FIRST QUARTERLY UPDATE TO THE 2007-08 FINANCIAL PLAN

The State Division of the Budget today released the First Quarterly Update to its 2007-08 Financial Plan.

The Update revises the state’s budgetary projections for the 2007-08 through 2010-11 fiscal years, which were set forth in the Enacted Budget Financial Plan. It reflects the estimated impact of laws that have been enacted since the budget was passed and updated estimates of spending and revenue for the year based on a review of current financial data and operations.

The General Fund is projected to end the year with a closing balance of $3.0 billion in 2007-08, an improvement of $12 million from the Enacted Budget estimate. Growth in personal income tax and real estate tax collections through the first quarter led to higher revenue growth than forecast in the Enacted Budget. This gain, however, is nearly offset by a projected increase in General Fund spending, which reflects the impact of legislation and other administrative actions approved by the Governor during the legislative session, including a rate increase for personal care providers in New York City that is expected to permit the continuation of health insurance benefits for many personal care workers and their families. Increased revenues were also offset by upward revisions to spending in number of programs, of which the largest was increased child welfare claims from localities.

All Funds spending is now estimated to total $120.4 billion in 2007-08, a decrease of $280 million from the Enacted Budget estimate. This decrease reflects higher spending for new legislation and certain local aid programs, which is offset by reductions in expected capital spending due to the timing of projects and federal aid disbursements. All Funds spending including “Off-Budget” capital items is now estimated at $122.9 billion, a decrease of $462 million from the Enacted Budget estimate.

The budget gap for 2008-09 has been revised upward by approximately $500 million to $3.6 billion. This revision is due mainly to (i) the impact of legislation approved by the Governor during the legislative session ($111 million); (ii) lower lottery revenue estimates ($492 million), primarily as a result of underperformance of VLTs at Yonkers Raceway and projected delays in the opening of a video lottery terminal facility at Aqueduct due to MGM’s termination of its contract with NYRA during the quarter; (iii) shortfalls in revenues for the Dedicated Highway and Bridge Fund ($102 million); and (iv) increased child welfare claims from localities ($92 million). These shortfalls more than offset an improvement in revenue estimates of $326 million, primarily as a result of greater personal income growth. In January 2008, the Governor will submit a balanced Executive Budget to close this gap.

For the first time, the updated Financial Plan includes separate presentations of the State Funds Operating Budget and Capital Budget. This is a practice followed by New York City’s Office of Management and Budget, as well as by a number of other states including Pennsylvania, Ohio, and Illinois. By separating the operating budget from the capital budget, the public can better understand how much the State is spending for long-term investments and how much is used to pay for ongoing services.

According to the updated Financial Plan, the State Operating budget is projected at $78.7 billion in 2007-08. This represents an increase of 7.0%, compared to an increase of 11.0% during the 2006-07 year. The capital budget is projected at $6.9 billion. This represents an increase of 24.4%, compared to 17.0% during the 2006-07 year.

The Updated Financial Plan is available at www.budget.state.ny.us.

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