2006-07 Executive Budget Overview - New York State ...

2006-07 Executive Budget

Overview

January 24, 2006

2006-07 Budget Highlights

Base receipts are on track to grow by over 11 percent in 2005-06 (for the second year in a row) and 8 percent in 2006-07. Out-year receipt growth of 5 percent is assumed.

The 2006-07 Budget takes advantage of the strong revenue performance to boost reserves, in anticipation of moderating economic growth.

Entire 2005-06 surplus -- $2 billion ? reserved for use in the out-years, not in 2006-07.

Rainy Day deposit keeps balance at statutory maximum ($945 million). $250 million deposit to Debt Reduction reserve. $375 million set aside for Sound Basic Education reserve. $275 million reserved for potential labor settlements.

Spending restraint constitutes the vast majority of budget-balancing actions, and generates resources for tax reductions, spending initiatives.

Budget gap is under $1.9 billion for 2007-08 and $3.8 billion in 2008-09. 2

Economic Forecast

DOB projects that the Federal Reserve will successfully engineer a soft landing, with real U.S. GDP slowing from growth of 3.6 percent for 2005 to 3.3 percent for the current year.

Consistent with slower growth and the peaking of energy prices in late 2005, DOB expects inflation of 3.1 percent for 2006, following 3.4 percent in 2005.

U.S. employment is projected to grow 1.6 percent in 2006 (job gains of about 180,000 per month), after growth of about the same rate for 2005.

State economy is expected to see slightly slower growth in 2006 and beyond.

DOB projects growth in private sector State employment of 0.9 percent for 2006, following 1.1 percent growth in 2005.

On a State fiscal year basis, wage growth is projected to fall from 6.1 percent in 2005-06 to 5.5 percent in 2006-07.

3

U.S. Economic Forecast Comparison

2005

2006

2007

2008

2009

(preliminary) (forecast) (forecast) (forecast) (forecast)

Real U.S. GDP (% change) DOB Blue Chip Consensus Moody's Global Insight Macroeconomic Advisers

3.6

3.3

2.7

2.9

3.1

3.6

3.4

3.1

NA

NA

3.6

3.7

NA

NA

NA

3.6

3.4

2.7

3.0

3.2

3.6

3.7

3.4

NA

NA

Consumer Price Index (% change)

DOB

3.4

Blue Chip Consensus

3.4

Moody's

3.3

Global Insight

3.4

Macroeconomic Advisers

3.4

3.1

2.5

2.6

2.6

2.9

2.4

NA

NA

3.2

NA

NA

NA

2.6

1.8

2.0

2.0

2.7

2.0

NA

NA

Unemployment Rate (%) DOB Blue Chip Consensus Moody's Global Insight Macroeconomic Advisers

5.1

4.9

4.9

5.0

5.1

5.1

4.9

4.9

NA

NA

5.1

4.9

NA

NA

NA

5.1

4.8

4.9

5.0

4.9

5.1

5.0

5.0

NA

NA

Sources: Projections for 2005-2009 by New York State Division of the Budget, January 2006; Blue Chip Economic Indicators, January 2006; Moody's , Macro Forecast, January 2006; Global Insight, US Execut ive Summary, January 2006; and Macroeconomic Advisers, January 2006.

DOB's 2006 and 2007 projections for real U.S. GDP forecasts are on the low end. DOB projects slightly higher inflation for 2007 than other forecasters.

4

Revenue Forecast

Base revenue growth is projected to decline from 11 percent in 2005-06 to 8 percent to 2006-07 and roughly 5 percent in the out-years, consistent with growth at this stage of an economic expansion.

Tax law changes will reduce growth to 6.6 percent in 2006-07 and 4.9 percent in 2007-08.

In 2006-07, bonus growth is estimated at 9 percent, while capital gains are expected to decline by 3 percent.

Growth in underlying income tax liability is estimated at 6.4 percent in 2006 (4.9 percent growth in NY AGI).

Growth in non-PIT Base receipts is estimated to be below 4 percent.

5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download