Budget Watch Dog Group Warns State Surplus is Temporary

By Karen DeWitt

Albany, New York – A budget watchdog group warns that lawmakers should not get too excited over the recently reported budget surplus, and predicts even tougher economic times are ahead.

The Citizens Budget Commission says a report that found a nearly $800 million dollar surplus in the first quarter of the fiscal year should not be viewed as a license to spend more money. The Commission's Tammy Gamerman says there are likely harder times ahead.

"If you take a look at the broader economy, everything is starting to point down," said Gamerman. "We don't believe that tax revenues are going to continue to come in at the level that they have."

The global economy is slumping, and the Citizens Budget Commission notes that federal deficit reduction could result in cuts to key social service programs for New York, including Medicaid. It's also unlikely that another stimulus package, which helped the state balance its budget and fund road construction projects in the past, will be renewed.

The State Comptroller, Tom DiNapoli, who wrote the report on the budget surplus , and Governor Andrew Cuomo, both agree with the CBC's warnings, and the governor's budget office has said the surplus is illusory, and a result of tax payment scheduling, that will not mean extra cash by the end of the fiscal year.

Some legislators and advocacy groups, though, have suggested restorations to programs reduced in the state budget and repealing some taxes, including the MTA pay roll tax. Gamerman says those actions would be a mistake.

She says the state budget, while in balance back on April 1st, the start of the fiscal year, still contains some uncertainties that could be worsened by a further economic downturn. The state has budgeted for a 4% cap on increases in Medicaid spending, but if growing unemployment results in a higher caseload, the cap might not be met, says Gamerman.

And there are still outstanding union contracts. The second largest state worker union is set to vote on a contract containing numerous concessions, and already some employees are attempting to organize an effort to defeat the measure.

Gamerman says the successful contract settlement with the Civil Service Employees Association still leaves nearly $400 million dollars in budgeted workforce savings yet to be achieved.

"The governor has said he's going to try to find some savings from agency consolidations and restructuring," said Gamerman. "There may be some lay offs at the end of the day, but these have not been clearly delineated yet."

If that's not enough, the instability of the stock market, and shrinkage in the financial industry also effect the state budget, which relies on Wall Street related revenues for around 15% of total taxes.

"A number of the larger banks have been announcing fairly significant lay offs," said Gamerman. "We know many of them are headquartered in New York City so that will certainly have an impact on state personal income tax revenues."

Gamerman says there are a number of indications that projected tax revenues will not hold up through the rest of the year. New York already faces a $2.4 billion dollar structural deficit next year, if nothing is done to change spending on programs, setting the stage for another year of hard decisions.