So what is the Governor going to do? Or should we say what is the Legislature going to do? This is what we are looking at… And I think it is just the icing on the cake. What is causing this financial collapse? The tare of growth of government, government agencies, taxpayer funded projects and PENSIONS. Pensions are putting many Liberal run states into fiscal chaos. See the shark in the picture? That is the pension system in NY and we are for dinner.
Governor Says New York In A Recession
The Governor’s Response
To address the deteriorating economy, Governor Paterson is taking a number of actions to reduce spending and improve the fiscal integrity of the State:
- Agency Spending Reductions: Governor Paterson is ordering executive state agencies to implement an immediate $630 million reduction in 2008-09 spending. This represents a roughly 7 percent cut on top of the 3.35 percent reduction the governor called for as his first act in office.
- Hiring Freeze: Governor Paterson is also ordering an immediate hard hiring freeze. Until further notice, only absolutely essential positions will be filled. All new hires will have to be approved by the Division of the Budget.
- Special “Economic” Session of the Legislature: While the current economic forecast represents the best information now available and agency spending cuts will fully close the potential $630 million 2008-09 gap, there are no guarantees that revenue projections will remain unchanged throughout the remainder of the fiscal year. Moreover, the State faces significant deficits in the coming years that it must begin to address. As such, Governor Paterson will call a special “economic” session of the Legislature August 19 to consider $600 million of additional spending cuts.
Revenues and Spending
General Fund state revenues for 2008-09 are expected to come in $615 million lower than expected at the time of the Enacted Budget. Business taxes represent the largest portion of the decline and are now forecast to be $510 million below initial projections. Sales tax revenues are expected to be down $161 million because of slowing consumer demand in the weakening economy. These changes were offset by a $25 million increase in projected personal income tax collections, which is related almost entirely to final tax payments based on strong economic performance in the first half of 2007. Miscellaneous receipts are also expected to be higher than projected by $31 million.
Spending was also initially projected to be marginally higher than previously estimated by $15 million in 2008-09. When combined with the $615 million decline in revenues, this created a total potential shortfall of $630 million, which will be entirely eliminated by Governor Paterson’s order to make additional reductions in agency spending.
Out-year Deficits
The State’s out-year budget deficits have grown to $6.4 billion in 2009-10, $9.3 billion in 2010-11, and $10.5 billion in 2011-12 – a cumulative total of $26.2 billion over that three-year time period. When the budget was enacted, these gaps totaled $5.0 billion in 2009-10, $7.7 billion in 2010-11, and $8.8 billion in 2011-12 – a cumulative total of $21.5 billion.
Overall Spending
According to DOB’s updated first quarter forecast, 2008-09 State Operating Funds spending is expected to total $80.5 billion, an increase of 4.5 percent compared to the prior year. All Funds spending is expected to total $121.3 billion, an increase of 4.5 percent. General Fund spending is expected to total $56.2 billion, an increase of 5.2 percent.
At the time of budget enactment, State Operating Funds spending was expected to total $80.9 billion (5.0 percent increase), All Funds spending was expected to total $121.6 billion (4.8 percent increase), and General Fund spending was expected to total $56.4 billion (5.6 percent increase).
State Workforce
The overall size of the state workforce is now expected to total 200,251 at the close of the 2008-09 fiscal year, an increase of 497 over 2007-08. Originally, the Enacted Budget assumed an increase of 1,416. This nearly two-third cut in the increase reflects the impact of the 3.35 percent across-the-board agency spending reduction, as well as Governor Paterson’s directive to limit hiring to absolutely essential positions.
