Mid-Year Report Forecasts Budget Gaps in Upcoming Years

As the year draws to a close, it is time for those in state government to begin thinking about the state budget. Each year, New York State passes a budget for its fiscal year that begins April 1 and ends March 31. The budget process begins in mid-January when the governor submits his budget proposal to the legislature. The legislature then holds budget hearings, where agency heads answer questions regarding the governor’s proposed budget. It is the hope that the governor and the legislature can reach an agreement and pass an on-time balanced budget by the April 1 deadline.

There are several ways to examine the state budget and for that reason it is complicated to understand exactly where the state is getting its revenue, how much the state is spending, and where the money is going. The state has two major sources of revenue. The revenue it receives through taxes and fees it imposes on its citizens and the revenue it receives from the federal government. The revenue the state receives from its citizens goes into the state’s general fund, unless otherwise earmarked for another fund established to finance a specific activity. The general fund is the major operating fund of the state and by law it is required to be balanced every year.

In addition to the general fund, the state has broader measures of revenue and spending that include activity outside the general fund. First, there is a measure known as the “state operating funds.” Although the word “funds” is in its title, it isn’t a sole account but rather a measure of all state spending excluding long-term capital projects and money received from the federal government. At mid-fiscal year 2016, the state operating funds totaled about $96 billion. The state also has the “all government funds,” which is the most comprehensive view of the financial operations of the state because it includes both state and federal revenues. At mid-fiscal year 2016, all government funds totaled $156 billion.

Since 2014-15, the state has kept state operating funds spending at 2 percent. This is substantially lower than say what spending was in the years Eliot Spitzer was governor. All government funds spending, however, has been more than 2 percent, because the amount of money the state receives from the federal government varies depending on the circumstances. For example, the federal government provided New York State with substantial money to help the state recover from the aftermath of Superstorm Sandy. This drove all government funds spending over 2 percent.

Recently, the NYS Division of Budget released its mid-year financial updates. The mid-year update for the general fund balance shows no change from enacted budget estimates. However, budget analysts predict future general fund budget gaps, largely due to personal income tax (PIT) receipts coming in at lower levels than expected. The report indicates that PIT receipts this fiscal year will be about $775 million lower than expected. This drop in PIT receipts is expected to create a projected $689 million general fund budget gap for the state’s 2017-18 fiscal year if revenue and spending remain at current levels.

Because of these lower than expected amounts of revenue, it is apparent that, unless things change substantially, this year’s budget process will be challenging. That being said, I look forward to returning to Albany in January to begin working with my colleagues to craft a budget that provides necessary funding for state programs, but at the same time makes sure that we live within our means.

William (Will) A. Barclay is the Republican representative of the 120th New York Assembly District, which encompasses most of Oswego County, including the cities of Oswego and Fulton, as well as the town of Lysander in Onondaga County and town of Ellisburg in Jefferson County. Contact him at barclaw@assembly.state.ny.us, or (315) 598-5185.

As the year draws to a close, it is time for those in state government to begin thinking about the state budget. Each year, New York State passes a budget for its fiscal year that begins April 1 and ends March 31. The budget process begins in mid-January when the governor submits his budget proposal to the legislature. The legislature then holds budget hearings, where agency heads answer questions regarding the governor’s proposed budget. It is the hope that the governor and the legislature can reach an agreement and pass an on-time balanced budget by the April 1 deadline.

There are several ways to examine the state budget and for that reason it is complicated to understand exactly where the state is getting its revenue, how much the state is spending, and where the money is going. The state has two major sources of revenue. The revenue it receives through taxes and fees it imposes on its citizens and the revenue it receives from the federal government. The revenue the state receives from its citizens goes into the state’s general fund, unless otherwise earmarked for another fund established to finance a specific activity. The general fund is the major operating fund of the state and by law it is required to be balanced every year.

In addition to the general fund, the state has broader measures of revenue and spending that include activity outside the general fund. First, there is a measure known as the “state operating funds.” Although the word “funds” is in its title, it isn’t a sole account but rather a measure of all state spending excluding long-term capital projects and money received from the federal government. At mid-fiscal year 2016, the state operating funds totaled about $96 billion. The state also has the “all government funds,” which is the most comprehensive view of the financial operations of the state because it includes both state and federal revenues. At mid-fiscal year 2016, all government funds totaled $156 billion.

Since 2014-15, the state has kept state operating funds spending at 2 percent. This is substantially lower than say what spending was in the years Eliot Spitzer was governor. All government funds spending, however, has been more than 2 percent, because the amount of money the state receives from the federal government varies depending on the circumstances. For example, the federal government provided New York State with substantial money to help the state recover from the aftermath of Superstorm Sandy. This drove all government funds spending over 2 percent.

Recently, the NYS Division of Budget released its mid-year financial updates. The mid-year update for the general fund balance shows no change from enacted budget estimates. However, budget analysts predict future general fund budget gaps, largely due to personal income tax (PIT) receipts coming in at lower levels than expected. The report indicates that PIT receipts this fiscal year will be about $775 million lower than expected. This drop in PIT receipts is expected to create a projected $689 million general fund budget gap for the state’s 2017-18 fiscal year if revenue and spending remain at current levels.

Because of these lower than expected amounts of revenue, it is apparent that, unless things change substantially, this year’s budget process will be challenging. That being said, I look forward to returning to Albany in January to begin working with my colleagues to craft a budget that provides necessary funding for state programs, but at the same time makes sure that we live within our means.

William (Will) A. Barclay is the Republican representative of the 120th New York Assembly District, which encompasses most of Oswego County, including the cities of Oswego and Fulton, as well as the town of Lysander in Onondaga County and town of Ellisburg in Jefferson County. Contact him at barclaw@assembly.state.ny.us, or (315) 598-5185.