DIVISION OF THE BUDGET
ELIOT SPITZER, GOVERNOR
November 15, 2007 CONTACT: Jeffrey Gordon
JOINT QUICK START BUDGET REPORT ISSUED BY DIVISION OF THE BUDGET, SENATE AND ASSEMBLY
Report Includes Analysis of Economic and Fiscal Issues Facing New York State
The Executive and both houses of the Legislature today issued a joint “quick start” report on the state’s projected receipts and disbursements for the prior, current and ensuing fiscal years, as required by the Budget Reform Act enacted earlier this year.
The report also includes a summary of each body’s assessment of the state’s economic outlook, and a forecast for several of the State’s major programs, including school aid, Medicaid and welfare.
All parties agreed that New York is facing a period of economic uncertainty, which has the potential to present challenges to state finances in 2008-09 and beyond. The parties’ forecasts for the economy all indicated that:
- New York State employment can be expected to grow more slowly in 2008 than in 2007, and wage growth is expected to slow even further due to both slower job growth and weaker finance sector bonus growth.
- Significant risks to all forecasts exist from both the ongoing contraction in the housing market and uncertain credit market conditions.
- High energy prices and a weakening dollar represent risks for both increased inflation and decreased household spending.
- Risks associated with rising energy costs have grown since the initial quick start forecasts were completed by DOB on October 30 and the Legislature on November 5.
- Given the significant losses experienced by many Wall Street firms related to the declining values of asset-backed securities, particularly mortgage-backed securities, the outlook for finance sector bonus payouts is uncertain at the current time.
The analysis contained in the reports exhibit a narrow range of receipt projections for the remainder of 2007-08 and 2008-09. The range of estimates of All Funds tax receipts differ from Executive estimates by a maximum of 1.2 percent for the State Fiscal Year (SFY) 2007-08 and 0.6 percent for SFY 2008-09.
To date, tax collections have remained consistent to slightly ahead of Enacted Budget projections for the current fiscal year. However, the issues surrounding the subprime lending situation and the associated negative consequences for the housing market and financial service companies have resulted in a significant change in the risk profile the State faces over the next 18 months. The most critical uncertainty involving current year revenue projections concerns bonus payouts by Wall Street firms during the December-March time frame.
The official “quick start” process, which culminated today with the issuance of this joint report, began on October 30, 2007 when the Division of the Budget (DOB) issued its Mid-Year Financial Plan, updating the state’s official financial projections for the 2007-08 through 2010-11 fiscal years. On November 5, the Senate, Assembly, and the State Comptroller each submitted public reports containing their own estimates for receipts and disbursements. On November 13, the Director of DOB and fiscal staff from the Senate, Assembly, and Comptroller’s Office met publicly to review and discuss their individual forecasts.
A copy of the report can be found on the internet at: www.budget.state.ny.us.