He says the projected shortfalls in revenue compared to spending and debt are worse than the state faced after the Sept. 11, 2001, terrorist attacks and require drastic action to reduce spending.
He notes the state budget has increased from about $62 million in the 1994-1995 fiscal year to more than $120 billion today.
"New York is at the epicenter of an extraordinary financial crisis on Wall Street," he said. "We will have no choice but to take bold and aggressive action to reduce state spending. I have full confidence that my partners in the Legislature will work together with me at next month's special session to take the actions that will be necessary to get our state's fiscal house in order."
The Division of the Budget (DOB) released its mid-year update to the state financial plan. In that report, DOB forecasts that the state will have to close budget deficits of $1.5 billion in 2008-09, $12.5 billion in 2009-10, $15.8 billion in 2010-11, and $17.2 billion in 2011-12 - a cumulative total of $47 billion. These deficits are nearly double the $26.2 billion cumulative budget gap ($6.4 billion in 2009-10, $9.3 billion in 2010-11, $10.5 billion in 2011-12) projected in DOB's July 2008 First Quarter Update to the State Financial Plan. This increase is primarily attributable to the fact that the state will lose $19.2 billion in revenue over the next four years as a result of the recent turmoil on Wall Street and its long-term effects on the broader economy.
In 2009-10, General Fund revenues are projected to decline by 5.8 percent compared to 2008-09. But General Fund spending is projected to increase by 11.9 percent based on commitments in current law.
The state budget has grown from $61.9 billion in 1994-95 to $120.8 billion in 2008-09, an average annual increase of 4.9 percent, which is nearly double the average inflation rate of 2.7 percent over that period. While spending has been limited to the rate of inflation during the last two fiscal years, Governor Paterson believes that we must take significant action to address long-term, unsustainable growth in state spending.
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