STATE OF NEW YORK

STATE OF NEW YORK

FINANCIAL CONDITION REPORT

For Fiscal Year Ended March 31, 2012

Thomas P. DiNapoli, State Comptroller

STATE OF NEW YORK

FINANCIAL CONDITION REPORT

For Fiscal Year Ended March 31, 2012

For a copy of the Comprehensive Annual Financial Report or additional copies of this report, contact:

Comptroller's Office of Public Information 110 State Street, 15th Floor Albany, New York 12236 (518) 474-4015 email: finrep@osc.state.ny.us

This report and the Comprehensive Annual Financial Report may also be obtained in Adobe Acrobat format from the Office of the State Comptroller's website at osc.state.ny.us.

In an effort to reduce the costs of printing, if you would like to have your name removed from our mailing list or if your present address has changed, contact the Comptroller's Office of Public Information at (518) 474-4015 or at the Office of the State Comptroller, 110 State Street, 15th Floor, Albany, NY 12236 or by email: finrep@osc.state.ny.us.

This report, or any portion thereof, may be reproduced without permission.

STATE OF NEW YORK -- 2012 FINANCIAL CONDITION REPORT PAGE 1

Contents Message from the Comptroller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Government-Wide Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Fund Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Total Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Total Spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Public Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Public Welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Public Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Local Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15 Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 New York's Public Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-19 Economic and Demographic Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-22 Taxes: Where New York Stands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Implications for the Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24-25 Appendix 1: State Funds Spending by Major Service Function. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Appendix 2: Federal Funds Spending by Major Service Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Appendix 3: State Receipts by Major Source. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

PAGE 2 OFFICE OF THE STATE COMPTROLLER -- THOMAS P. DINAPOLI

State of New York March 31, 2011

Comptroller's 2012 Report on the Financial Condition of New York State

This report provides citizens with an overview of the financial condition of New York State. It presents selected financial, economic, and demographic information in an easy-to-understand format.

It also presents basic information on trends in State receipts (revenues) and spending (disbursements), the State's financial position as measured by Generally Accepted Accounting Principles (GAAP), and selected economic and demographic trends affecting the State. This report fills an information need not met by the traditional, more detailed financial reports issued by the Comptroller's Office, and is meant to complement these other reports, not replace them. Detailed accounting data can be found in reports such as the Comprehensive Annual Financial Report.

Financial condition is a broad concept aimed at assessing the ability of a government to meet current and future financial and service obligations. It deals with the State's ability to deliver acceptable levels of services at acceptable levels of taxation, while achieving budget balance and making required debt service payments and pension contributions.

The Office of the State Comptroller was honored this past year when it received the Award for Outstanding Achievement in Popular Annual Financial Reporting from the Government Finance Officers Association for the 2011 Financial Condition Report.

STATE OF NEW YORK -- 2012 FINANCIAL CONDITION REPORT PAGE 3

Message from the Comptroller

I am pleased to present the State of New York Financial Condition Report for the State fiscal year ended March 31, 2012.

In the past few years, New York State has made important progress toward achieving long-term budget balance. The State has enacted significant changes in its three largest expenditure categories -- Medicaid, school aid and agency operations -- and created a new cap on local property taxes, ushering in a new era of State and local fiscal policy. It is important that New Yorkers understand the impact of these changes as well as the challenges that remain before us. This report is intended to help by illustrating key trends in our economy as well as in our State and local budgets.

The new pension tier signed into law this year is intended to produce long-term savings for both localities and the State as employee turnover occurs over the next three decades. The property tax cap enacted in 2011 has already begun to influence school and municipal budgets, and may have a significant restraining impact on property taxes, the largest source of locally generated tax revenue, in years to come.

More than at any time in recent history, the policy decisions of 2011 and 2012 establish current and structural budgetary balance as the State's primary fiscal goal. Despite real progress, as of this writing the State faces projected budget gaps of $3.6 billion and $4.4 billion in the fiscal years starting in 2014 and 2015, respectively, and a

smaller but not insignificant gap of $982 million during the fiscal year starting April 1, 2013. The bottom line: New York faces continuing challenges both in attaining structural balance and in delivering services in the future.

A truly sustainable fiscal course would become more attainable if the State implements comprehensive reform of both our budgetary and debt practices, as I have recommended repeatedly. I encourage every citizen to learn more about the fiscal, economic and social challenges facing New York and to participate fully in the public debate on these vitally important issues.

Fortunately, it remains the case that New York has tremendous economic and social assets. These include an industrious, welleducated workforce; innovative businesses, including a world-class financial sector; a broad and strong network of human service organizations; exceptional facilities for education and culture; and a well-developed infrastructure. The more effectively we face the challenges mentioned above, the better we will position the Empire State to build on its great assets for a stronger future.

Thomas P. DiNapoli, State Comptroller

PAGE 4 OFFICE OF THE STATE COMPTROLLER -- THOMAS P. DINAPOLI

Government-Wide Financial Data

New York State's government-wide financial statements include a Statement of Net Assets (Deficits) and a Statement of Activities, both of which distinguish between the State's governmental and business-type activities. (Component Unit data not shown.)

Governmental activities

Most of the State's basic services are reported here, including education, public health, public welfare, public safety, transportation, environment and recreation, support and regulation of business, general government, and interest on long-term debt. Federal grants, personal income taxes, consumption and use taxes, business and other taxes, lottery revenues, and bond proceeds finance most of these activities.

Business-type activities

Revenues are received by the State from its customers to help it cover all or part of the cost of certain services it provides. The State's Lottery Fund, Unemployment Insurance Benefit Fund, the State University of New York (SUNY) and the City University of New York ? Senior Colleges (CUNY) are reported here.

The full accrual method of accounting, which is also used by many businesses, recognizes revenues and expenses when the earning process is complete, regardless of when cash is received or disbursed. This results in a long-term perspective on finances.

Condensed Statement of Activities -- Primary Government

For the year ended March 31, 2012 (amounts in millions)

Net

Program (Expenses)

Functions/Programs

Expenses Revenues Revenues

Governmental activities:

Education

$30,828

$4,221 ($26,607)

Public health

58,817

34,984

(23,833)

Public welfare

12,703

12,011

(692)

Public safety

6,264

762

(5,502)

Transportation

8,347

3,365

(4,982)

Environment and recreation

1,653

625

(1,028)

Support and regulate business

1,625

1,546

(79)

General government

5,641

3,261

(2,380)

Interest on debt

1,922

43

(1,879)

Total governmental activities

127,800

60,818 (66,982)

Business-type activities: Lottery Unemployment insurance State University of New York City University of New York

Total business-type activities

Total primary government

5,587 7,363 9,709 2,937

25,596

$153,396

8,439 7,323 5,893 1,525

23,180

$83,998

2,852 (40)

(3,816) (1,412)

(2,416)

(69,398)

General revenues and net transfers:

Taxes

63,731

Other

4,523

Net transfers

(211)

Total general revenues and net transfers 68,043

Change in Net Assets (decrease) ($1,355)

Condensed Statement of Net Assets (Deficits) -- Primary Government

As of March 31, 2012 (amounts in millions)

Governmental Business-type

Assets and Deferred Outflows of Resources

Activities Activities

Cash and investments

$9,388

$6,977

Receivables, net

19,563

3,893

Internal balances

(249)

794

Other assets

745

294

Capital assets

83,696

11,746

Total Assets

113,143

23,704

Total $16,365

23,456 545

1,039 95,442

136,847

Deferred outflows of resources

146

Total Assets and Deferred Outflows of Resources 113,289

58 23,762

204 137,051

Liabilities Tax refunds payable Payable to local governments Accrued liabilities and accounts payable Other liabilities due within one year Liabilities due in more than one year

Total Liabilities

9,157 4,515 7,038 5,397 60,849

86,956

-- -- 1,887 3,881 18,652

24,420

9,157 4,515 8,925 9,278 79,501

111,376

Net Assets (Deficits)

Invested in capital assets net of related debt

65,875

920

66,795

Restricted for debt service and other purposes

3,151

1,345

4,496

Unrestricted deficits

(42,693)

(2,923)

(45,616)

Total Net Assets (Deficits)

$26,333

($658)

$25,675

The Statement of Net Assets (Deficits) reports the State's total assets and liabilities. This Statement reports the difference between assets and liabilities in three categories: Capital Assets Net of Related Debt, Restricted Net Assets and Unrestricted Net Assets.

The Statement of Activities reports the expenses of each of the State's programs, reduced by the revenues generated by those programs, to arrive at net program expense. The net program expense is then reduced by general revenues and other gains and losses to arrive at a change in net assets for the year.

For prior years' comparative government-wide data, please see the Statistical Section of the Comprehensive Annual Financial Report (Net Assets by Component, Changes in Net Assets, and Program Revenues by Function schedules).

STATE OF NEW YORK -- 2012 FINANCIAL CONDITION REPORT PAGE 5

Fund Financial Data

The State also prepares fund financial statements. Funds represent sources of funding and spending for particular purposes. The General Fund is used to report sources of funds and expenditures that are not required to be accounted for in another separate fund. In New York, significant sources of funds that normally would be reported in the General Fund have been pledged or dedicated to other funds for repayment of debt or project funding and are therefore reported in other governmental funds.

Fund financial statements provide a short-term view of government finances. Thus, payment of fund expenditures from proceeds of long-term borrowing will not have any impact on the fund balance, because the liability to repay the borrowing is not reported in the fund.

The relationship between fund operating results and accumulated fund balance (or deficit) is graphically depicted at right. Operating results are the net change in fund balance in a reporting period; the amount by which the accumulated fund balance increased or decreased during the reporting period.

n As of the year ended March 31, 2012, the State's governmental funds reported a combined operating surplus of $619 million, increasing the combined fund balance from $5.8 billion at April 1, 2011 to $6.4 billion at March 31, 2012.

n The combined governmental funds operating surplus included a $137 million surplus in the General Fund. While General Fund expenditures exceeded revenues, the surplus occurred as a result of transfers to the General Fund from other funds. The General Fund accumulated fund deficit decreased from $2 billion at April 1, 2011 to $1.9 billion at March 31, 2012.

Business-type Activities

(amounts in billions)

$10

8.4

$8

$6

5.6

7.4 7.3

$4

9.7 5.9

General Fund Operating Results versus Accumulated Surplus (Deficit)

(amounts in billions)

4.0 $4 $3 $2 1.6 $1 $0 -$1 -$2 -$3 -$4 -$5 -$6 -$7 -$8

2008

Operating Results

Fund Balance

1.5

-0.6

-2.0 -2.9

-3.5

-6.9 2009

2010

2011

Governmental Operating Results versus Accumulated Surplus

(amounts in billions)

11.8 $12 $10

$8 $6 $4 $2 $0

-0.4 -$2 -$4 -$6 -$8

2008

Operating Results Fund Balance

3.8

3.9

0.1

-8.0 2009

2010

5.8 1.9

2011

0.1 -1.9

2012

6.4 0.6

2012

Expenses Program Revenues

2.9

For more detail please see the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) in the Comprehensive Annual Financial Report.

$2

1.5

$0

Lottery

Unemployment State University of City University of

New York New York ? Senior Colleges

PAGE 6 OFFICE OF THE STATE COMPTROLLER -- THOMAS P. DINAPOLI

Total Receipts

Revenues are affected by economic changes and changes in federal and State policies. Tax base is a measure of the State's ability to generate revenue. A decreasing tax base may force spending reductions and/or increased taxes. Receipts are revenues that have been recorded on a cash basis. Appendix 3 contains State receipts by major source for the past five fiscal years.

New York's 2012 Receipts Sources

Borrowings 2.8%

Personal Income Tax

29.1%

n Receipts have increased $17.4 billion (15.0 percent) since 2008.

n In 2012, total tax receipts of $64.3 billion represented a 7.0 percent increase over 2008 tax receipts.

Federal 33.5%

n Receipts from the federal government increased 27.8 percent since 2008. Medicaid was responsible for the largest increase in federal cash receipts. During fiscal years 2009 through 2012, the State received additional federal funding under the American Recovery and Reinvestment Act.

n Personal income tax and consumer taxes accounted for 40.1 percent of 2012 receipts, and have increased 7.2 percent since 2008.

Miscellaneous & Lottery 15.4%

Consumption & Use Taxes

11.0%

Business Taxes 5.9%

Other Taxes 2.3%

n During fiscal year 2012, the State experienced a 7.1 percent increase in personal income tax receipts -- its largest tax revenue source.

Tax Receipts by Year (amounts in billions)

$40

38.8

36.6

36.8

36.2

34.8

$35

$30

$25

$20

$15

13.2

13.2

12.9

14.2

14.6

$10

8.2

7.6

7.5

7.3

7.9

$5

2.1

1.9

2.6

3.2

3.1

$0 2008

2009

2010

2011

2012

Personal Income Tax Consumption & Use Taxes Business Taxes Other Taxes

Total State Receipts (amounts in billions)

$150

$120

$90

$60

$30

$0

2008

2009

Borrowings Misc. & Lottery Federal Taxes

2010

2011

2012

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