Senate Finance Committee Releases Midyear Economic Report
Utilizing Internationally Recognized IHS Global Insight Data, State must close $2.872 Billion Deficit
Albany, NY—Senate Finance Committee Chair Carl Kruger today released the Senate’s midyear report on revenue, expenditures and general fund projections, and while data indicates progress in the economy, unemployment and other factors continue to lag, slowing economic growth.
The full report is available at http://www.nysenate.gov/report/2009-mid-year-report-receipts-and-disburs....
Utilizing national and state-focused data from IHS Global Insight, an internationally recognized economic forecaster, the current budget deficit totals $2.872 billion for this fiscal year and $6.465 billion for State Fiscal Year 2010-11.
“What the data and any reputable economist will tell you, is that cutting programs in such a fragile environment will lead to additional layoffs and service cuts that exacerbate the problem and hurt our ability to recover,” said Senator Kruger. “The deficit reduction plan we act on must be fiscally prudent, and that means first cutting waste in government.”
All Funds and General Funds projections:
· All Funds tax collections are estimated to total $59.42 billion in SFY 2009-10. This reflects a decrease of 1.5 percent from collections of $60.34 billion in SFY 2008-09.
· For SFY 2010-11, All Funds tax collections are projected to increase by 7.3 percent to $63.75 billion. This increase reflects economic growth as a result of the continued recovery projected for 2010 as well as the full year impact of the revenue measures enacted in SFY 2009-10.
· General Fund tax collections are estimated to be $37.43 billion in SFY 2009-10, a decrease of 2.3 percent from SFY 2008-09 collections of $38.34 billion.
· For SFY 2010-11, General Fund tax collections are projected to increase by 7.9 percent to $40.37 billion. As with All Funds collections for SFY 2010-11, this increase reflects projected economic growth as well as the full year impact of the revenue measures enacted in SFY 2009-10.
National economic growth
At the beginning of 2009, the national economy had by then been in recession for one year after reeling from the collapse of the housing market and foreclosure crisis. The first quarter of 2009 was the fourth consecutive quarter of a decline in real GDP; declining by 6.4 percent. However, as the fiscal stimulus package began to make its way through the economy, real GDP decline slowed; decreasing by only 0.7 percent in the second quarter. Expected growth of about 3.5 percent in the third quarter came as the economy began to unearth itself from the recession—growth is expected in the fourth quarter as well, though at a slower rate of 2.6 percent.
Similar to the recovery from the 2001 recession, employment growth is projected to lag overall economic growth. However, while job losses are still projected to occur in 2010, wage growth and personal income growth are projected to return; increasing by 2.2 percent and 2.8 percent, respectively.
New York’s recession will last well into 2010
Unlike the recession of 2001, where New York’s economy entered into recession earlier than the rest of the nation, New York entered the current recession later. As a result of the impact the financial markets have on the New York State economy, New York’s recession will last well into 2010 and our recovery is projected to be later and slower than the nation’s.
Just as employment in New York will likely decline both this year and next, wages and personal incomes are also negatively affected. In-state wages this year are estimated to decline by 0.7 percent. However, unlike personal income at the national level, which is estimated to decline in 2009, personal income in New York is estimated to grow, although at a slow rate of 0.3 percent. In 2010, personal income is projected to continue to grow, increasing by 2.8 percent.
Over one half of New York’s general fund is derived from personal income taxes; as a result slower decline or positive growth generates more revenue than previously expected.