State Lawmakers Facing $2.1 Billion Hole

ALBANY—State lawmakers will have to wrangle against a $2.1 billion mid-year shortfall in the state budget this September.

The Division of Budget today released the first quarter update to the spending plan adopted in April, which found sales tax and income tax revenues down about $743 million below their projected levels. Over the course of the year, the DOB estimates, these shortfalls (and some increased costs for health and welfare benefits that are up due to the economic climate) will grow to $2.1 billion. There is also an estimate that $30 million has been lost due to litigation over an expansion of the bottle deposit law, and money from video slot machines at Aqueduct Race Track being booked on next year's balance sheets.

The cumulative deficit will grow to $38.2 billion by 2013, but this includes the loss of federal stimulus funding. It's also possible, the report says, that the general fund may run out of money by November or December. If that happens, the state would shift money from other funding pools, officials said.

David Paterson will present a plan to deal with the deficit in September, the DOB says. He plans to develop it along with Lieutenant Governor Richard Ravitch. In a conference call to reporters, new-Budget Director Bob Megna refused to offer many specifics of the plan, and didn't rule out tax increases, fee increases or further workforce reductions.

"Right now we're in the process of developing the plan, and we need to do that at this point, and we need to focus on reducing spending and keeping spending down," he said during an hour-long conference call with reporters. "We're going to try to stay away from tricks and gimmicks."

Paterson was not on the call. State Lawmakers Facing $2.1 Billion Hole