DIVISION OF THE BUDGET
DAVID A. PATERSON, GOVERNOR
February 24, 2009 CONTACT: Jeffrey Gordon
GOVERNOR PATERSON, LEGISLATIVE LEADERS
REACH REVENUE CONSENSUS
Governor David A. Paterson, Senate Majority Leader Malcolm Smith, Assembly Speaker Sheldon Silver, Senate Minority Leader Dean Skelos and Assembly Minority Leader James N. Tedisco today announced that they have reached an agreement on available revenues for the 2008-09 and 2009-10 State fiscal years – five days earlier than the statutory deadline of March 1.
The legislative forecasts incorporate updated job loss figures recently issued by the federal government that showed greater deterioration in the economy in 2008 than previous figures demonstrated in December when forecasting was completed for the Executive Budget. Furthermore, since December, the economy has continued to decline.
The agreement acknowledges that differences exist between the parties, but for the purposes of Budget discussions between the Governor and Legislature, the parties agree that the weaker economic outlook reached in economic consensus should result in a decrease in General Fund receipts of $1 billion when compared with the amount projected in the Executive Budget. It also indicates that, based on the testimony of economic experts at the Consensus Revenue Conference held on February 23, the outlooks for both the economy and revenue are highly uncertain, with significant risk of further deterioration.
“While the economic outlook for New York is clearly troubling, I am pleased that all parties recognize the seriousness of the fiscal crisis we must address,” said Governor Paterson. “In the coming weeks, we will work together to develop a responsible plan to ensure the long-term fiscal integrity of our State.”
Senate Majority Leader Malcolm Smith said: “The consensus reached today highlights the difficult economic challenges facing our state. We have to use this as an opportunity to restructure New York’s budget process through fiscal responsibility and prudent spending practices. However, a strong commitment to job creation and economic development is equally essential to the long-term economic growth and revitalization of the state. While today’s numbers are daunting, recognizing the problem is the first step toward fixing it; and I look forward to working with the Governor and Legislative leaders to meet that goal.”
Assembly Speaker Sheldon Silver said: “For more than a year now the Assembly has projected a significant downturn in our state and national economies. As the home of Wall Street, New York has been hit especially hard by major job losses and a reduction in tax receipts. We are committed to working with the Governor and the Senate to address these extraordinary fiscal challenges and to craft a responsible budget. We know that the task will not be easy, but with shared sacrifice, we can achieve a responsible budget that does not unfairly burden working people. Today’s revenue agreement is an important step in that direction.”
Senate Minority Leader Dean Skelos said: “Senate Republicans agree with the conclusion that revenues will decline. We also agree with the testimony offered at the conference that raising income taxes could cost the state another 22,000 jobs in addition to the hundreds of thousands of jobs we’ve already lost. We need to make economic investments to make New York more competitive with other states and so we can reverse these job losses and begin to retain and create jobs.”
Assembly Minority Leader James Tedisco said: “I applaud my colleagues for working together to come up with a realistic figure that reflects the colossal economic challenges were experiencing. Lower revenue projections only add to the problem of a multi-billion dollar deficit and a $54 billion debt New York faces. It’s all the more reason for us to come together again to tighten our belts, rein in spending and stop borrowing. We need a budget that is leaner, more effective, and spends for priorities of the constituents of this great state.”
The economic forecasts contained in the Executive Budget and Legislative reports all recognize that the national economy is in the midst of the worst recession since World War II. In addition, all parties emphasize the preponderance of downside risk stemming from the uncertainty surrounding the health of the banking system and the duration of the current credit crisis. Implementation of a $787 billion stimulus plan is expected to begin soon, but all parties agree that, absent a well-functioning credit market, there is tremendous uncertainty associated with projecting the timing and extent of its impact.
The consensus forecast for New York State reflects a broad-based recession that has engulfed both Wall Street and Main Street. Employment and wages, as well as total personal income, are all projected to fall in 2009. All parties agree that as a result of the restructuring of Wall Street, we can anticipate decreased levels of financial market activity through the near future. All parties agreed that the greatest risk to the consensus forecast is the current state of financial markets. With indicators from credit-market sensitive sectors, such as housing starts and vehicle sales, at or near historical lows, the parties find virtually no upside potential to the consensus forecast. In addition, the uncertainty surrounding the depth and duration of the global recession forms an additional source of downside risk to the forecast.
Link to Consensus Report (PDF)