New York State budget officials may need to plug a fiscal 1994 budget hole that has grown more than twice as large as their original estimate, sources in Albany said yesterday.
State officials have come to the conclusion in recent months that the fiscal 1994 budget gap could reach as high as $4 billion, a source with knowledge of the state budget said. In February, budget officials had said they would have to take steps to close a $1.6 billion gap in the the fiscal 1994 spending plan.
The widening gap in the state's budget for fiscal 1994, which starts April 1, is largely related to projections that the state's economy will continue to founder. Continued economic weakness would pressure government agencies to provide more public assistance at a time when tax revenues are falling, state budget officials said.
The predictions of a much larger gap comes when the state's 1993 fiscal year budget appears to have remained in balance. In October, state budget officials announced in their midyear financial update a projected $21 million surplus for fiscal 1993. Analysts said the projected surplus marked the first time since 1989 that budget officials accurately forecasted the impact of the state's soured economy on revenues and expenditures.
Claudia Hutton, a spokeswoman for the State Budget Division, would neither confirm nor deny speculation that the 1994 gap could range as high as $4 billion. The speculation began with a published report stating that budget officials needed to make severe spending cuts if Gov. Mario M. Cuomo is to submit a balanced budget for the next fiscal year.
"I can't confirm it' we haven't done all the analytical work yet," she said. "The last projection was in February. I know it will be a lot bigger, at least $1 billion bigger."
Hutton said the state is attempting to determine the size of the 1994 budget gap, and that the governor will ultimately propose a balanced budget on Jan. 19, when he presents his spending plan to the state Legislature. "We know we have to cut spending and we will propose a balanced budget," she said.
Hutton would not speculate on what budget reductions would be made.
Cuomo has stated he would not propose personal income tax or sales tax increases. He has made no statements about raising business or other taxes, Hutton said.
Officials at the rating agencies all said they have no knowledge of a fiscal 1994 deficit that could reach $4 billion. New York State general obligation bonds are rated A-minus by standard & Poor's Corp., A by Moody's Investors Service, and A-plus by Fitch Investors Service.
Standard & Poor's yesterday affirmed its rating on state's GOs in reaction to a $110 million bond deal scheduled for next week.
Market players were surprised by the higher deficit projections, and some speculated that budget problems could mean higher yields on the state's bonds down the road. But the tax-exempt arena made hearty gains yesterday, and the Street took little time to focus on the news.
Still, one analyst who monitors state finances said the higher gap projections for fiscal 1994 demonstrates the need for the state employ more rigorous budget analysis during the course of the fiscal year.
Cynthia Green, senior research analyst for the Citizens Budget Commission, a nonprofit fiscal watchdog, agreed that speculation about the size of the state's future gaps will continue, unless Albany takes steps to better forecast future budgets.
Green said that state should provide budget forecasts for a five-year period and update these forecasts quarterly. This type of budgeting, currently used by New York City, would allow the state to determine how its fiscal policy will be reflected in the future and identify whether budget gaps are likely to occur, she added. "Everybody would know under current policy what the budget will look like in the future," she said.