New York State Gov.-elect George Pataki could face a budget gap of as much as $4 billion in fiscal 1996, complicating his ability to deliver on a campaign promise to cut taxes by 25% over the next four years, municipal market analysts say.
State officials confirmed yesterday that the gap for fiscal 1996, which begins April 1, 1995, could be as high as $4 billion. State budget division spokeswoman Claudia Hutton said the fiscal 1995 budget remains in balance. She would not comment on fiscal 1996.
Hutton said the budget office will make public the state's projections about the 1996 budget before the end of the year.
But news of the state's pending budget problems confirmed the doubts many credit and budget analysts have about the future of the state's finances, as well as the feasibility of Pataki's tax cut plan.
"A gap that large would be difficult given the size of the state's budget," said Ann Ross, a vice president at Roosevelt & Cross Inc. "Is it a credit concern? Yes. But we have to wait and see the details of Pataki's plan."
Despite producing a surplus of $1.6 billion in fiscal 1994, New York continues to face budget gaps well into the future. Recently, the state budget division said the state will produce a small surplus in fiscal 1995, but only after making spending cuts to keep revenues in line with expenditures.
Given the. size of the gap for fiscal 1996, analysts say Pataki's tax cut plan may be difficult to achieve without causing even larger gaps in the future.
Of most concern are Pataki's revenue projections. In order to achieve a 25% tax cut during the next four years, Pataki's plan relies on revenue growth of about 6% a year. But the size of the 1996 gap seems to confirm the belief of many analysts that these revenues will not materialize. Analysts say the state will be lucky to achieve revenue growth of 3% or 4% given layoffs on Wall Street and the reduction of city government jobs.
"We're looking at one of the biggest financial problems the state has faced in the last four or five years," said Cynthia Green, deputy research director at the Citizens Budget Commission, a nonprofit fiscal watchdog group.
"This issue needs to be addressed now," Green added. "The new administration and the legislature will be looking at a very difficult situation."
Press officials in the governor-elect's office did not return a telephone call for comment. But state finance officials, speaking on a not-for-attribution basis, confirmed that personal income tax revenues are falling, and that the tax cuts passed as part of the state's fiscal 1995 budget are squeezing revenues even tighter.
State finance officials also said that the budget for fiscal 1995, which began April 1, includes millions of dollars in additional spending measures.