What's New

Zack Hutchins
Director of Communications

September 16, 2004

State spending may jump $5 billion in 2005

New York State's General Fund spending could rise an estimated $4.9 billion, or 11.3 percent, in the next fiscal year, Governor Pataki's Budget Division reported.

Mostly because of that higher spending, the state faces a projected budget gap of $5.7 billion in the fiscal year starting April 1, 2005, the Budget Division said. Although most tax revenues are expected to continue rising as the state economy grows, $2.4 billion in certain borrowing and other "one-shot" revenues the state used this year will not be available in 2005, adding to the gap.

Next year's projected increase, driven mostly by Medicaid and education spending, would come on top of an 8.2 percent increase in state-funded spending (not counting federal funds) in the current year. This year's increase is nearly four times the projected inflation rate for New York State.

The Budget Division estimated next year's General Fund spending increase in its report on the 2004-05 enacted state budget, released this week. The General Fund receives and disburses most of the state's tax revenue. State-funded spending includes some other tax revenue and receipts from most fees and charges, including State University tuition. The overall budget, including federal funds, totals $101.2 billion. Including expenditures outside the General

The current budget adopted by the Legislature in August added $1.4 billion in spending to the plan Governor Pataki proposed in January. The Budget Division said the Legislature's additional spending would have created a $669 million deficit this year. The Governor vetoed $235 million in spending. State agencies will limit spending, and seek to increase federal aid, to make up the rest of this year's potential gap, the Budget Division said.

The estimates for 2005 assume that the tax increases the Legislature imposed in 2003 on personal income and sales will start to phase down in the coming year, as scheduled. Unions and other pro-spending lobbyists in Albany are urging the Governor and legislators to keep those tax hikes in place and enact other increases.

A report by the Office of the State Comptroller said the projected budget gap for 2005 does not include education spending the state may be forced to provide in response to the Campaign for Fiscal Equity lawsuit. Such spending "could add $1 billion or more to next year's gap, pushing it close to $7 billion," the comptroller's office said.

The comptroller's report said this year's budget projects a 9 percent increase in outstanding debt over the next five years.

"New York State's debt per capita is the fourth highest in the nation," it said. "Debt service costs ... show an increase of nearly $1 billion over last year. Even after concerted efforts to refinance state debt for budgetary savings, increasing debt costs will add to the state's future budget problems."