DIVISION OF THE BUDGET
ELIOT SPITZER, GOVERNOR
Date: February 11, 2008 CONTACT: Jeffrey Gordon
GOVERNOR SPITZER OUTLINES 21-DAY AMENDMENTS TO THE 2008-09 EXECUTIVE BUDGET
Worsening Economic Climate Requires Additional Savings Actions to Address Decline in Expected Revenues
Governor Eliot Spitzer today outlined his 21-day amendments to the 2008-09 Executive Budget. These amendments contain significant savings actions necessary in the worsening economic climate. These actions address a projected decline of $384 million in anticipated revenue for the 2008-09 fiscal year. He will formally submit these amendments to the Legislature tomorrow.
“The continued worsening outlook for the economy demands additional tough choices,” said Governor Spitzer. “With the submission of these amendments, we are taking the steps necessary to ensure the fiscal integrity of our state government.”
The $384 million decline in revenue has been addressed through $237 million in net savings actions and $147 million in overall spending re-estimates made after evaluating the most recent financial results available to the state. After the submission of the 21-day amendments, state operating fund spending is projected to be $81.6 billion in 2008-09, a 4.8 percent increase compared to 2007-08.
The Division of the Budget (DOB) currently projects General Fund budget gaps of $3.6 billion in 2009-10, $6.1 billion in 2010-11, and $7.2 billion in 2011-12, assuming enactment of all proposed Executive Budget recommendations. These represent increases of $289 million in 2009-10, $452 million in 2009-10, and $359 million in 2011-12 compared to the initial 2008-09 Executive Budget projections.
Although the Constitution allows 30 days to submit amendments to the Executive Budget, Governor Spitzer has done so after only 21 days for a second straight year, in accordance with the budget reform legislation passed in January 2007. It is part of his efforts, along with the “Quick Start” discussions with the Legislature that began in November, to help ensure an on-time budget.
The Economic Outlook
Consistent with past practice, the revenue estimates used to construct Governor Spitzer’s Executive Budget proposal were completed in late December. Over the last two months, however, the emergence of a number of negative economic indicators has forced the Division of the Budget to reevaluate these projections.
The outlook for Wall Street, which accounts for 20 percent of state tax revenues, has continued to deteriorate. Since initial revenue estimates for the 2008-09 Executive Budget were completed, the S&P 500 has fallen by more than 9 percent and sub-prime mortgage-related write-downs have increased by greater than $30 billion. These developments, as well as the further slowing of the US economy, have led DOB to revise its national forecast for 2008 downward for wage growth from 4.8 percent to 3.9 percent, job growth from 1.0 percent to 0.6 percent, and growth in corporate profits from 3.1 percent to 0.5 percent.
While the 2007-08 fiscal year will remain in balance without further action, these changes to the economic forecast are projected to cause a decline in revenue of $384 million in 2008-09. The largest components of this drop are decreases of $275 million in personal income tax collections and $50 million in corporate franchise tax collections. Total revenue projections for the 2009-10 through 2011-12 fiscal years have been revised downward by a cumulative total of $1.57 billion.
In his 21-day amendments, Governor Spitzer has recommended savings actions totaling $261 million (including a pre-payment of $88 million in 2008-09 pension costs), which were offset by $24 million in additional costs – a net savings of $237 million.
Savings actions include:
- State Government Efficiency Management: Taking various actions to improve the operational efficiency of state government agencies including reducing non-essential activities, managing overtime, maximizing federal revenues, and others. (Additional 2008-09 Savings: $36 million)
- Environmental Protection Fund: Increasing the amount of Environmental Protection Fund money available to the General Fund. (Additional 2008-09 Savings: $25 million)
- Covered Lives Assessment: Increasing the covered lives assessment by an additional $50 million from $990 million to $1.04 billion. The initial 2008-09 Executive Budget Proposal contained an increase of $140 million (from $850M to $990M). (Additional 2008-09 Savings: $50 million)
- Public Health: Funding various public health programs (including cervical cancer vaccine, lead poisoning prevention, immunization, and obesity prevention) through assessments on insurance companies. (Additional 2008-09 Savings: $25 million)
- EPIC: Requiring prior authorization of prescriptions not covered by Medicare Part D and increasing the use of generic drugs in the Elderly Pharmaceutical Insurance Coverage (EPIC) Program. Under this proposal, an individual’s physician will continue to have final say on which drug is prescribed. (Additional 2008-09 Savings: $19 million)
- Trend Factor Reduction: Reducing the trend factor increase for hospital, nursing home, and home/personal care reimbursement by 10 percent more than was initially projected in the Executive Budget. (Additional 2008-09 Savings: $18 million)
A net decease in spending of $89 million for 2007-08 and $147 million for 2008-09 is anticipated. These changes are primarily driven by lower than expected health care costs in Medicaid, HCRA, and Family Health Plus, higher than expected collections of rebates from pharmaceutical companies, and greater savings than projected from Berger Commission recommendations. These reestimates were made after reviewing actual financial disbursement for up to the month of January 2008.
The updated New York State Financial Plan at-a-glance reflecting the changes made during the 21-day amendment process can be found here.
A summary of the 21-day amendment savings plan can be found here.
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