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Comptroller Thomas DiNapoli's Financial Plan Update

Comptroller Thomas DiNapoli's Financial Plan Update

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Published by Cara Matthews
Review of 2013-14 Executive Budget amendments and federal sequestration cuts
Review of 2013-14 Executive Budget amendments and federal sequestration cuts

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Published by: Cara Matthews on Mar 08, 2013
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Thomas P. DiNapoli, State Comptroller 
s Fiscal Update:
Review of theSFY 2013-14 Executive Budget Amendments andImpact of Federal SequestrationMarch 2013
Executive Summary
The Executive Budget for State Fiscal Year (SFY) 2013-14 was released by theExecutive on January 22, 2013. On February 21, the Executive submitted finalamendments to the proposed budget, to supplement the 21-day amendmentspreviously released. Major changes from the original Executive Budget and FinancialPlan include:
Proposals to address the loss of $1.1 billion in federal revenue associated withMedicaid financing for the developmentally disabled. These include $500 millionin State Medicaid actions, and changes intended to generate $600 million innew federal Medicaid funding.
Increased current year tax projections of $227 million, primarily due toestimated Personal Income Tax (PIT) payments in December and January thatwere higher than anticipated as a result of federal tax law changes. Projectionsfor subsequent years were reduced for the same reason.
Plans to accelerate $183 million in debt service payments from April 2013 toMarch 2013 as a result of the unanticipated tax revenue in SFY 2012-13. Thiswill have the effect of lowering spending in SFY 2013-14 and offsetting thedecline in projected tax revenue in the coming fiscal year.On February 28, the Legislature and the Executive met publicly to discuss economicconditions as well as to release individual revenue and economic projections asrequired by Section 23 of the State Finance Law. The Assembly Majority presentedtax revenue projections that were $529 million higher than the 30-day All Fundsestimate by the Division of the Budget (DOB) included in the Execu
tive’s amended
Financial Plan. The Assembly Minority forecast tax revenues that were $331 million
lower than DOB’s most recent estimate.
Estimates by the Senate conferences variedfrom
the Executive’s
but by smaller margins. On March 1, revenue consensus wasreached by the Executive and the Legislature on a two-year estimate that was $200million higher than SFY 2013-14 Executive Budget Financial Plan estimates.
2 Although the SFY 2013-
14 Executive Budget continues the State’s effort to
movetoward long-term structural balance, t
he Comptroller’s report on the
SFY 2013-14Executive Budget identified several risks to the Financial Plan. These risks include taxreceipt projections that may be too optimistic, and revenues that may not materializeas expected, both in terms of timing and in amount, such as federal aid subject tosequester cuts as well as disaster assistance. While the Executive Budget
amendments address some of the risks identified in the Comptroller’s report, several
persist.For example, the implementation of federal budgetary sequestration is expected tohave a $436 million impact in New York State, including almost $290 million for theState, during the remainder of the 2012-13 federal fiscal year, according to FederalFunds Information for States. The federal fiscal year runs through September 30. TheExecutive Budget as amended includes no specific actions to address such loss of federal funding. The Senate and the Assembly are expected to act on the budget proposals by their respective houses, with meetings of the joint legislative budget conference committeesfollowing shortly thereafter. There are positive indications that all parties recognize thefiscal constraints facing the State, and share a common goal of adopting a budgetbefore the start of the new fiscal year on April 1.
Financial Plan Update
SFY 2012-13
DOB modified the SFY 2012-13 Third
Quarter Update included in the Executive’s
proposed budget primarily to address unanticipated tax revenues associated withfederal tax law changes. Projections for All Funds receipts were increased by $212million, including $227 million in increased tax collections, offset by $15 million in lower Miscellaneous Receipts. DOB increased projected spending by $190 million, primarilyreflecting a plan to move a scheduled SFY 2013-14 debt service payment of $183million to March 2013 in the current fiscal year.
SFY 2013-14
Updated with Amendments
The Executive’s
updated Financial Plan lowers projected PIT receipts for SFY 2013-14by $100 million from January projections and by $752 million from projections made inNovember 2012, primarily due to changes in projections for withholding. In November 2012, withholding was projected to increase 6.7 percent in SFY 2013-14. The latestFinancial Plan update reduces that projection to 5.2 percent, with a portion of thisreduction due to non-recurring federal actions. In addition, business taxes areexpected to grow 3.4 percent in SFY 2013-14, up from 2.8 percent in both theNovember and January plans.
The most significant change in the amended Financial Plan is the Executive’s plan to
deal with the loss of $1.1 billion in federal revenue associated with financing of facilities for the developmentally disabled. The 30-day amendments propose to deal
3with this loss by achieving $500 million in savings from the State
share of Medicaid,and $600 million in new federal revenues associated with various actions. All told, the projection for All Funds spending in SFY 2013-14 is lowered by $1.5 billionfrom the original Executive Budget, of which $1.4 billion is related to the changesassociated with federal funding. Figure 1 illustrates the change in federal receipts aswell as local assistance and the prepayment of debt service.
Figure 1Comparison of All Governmental FundsSFY 2013-14 January Proposal and SFY 2013-14 Amended Proposal
(in millions of dollars)
SFY 2013-14JanuarySFY 2013-14AmendedDollar ChangeReceipts:
69,22569,105(120)  Personal Income Tax42,52042,420(100)  Consumer Taxes and Fees15,16715,167-  Business Taxes8,4608,460-  Other Taxes 3,0783,058(20) 
Miscellaneous Receipts
Federal Grants
Total Receipts
Grants to Local Governments
State Operations
General State Charges
Debt Service
Capital Projects
Total Disbursements
Other Financing Sources (uses):
Transfers from Other Funds
Transfers to Other Funds
Bond and Note Proceeds
Net Other Financing Sources (uses)
Source: Division of the Budget
Risks Associated with SFY 2013-14 and Beyond 
The Comptroller’s Report on the
SFY 2013-14 Executive Budget, issued in February,identified a number of risks associated with the proposal, including the pace of theeconomic recovery, uncertainty regarding tax and other revenues, and unspecifiedsavings actions. While the now-amended Executive Budget includes actions toaddress some of these concerns, certain risks remain.While DOB reduced projections for certain tax collections in SFY 2013-14, there arestill risks associated with the revised estimates. Projected growth in PIT was reduced

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