New York State

New York State

FY 2015 Financial Plan

First Quarterly Update

ANDREW M. CUOMO, GOVERNOR

ROBERT L. MEGNA, BUDGET DIRECTOR

August 2014

Table of Contents

INTRODUCTION .................................................................................................................. 1 The State Budget Process................................................................................................ 1 Budget Projections .......................................................................................................... 2 Budgetary and Accounting Practices............................................................................... 3 Risks and Uncertainties ................................................................................................... 4

FINANCIAL PLAN OVERVIEW.............................................................................................. 9 Financial Plan At-A-Glance: Key Measures..................................................................... 9 Summary ....................................................................................................................... 10 Multi-Year Financial Plan Revisions............................................................................... 12

OTHER MATTERS AFFECTING THE FINANCIAL PLAN ....................................................... 19

MULTI-YEAR FINANCIAL PLAN PROJECTIONS ................................................................. 39

FY 2015 YEAR-TO-DATE OPERATING RESULTS ................................................................ 87

GLOSSARY OF ACRONYMS ............................................................................................... 99

FINANCIAL PLAN TABLES AND ACCOMPANYING NOTES .............................................. 105

Introduction

Introduction

This is the First Quarterly Update to the Enacted Budget Financial Plan ("Updated Financial Plan" or "First Quarterly Update") for Fiscal Year (FY) 2015. Except for the specific revisions described herein, the projections (and the assumptions upon which they are based) in the Updated Financial Plan are consistent with the projections set forth in the Enacted Budget Financial Plan. The State's FY 2015 began on April 1, 2014 and ends on March 31, 2015. The Division of the Budget (DOB) expects to next update the Financial Plan projections in October 2014.

THE STATE BUDGET PROCESS

The requirements of the State budget process are set forth in Article VII of the State Constitution, the State Finance Law, and the Legislative Law. The annual budget process begins with the Governor's submission of the Executive Budget to the Legislature each January, in preparation for the start of the fiscal year on April 1 (the submission date is February 1 in years following a gubernatorial election.) The DOB prepares a multi-year Financial Plan ("State Financial Plan") as part of the Executive Budget. The State Financial Plan sets forth projected receipts and disbursements for the current fiscal year, the "budget" year (i.e., the upcoming fiscal year), and the three subsequent fiscal years "outyears"). It must be accompanied by bills that: (a) set forth all proposed appropriations and reappropriations, (b) provide for any new or modified revenue measures, and (c) make any other changes to existing law necessary to implement the Budget recommended by the Governor. The General Fund must be balanced on a cash basis, as described below.

In acting on the bills submitted by the Governor, the Legislature has certain powers to alter the recommended appropriations and proposed changes to existing law. The Legislature may strike or reduce an item of appropriation submitted by the Governor. The Legislature may add distinct new items of appropriation, provided such additions are stated separately. These additional items are then subject to line-item veto by the Governor. If the Governor vetoes an appropriation separately added by the Legislature or a bill (or a portion thereof) related to the budget, these separately added items of appropriation or bill can be reconsidered in accordance with the rules of each house of the Legislature. If, upon reconsideration, the items are approved by two-thirds of the members of each house, such items will become law notwithstanding the Governor's veto.

Once the appropriation bills and other budget bills become law, DOB revises the State Financial Plan to reflect the Legislature's actions, and begins the process of implementing the Enacted Budget. Throughout the fiscal year, DOB monitors actual receipts and disbursements, and may adjust the estimates and projections in the State Financial Plan. Adjustments may also be made to the State Financial Plan to reflect changes in the economic outlook, updated data on program activities, new actions taken by the Governor or the Legislature, and other factors. As required by the State Finance Law, DOB updates the State Financial Plan generally issuing

FY 2015 First Quarterly Update

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INTRODUCTION

reports by July 30, October 30, and as part of the Executive Budget in January or February of each year.

Once the Budget is adopted for the fiscal year, the Legislature may enact one multi-purpose appropriation bill and additional single-purpose appropriation bills or revenue measures (including tax law changes) during any regular session or, if called into session for that purpose, any special session. In the event additional appropriation bills or revenue measures are disapproved by the Governor, the Legislature may override the Governor's veto upon the vote of two-thirds of the members of each house of the Legislature. The Governor may present deficiency appropriations to the Legislature in any fiscal year to supplement existing appropriations or provide new appropriations for purposes not considered by the regular and supplemental appropriations.

BUDGET PROJECTIONS

The State Financial Plan projections for future years typically show budget gaps in the General Fund. Budget gaps represent the difference between: (a) the projected General Fund disbursements, including transfers to other funds, needed to maintain current services levels and specific commitments, and (b) the expected level of resources to pay for them. The General Fund gap estimates are based on a number of assumptions and projections developed by the DOB in conjunction with other State agencies.1 Some projections are based on specific, known information (e.g., a statutory requirement to increase payments to a prescribed level), while others are based on more uncertain or speculative information (e.g., the pace at which a new program will enroll recipients). In addition, the Financial Plan assumes that money appropriated in one fiscal year will continue to be appropriated in future years, even for programs that were not created in permanent law and that the State has no obligation to fund. Funding levels for nearly all State programs are made (or, in the case of two-year appropriations, reviewed) annually, taking into account the current and projected fiscal position of the State. The Financial Plan projections for FY 2016 and thereafter set forth in this Updated Financial Plan reflect the savings that DOB estimates would occur if the Governor continues to propose, and the Legislature continues to enact, balanced budgets in future years that limit annual growth in State Operating Funds spending to no greater than 2 percent. The estimated savings are labeled in the Financial Plan tables as "Adherence to 2 percent State Operating Funds (SOF) Spending Benchmark". Total disbursements in Financial Plan tables and discussion do not assume these savings. If the 2 percent State Operating Funds spending benchmark is not adhered to, budget gaps may result.

1 See DOB's Economic, Revenue, and Spending Methodologies, November 2013, at

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