Pointing a finger of blame at the national recession, New York's budget director yesterday released a report saying the state faces a projected $689 million budget gap for fiscal 1992.
Meanwhile, New York City's budget gap could reach $250 million in its fiscal 1992 budget, which began July 1, according to Philip R. Michael, director of the city's Office of Management and Budget. The state's budget woes could cause the city's fiscal problems to worsen, Mr. Michael said.
The state Division of the Budget's annual midyear report for fiscal 1992, which began April 1, projects revenue from taxes is down $344 million from what lawmakers expected when they wrote the budget.
And general fund spending, now projected at $30.2 billion for the year and financed with taxes and fees, is $345 million higher than earlier estimates, driven primarily by Medicaid, prisons, welfare, and mental hygiene programs.
"States are discovering that the national economic malaise is impacting them more harshly than was predicted earlier this year," said Patrick J. Bulgaro, the budget director of the state's Division of the Budget.
Mr. Bulgaro said that while state officials were aware the Northeast would continue to suffer the ravages of the recession, it has only become sadly more apparent to what degree. He noted that new data makes it clear the state will lose an estimated 350,000 jobs, up from a previously estimated 247,000 jobs.
Other states are also muddling through recession-plagued budgets, the budget division noted, citing as an example California's $3 billion projected budget gap for its current fiscal year.
On the revenue side, the budget division said personal income tax collections are expected to be $311 million less than the projected $29,876 billion in collections estimated for this fiscal year. User taxes and fees have been revised downward by $43 million to total about $6.41 billion, while business taxes have been marked down by $28 million to $4.77 billion.
Receipts from other taxes, such as estate and gift taxes and real estate transfer taxes, however, have been revised upward by $81 million, to $1.21 billion.
A plan of action to deal with the gap has not been released yet, but many suspect it may entail further spending cuts, layoffs, or even deficit borrowing. At this time last year, when a $824 million gap was projected for fiscal 1991, Gov. Mario M. Cuomo vowed not to sell deficit notes to plug the gap. This time, however, the governor has said his administration has not ruled out any options.
State lawmakers yesterday were quick to agree that the national recession is the prime culprit of the state's budget gap, but disagreed on how to resolve the budget problem.
Senate Majority Leader Ralph J. Marino, R-Muttontown, blamed social services spending, saying, "Although state tax revenues are increasing despite the sluggish economy, they are not increasing at rates that can support a 26% increase in Medicaid costs." These costs, he said, will add about $992 million in Medicaid spending not included in the budget.
Mr. Marino, who has called for Medicaid reforms, added that, "We will carefully review the governor's report and await his proposal for dealing with what appears to be a serious deficit problem and Medicaid crisis."
While acknowledging that social services costs have risen, Assembly Speaker Mel Miller, D-Brooklyn, said, "Approaches pinned solely to social services reductions deflect attention from the structural realities of our fiscal problems."
Controlling Medicaid costs is just one solution, Mr. Miller noted, adding that a "renewed commitment to further fiscal reforms is now more critical than ever."
Rating agencies have been watching the state's budget problems with concern. Moody's Investors Service, which rates that state's GO bonds A, said, "New York State has struggled with chronic financial imbalances for four consecutive years," and has coped with these problems in various ways including using deficit notes.
The agency noted that while these tactics have worked in the past, the state needs to implement structural budget reform now more than ever.
"The solutions, which are yet to be identified, may well determine the state's future credit position," the agency said.
Standard & Poor's Corp., which also rates the state's debt A, could not be reached for comment.
For many local governments, the threat of further cuts in state aid could throw their budgets into turmoil. Mr. Michael of New York City said, "If they rolled any problem down to us, that could increase the dimensions of our problems."
Based on a tentative analysis, Mr. Michael said the city's estimated budget gap -- caused by restored spending, increased spending, and lower revenues -- could be about "one-third of the state's problem," or between $200 million and $250 million. The city is expected to release its revised financial plan for its roughly $29 billion fiscal 1992 budget on Nov. 8.
