MID-YEAR FINANCIAL PLAN UPDATE
Weak and unsettled economic conditions around the world -- illustrated by the Euro-zone financial crisis, volatility in the financial markets, and persistently disappointingdata on employment, consumer confidence, and income -- have darkened the State's fiscaloutlook. The significant positive receipts results early in the fiscal year have been largelyeroded as the economy weakened in the summer months. With the prospect of a weak bonus season on Wall Street, even more negative pressure is being placed on the State’sreceipts outlook.Based on comprehensive review of these factors, as well as actual operating results,updated program data, and other factors, the Division of the Budget (DOB) estimates thatthe General Fund has a budget shortfall of $350 million in the current fiscal year. Toeliminate the shortfall, DOB will immediately institute a fiscal management plan. If itappears that the savings from the management plan will be insufficient to eliminate theshortfall, the Governor is expected to call the Legislature into session to consideradditional actions to achieve a balanced budget in the current fiscal year.The same adverse economic factors have increased the size of the projected budget gapthat must be closed in FY 2013. DOB now estimates that the gap for FY 2013 is in therange of $3.0 billion to $3.5 billion. The Governor will propose an Executive Budget forFY 2013 that will eliminate the gap.DOB will have a better sense in coming weeks of the magnitude of the receipts declineas more data becomes available and we coordinate our analysis with the Legislature.