More budget cuts required as tax revenue forecasts are pessimistic
(ALBANY, New York) State budget officials said last Thursday that New York's economy was slipping into a recession that could last till early next year and prove worse than the recession looming before the country as a whole.
The worst is yet to come: A woman going through job listings at an employment centre; historically, recessions in New York have lasted twice as long and inflicted deeper job losses, compared with those in the nation as a wholeLaura Anglin, the budget director for governor David Paterson, said that key economic indicators, like falling corporate profits and four consecutive months of job losses nationally, had convinced state budget analysts that the United States was already in a recession and that New York was soon to follow.
'New York tends to lag the nation,' Ms Anglin said. 'That's why we worry that the worst is yet to come.' Historically, recessions in New York, compared with those in the nation as a whole, have lasted twice as long and inflicted deeper job losses, according to state budget officials.
Job growth in the state is expected merely to stagnate next year.
The downturn appears far worse nationally than previously projected, with more than US$200 billion in write-offs till April at major financial firms and 63,000 layoffs in the financial and insurance sectors. On Wall Street, which supplies one-fifth of the state's tax revenue, bonuses are expected to be down 11 per cent this fiscal year, after a small decline last year and a 25 per cent increase the year before.
Those forecasts were paired with sharply more pessimistic tax revenue forecasts for the coming years, which Ms Anglin - echoing Mr Paterson's recent calls for more budget cuts - said would require drastic reductions in state spending. Over the last nine months, the state has revised its projections for this year downward by US$1.7 billion.
New Yorkers are tightening their belts, Ms Anglin said. 'They're feeling the crunch of higher prices; they're having to manage their resources better. I think that the typical New Yorkers should know that we're aware of that and that the state needs to do the same thing.'
The budget gap for the next fiscal year is projected at US$5 billion. It is expected to increase to US$7.7 billion in the 2010 fiscal year and US$8.8 billion in the 2011 fiscal year, according to the budget office, approaching levels not seen since the recession that followed the Sept 11 attack, which all but put Lower Manhattan out of business for months. Without the budget cuts already planned for next year, Ms Anglin said, spending would increase by 10.2 per cent over this year compared with revenue increases of only 2.7 per cent, a level she described as 'not sustainable'. Because of steadily increasing state spending, Ms Anglin said, even a quick recovery would not necessarily ameliorate future budget gaps.
Mr Paterson sought and won hundreds of millions of dollars in additional cuts from his commissioners and agency heads soon after succeeding Eliot Spitzer in March. Last week, he suggested that he wanted the Legislature to take the unusual step of reopening the budget to seek more cuts for next year and after.
The just-approved budget increased spending by 4.8 per cent overall for the current fiscal year, with significant increases in school aid, upstate economic development and capital improvements to the state university system. Medicaid continues to be a major state expense.
Not since former governor George Pataki's first term has New York actually cut spending, said Edmund McMahon, director of the Manhattan Institute's Empire Center for New York State Policy, which advocates less government spending. Mr Paterson, he suggested, would need to do the same.
'The budget gaps are clearly spending-driven. And the budget gaps were made worse by the budget they just did,' Mr McMahon said. 'The school-aid spigot is going to have to be turned off. And he's going to have to fight his own battles on Medicaid.' - NYT
.jpg)
No comments:
Post a Comment