ALBANY—And the New York State budget shortfall is now…$16.2 billion!
David Paterson’s budget office just put out a release that says the gap has grown due to lower-than-expected tax revenues and the lack of payment from the Delaware North racing franchise since lawmakers enacted a plan to bridge the current year’s deficit in February.
The release ends with this sentence: “The Governor and Legislature will accommodate these new costs as part of a fiscally responsible Enacted Budget.”
GOVERNOR PATERSON, MAJORITY LEADER SMITH AND SPEAKER SILVER ANNOUNCE ADDITIONAL $2.2 BILLION DECLINE IN PROJECTED STATE REVENUES
Combined with $1 Billion Loss in Tax Collections Agreed to Through Revenue Consensus Process, Overall Decline in Anticipated Revenues Totals $3.2 Billion since Passage of Deficit Reduction Plan on February 3
Governor David A. Paterson, Majority Leader Malcolm A. Smith and Speaker Sheldon Silver today announced that projected State revenues will decline by an additional $2.2 billion through the end of the 2009-10 fiscal year. Combined with the impact of the $1 billion loss in tax collections agreed to through the revenue consensus process on February 24, the overall decline in anticipated State revenues since the passage of the 2008-09 Deficit Reduction Plan on February 3 now totals $3.2 billion.
“From the first day I took office, I have been sounding the alarm about the serious fiscal and economic crisis facing our State. I will continue to fight every day to enact a fair and responsible on-time budget that makes the difficult choices needed to confront our new fiscal reality,” said Governor Paterson. “I will take whatever actions are necessary to get our fiscal house in order and eliminate this deficit. I look forward to working with my partners in the Legislature to address this historic challenge.”
Senate Majority Leader Malcolm A. Smith said: “These numbers emphasize the troubling fiscal outlook for New York and should serve as a stark reminder of the economic challenges that lay ahead as we strive to change the structure of our State’s budget. By recognizing just how dire the economic conditions are, we can better prepare ourselves to build a new economy, one based on the principles of fiscal responsibility and prudent spending practices coupled with sound economic development and job creation.”
Assembly Speaker Sheldon Silver said: “For more than a year, the Assembly has warned that the global economic downturn and the loss of jobs across New York State – and particularly on Wall Street – would drastically reduce State tax revenues. Unfortunately, economic conditions are still declining. The Assembly will continue to work diligently with Governor Paterson and the Senate to develop a fiscal plan for the coming year that does not ask just one segment of New Yorkers to shoulder the burden. We will work to shape a responsible budget that reflects the needs of working families and supports education, economic development, public safety and other vital services.”
The further loss in revenues announced today is related to worsening turmoil within the financial sector and broader economy. Over just the last several weeks, the federal government has released a series of dire reports on the economy. In February, national private sector job losses totaled 660,000 and the national unemployment rate rose from 7.6 percent to 8.1 percent; cumulative private sector job losses since the beginning of the downturn have reached 4.6 million; and the decline in real national GDP growth for the fourth quarter of 2008 was revised downward from -3.8 percent to -6.2 percent.
At the State level, new unemployment claims have reached 39,000 per week in March 2009, an increase of more than 20,000 compared to one year ago. New York’s unemployment rate has increased from 4.4 percent in January 2007 to 7 percent in January 2009, and is expected to reach 8.4 percent by 2010.
After the passage of the 2008-09 Deficit Reduction Plan, the State’s projected 2009-10 budget gap totaled $13 billion. Since that time, projected revenues have declined by an additional $3.2 billion. The components of that decline include the following:
Tax Revenues ($2.8 billion): Due to the continued downturn in the economy, projected tax revenues are expected to be $2.8 billion lower than previously anticipated. Significant declines in revenue are anticipated in the following areas: personal income taxes due to job losses and declining wages, sales taxes due to declining consumption, and business taxes due to reduced economic activity and profitability. In February, Governor Paterson and legislative leaders previously agreed through the revenue consensus process that tax collections would be $1 billion below Executive Budget levels. Today’s announcement reflects an additional $1.8 billion downward revision in projected tax revenues.
VLT Franchise Payment ($370 million): In October 2008, Delaware North was selected through a competitive process to develop and operate a video lottery terminal (VLT) facility at Aqueduct Racetrack. As part of its agreement with the state, Delaware North was required to provide a $370 million up-front franchise payment. Due to the downturn in the financial markets, however, it was unable to obtain the financing necessary to meet that obligation.
The Governor and Legislature will accommodate these new costs as part of a fiscally responsible Enacted Budget.