New York Gov. David Paterson yesterday announced the state now faces a cumulative $47 billion deficit over the next four fiscal years, and the current budget shortfall stands at $1.5 billion, up from the $1.2 billion gap officials disclosed earlier this month.
The $47 billion total shortfall includes the $1.5 billion deficit for fiscal 2009, which began April 1, a $12.5 billion gap for fiscal 2010, followed by deficits of $15.8 billion and $17.2 billion in fiscal 2011 and fiscal 2012, respectively.
That total deficit grew from the state's earlier projections as officials now anticipate $19 billion of fewer revenues through fiscal 2012, including roughly $14.6 billion of fewer income tax receipts, according to New York's Division of the Budget. Those underperforming revenues are due to massive Wall Street losses, including the collapse of Lehman Brothers. Traditionally, Wall Street accounts for 20% of the state's operating budget and officials expect the state to lose 45,000 financial sector jobs in the next two years.
Legislative leaders are currently working on spending reductions to help shore up the current $1.5 billion deficit and will submit their proposals to the governor by Nov. 7, in advance of a special legislative session set for Nov. 18 that will balance New York's fiscal plan.
While the Division of the Budget released the mid-year update report yesterday, it could make public the state's second quarterly update to its annual information statement as early as today, according to Matt Anderson, spokesman for the division.
Paterson stressed that of the state's $121 billion fiscal 2008 budget, which includes federal funds and dedicated revenues, the general fund totals $56 billion. It is that $56 billion that must absorb the $12.5 billion of necessary spending reductions for the current and succeeding fiscal years.
"Our cuts are going to be $12.5 billion over the next year, so that's going to be almost 25% of our budget," Paterson said during a press conference on the Division of the Budget's mid-year update report. "Of the budget that we can actually spend, the general fund, the only thing we can touch, we're going to have to cut it by 25% ... We will attempt to do it as carefully and as fairly as we can, but once again, I must repeat these are going to be very hard cuts, we're really going to feel the pain because when you have to cut 25% of your general funds, you are in dire circumstances."
In response to Paterson's budget deficit announcement, New York City Comptroller William C. Thompson said officials must now work on addressing the shortfall as the city will take on the brunt of Wall Street losses.
"As I have stressed in recent weeks, New York is the unfortunate center of a worldwide economic crisis, and our city alone is expected to witness the loss of 165,000 jobs over the next two years," Thompson said in a press release. "We are confronted with many obstacles, difficult choices that likely will not be universally welcomed. But we must all work together to identify ways to confront this crisis head-on, to sacrifice equitably, and avoid paring vital services."
Paterson held to his earlier belief that raising taxes would put undue stress on the economy.
"All four of the [legislative leaders] when they sat right here on Oct. 3 made it pretty clear that we would be trying to do this without raising taxes, which we see as acerbating the problem at this time," he said.
The governor said he will urge Congress for more federal assistance for New York when he testifies today before the House Ways and Means Committee regarding a second economic stimulus package. New York gives the federal government more money than the state receives in return. The Division of the Budget expects to receive about $89 million fewer revenues from the federal government than what the state handed over to Washington this year.
"In order to address these issues, if New York is truly the epicenter of the national crisis of finance, we're going to need federal assistance ... I will encourage our colleagues in government in Washington of the importance of stabilizing New York's economy as it is a vital engine in the production of economic development in our national economy," Paterson said.
New York joins 21 other U.S. states that must fill budget gaps totaling roughly $9 billion for the current fiscal year, according to a Moody's Investors Service report.
"States reliant on manufacturing employment - such as Michigan, Ohio, and Wisconsin - and states with significant financial services employment - such as Connecticut, Massachusetts, New Jersey, and New York - are now facing modest to substantial budget gaps, which may worsen as the effects of the current economy are realized in their tax collections," the report said.
Meanwhile neighboring Connecticut Gov. M. Jodi Rell called for a special legislative session to begin Nov. 24 to address its $302 million fiscal 2009 budget shortfall through spending cuts.