41 15 15
Mental Hygiene (84) (118) (229) (309)
Allocation of Agency Operational Savings  (187) 89 236 246
Timing of Outstanding Labor Agreements 204 (204) 0 0
All Other 49 (41) (18) (39)
Other Adjustments (No Net Financial Plan Impact) 74 810 897 912
Mental Hygiene Accounting Reclassifications 168 810 897 912
Allocation of FMAP Contingency Savings (94) 0 0 0
REVISED BUDGET SURPLUS/(GAP) ESTIMATE (315) (9,026) (14,644) (17,232)
(Increase)/Decrease From Enacted Budget (315) (849) (1,183) (1,669)
Proposed Across-the-Board Reductions (Requires Leg. Approval) 375 0 0 0
Funding for Initiatives (60) 0 0 0
PROPOSED BUDGET SURPLUS/(GAP) ESTIMATE 0 (9,026) (14,644) (17,232)
 
* Tax changes include transfers from other funds before the impact of revisions to debt service costs.

RECEIPTS REVISIONS

General Fund receipts, including transfers from other funds, are estimated to total $54.5 billion in 2010-11, a decrease of $162 million compared to the Enacted Budget Financial Plan. Lower estimated tax receipts are expected to be offset in part by higher receipts from other sources, including miscellaneous receipts and nontax transfers from other funds.

  • Tax Receipts: Projected tax receipts have been reduced in each year of the Financial Plan, based on updated economic information and actual tax collection results through September 2010. Excluding the impact of debt service changes affecting the transfer of tax receipts to the General Fund, tax receipts in 2010-11 have been reduced by $278 million compared to the Enacted Budget forecast. The annual estimate for tax receipts has been reduced by less than the year-to-date variance due to a change in the timing of receipts from business tax audits, which DOB had originally expected to be settled before September 2010 but now anticipates will occur later in the fiscal year.

    Personal income tax receipts have been revised downward by approximately $300 million annually, reflecting weakness in quarterly estimated payments. Receipts from user taxes have been reduced in the current year based on consumer spending data and actual collections, but are expected to rebound in 2011-12 as the economy continues to slowly improve. Cigarette tax receipts have been reduced due to the litigation over on the State’s ability to collect certain taxes on Native American reservations, affecting receipts in both the General Fund and HCRA. Projected receipts from business taxes and other taxes have been increased modestly in both 2010-11 and 2011-12, reflecting unanticipated strength in estimated payments from banks and the performance of the real estate sector.
  • Other Receipts: The reduction in estimated annual tax receipts in 2010-11 is offset in part by higher than expected receipts from other sources. These unplanned receipts include legal recoveries, surplus workers compensation funds, and transfers related to reductions in statewide agency operations financed by special revenue funds (see discussion below). In addition, the State realized a one-time benefit of $43 million from the termination of its existing synthetic variable rate swaps in September 2010.
  • Accounting Reclassifications: The Mid-Year Update includes accounting reclassifications related to the transfer of money to and from the General Fund. The reclassifications have no impact on the net operating forecast (e.g., a reduction in planned transfers from other funds is offset by a commensurate reduction in planned transfers to other funds). The most sizeable reclassification is related to the adjustment of spending for mental hygiene services between the General Fund and State special revenue funds, which has the effect of reducing transfers to and from the General Fund by an equal amount.

DISBURSEMENT REVISIONS

General Fund disbursements, including transfers to other funds, are estimated at $55.7 billion in 2010-11, an increase of $153 million from the Enacted Budget Financial Plan. Likewise, spending has been increased in subsequent years. The most significant revisions are summarized below.

  • Medicaid: Gross State-share spending for Medicaid has been increased by approximately $800 million annually, due in part to actual and anticipated growth in the number of people enrolled in the program. Based on the updated estimates, more than 200,000 new enrollees are expected to enter Medicaid in the current fiscal year, bringing total enrollment to 4.9 million. In addition, higher State costs are driven by the Federal government increasing its share of rebates from drug manufacturers pursuant to Federal Health Care Reform; reconciliation of 2008 payments for the reimbursable portion of nursing home revenue assessments; and the impact of revisions to the HCRA operating forecast (see “Updated HCRA Financial Plan” herein).

    In 2010-11, the gross increase in State-share Medicaid spending is offset in part by certain non-recurring resources. Reconciliation of SFY 2009-10 local Medicaid obligations under the Medicaid Cap forms the basis for final enhanced FMAP shares under ARRA. The State Financial Plan is adjusted for $300 million in State funding previously reserved for this reconciliation ($208 million in SFY 2010-11). Furthermore, the local reconciliation also informs the lower distribution of the ARRA enhancement on the State’s “clawback” payments for certain dually eligible (Medicare and Medicaid) recipients’ drug benefit under Medicare Part D. This reduction decreases the State’s expenditures by $223 million in SFY 2010- 11 ($38 million in SFY 2011-12). The combination of all 2010-11 Medicaid revisions results in a net increase in costs of $368 million.
  • Social Services: Spending projections for child welfare services have been reduced by approximately $120 million annually based on updated claiming data from social service districts. In addition, projected spending for other programs, and the reconciliation of human services COLA based on statutorily defined inflationary increases, has been lowered.
  • School Aid: The September 2010 update to the school aid database resulted in higher than projected costs beginning in the 2011-12 school year. The costs reflect additional claims filed since the Enacted Budget, and updated wealth and demographic information reported by school districts. The revised Financial Plan projections also reflect the impact of a revised estimate of demographic and enrollment factors within the Foundation Aid formula. Based on statute, additional school year obligations from 2010-11 are to be paid in State fiscal year 2011-12. As in prior years, updated school district data and additional claims have resulted in a cost increase to the State's multi-year Financial Plan, subsequent to the Enacted Budget agreements.
  • Lottery/VLT Aid for Education: Receipts from statewide lottery games continue to fall below expectations, reflecting in part the impact of the economic downturn. DOB has lowered the estimate of lottery receipts expected to be available for School Aid across the Financial Plan forecast period.
  • Higher Education: Current economic conditions, in particular high unemployment rates, have contributed in part to the recent upward trend in student enrollment in SUNY and CUNY community colleges. Similarly, increased spending under the TAP grant award program is expected due to the increased enrollment in institutions of higher education.
  • Transportation/Motor Vehicles: The General Fund subsidy provided to the DHBTF has been revised across the plan period as a result of changes in estimated spending levels for capital projects, debt service costs, and other receipts.
  • Public Safety/Criminal Justice: General Fund spending projections have been increased to reflect additional disaster relief aid, and a downward revision to expected revenues from the Motor Vehicle Law Enforcement fee that is used to support State Police costs.
  • Fringe Benefits: Reflects multi-year upward revisions for health insurance costs for State employees and retirees mainly due to three factors: delays in the State’s progress in self-insuring parts of NYSHIP; reduced savings from the implementation of the Medicare Part B premium sharing legislation enacted as part of the 2010-11 budget; and projected increases due to Federal Health Care Reform and premium rate changes. Reductions in the State’s salary base are expected to reduce pension and social security costs, compared to the Enacted forecast.
  • Mental Hygiene: The revisions reflect two-year net savings of $10 million for 2010-11 and 2011-12, excluding the impact of the workforce reduction plan. The major changes include reduced projected spending of approximately $40 million for the human service COLA based on the current statutory formula (a decrease from an annual increase of 3.5 percent to 1.2 percent in 2011-12). This is partially offset by higher estimated costs for a recent Federal District Court decision mandating additional supported housing and support services, such that costs are now projected to be $4 million in 2010-11 and $45 million in 2011-12, or $8 million more than projected previously, as well as $12 million in additional costs based on the latest projected civil confinement caseload for the SOMTA program.
  • Timing of Outstanding Labor Settlements: The Enacted Budget Financial Plan included estimated spending in 2010-11 to finance potential agreements with labor unions that have not yet reached settlements for the period from 2007-08 through 2010-11. Based on the status of negotiations and the timetable for ratification, it no longer appears likely than any spending for potential agreements will occur in the current year.
  • Allocation of Statewide Agency Operational Savings: The Enacted Budget Financial Plan included $500 million in planned savings from statewide reductions in agency spending. The estimated spending for each agency has been revised to reflect its share of the reductions. Savings were anticipated from, among other things, workforce reductions that include the early retirement incentive plan, hiring freezes, layoffs, eliminating positions through attrition, delaying planned hiring of staff, encouraging participation in the voluntary reduction in work schedule program, eliminating funded vacancies and temporary positions, and enhancing controls for reducing overtime costs. Operational efficiencies that reduce costs in contractual services, supplies and materials, equipment purchases and travel expenses are also expected. Total savings at a level comparable to the Enacted Budget projections are expected by the end of fiscal year 2011-12, with lower than expected savings in 2010-11 and higher savings in 2011-12.
  • Allocation of FMAP Contingency Reductions: The Enacted Budget mandated uniform reductions to most local assistance payments to cover the difference between the $1.1 billion in savings counted on in the proposed 2010-11 Financial Plan from enhanced FMAP and the actual amount ultimately approved by the Federal government. DOB calculated this difference at $281 million. The payment reductions to local assistance spending began taking effect in mid- September 2010, as provided by law, and have been allocated to agency budgets in the Mid-Year Financial Plan.

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