New York State - OpenBudget.ny.gov · New York State FY 2015 Executive Budget Financial ... ANDREW M. CUOMO, GOVERNOR ... the estimated impact of the Governor’s Executive Budget

New York State

FY 2015 Executive Budget Financial Plan

UPDATED FOR GOVERNOR'S AMENDMENTS

AND FORECAST REVISIONS

ANDREWM.CUOMO,GOVERNOR

ROBERTL.MEGNA,BUDGETDIRECTOR

FEBRUARY2014

FY 2015 EXECUTIVE BUDGET FINANCIAL PLAN

UPDATED FOR GOVERNOR'S AMENDMENTS AND FORECAST REVISIONS

INTRODUCTION..................................................................................................................1 TheStateBudgetProcess................................................................................................1 BudgetProjections..........................................................................................................2 Budgetary/AccountingPractices.....................................................................................3 RisksandUncertainties...................................................................................................4

FINANCIALPLANOVERVIEW..............................................................................................9 RevisionstotheExecutiveBudgetFinancialPlan...........................................................9 FinancialPlanAtAGlance:KeyMeasures....................................................................11 ExecutiveSummary.......................................................................................................12GENERALFUNDFINANCIALPLAN....................................................................................21 CurrentFiscalYearUpdate............................................................................................21 FY2015FinancialPlan...................................................................................................23 FY2015DetailedGapClosingPlan...............................................................................27BUDGETRISKSANDUNCERTAINTIESTOTHEFINANCIALPLAN.....................................39

MULTIYEARFINANCIALPLANPROJECTIONS..................................................................59APRILTHROUGHDECEMBER2013OPERATINGRESULTS.............................................119FISCALIMPACTONLOCALGOVERNMENTS..................................................................135GLOSSARYOFACRONYMS.............................................................................................139FINANCIALPLANTABLESANDACCOMPANYINGNOTES..............................................145

TableofContents

Introduction

FY2015ExecutiveBudgetFinancialPlanUpdatedforGovernorsAmendmentsandForecastRevisions 1

IntroductionTheGovernor submittedhisExecutiveBudget forFiscalYear (FY)2015 to the LegislatureonJanuary 21, 2014. The ExecutiveBudget FinancialPlan sets forth themultiyear forecastofreceiptsandprojectionsbasedontheGovernorsproposedBudget.TheStateConstitutionpermits theGovernor tosubmitamendments to theExecutiveBudgetwithin30daysofitsconstitutionalsubmissiondate.TheGovernorsubmittedamendmentstotheExecutiveBudgetforFY2015onFebruary11,2014andFebruary20,2014,aspermittedbylaw.This Executive Budget Financial Plan for FY 2015, as amended (the Executive Budget orExecutiveBudget FinancialPlan): (i) summarizes the fiscal impactof the amendments andforecast revisions that have beenmade to the Governors Executive Budget Financial Planoriginally submittedon January21,2014;and (ii)updatesand summarizes theStateofNewYorks official Financial Plan projections for FY 2014 through FY 2018. The Financial Planprojections reflect the estimated impact of the Governors Executive Budget proposal, asamended,forFY2015,asdescribedherein.TheStatesFY2015willbeginonApril1,2014andendonMarch31,2015.THE STATE BUDGET PROCESS The requirements of the State budget process are set forth in Article VII of the StateConstitution,theStateFinanceLaw,andtheLegislativeLaw.Theannualbudgetprocessbeginswith theGovernors submission of the Executive Budget to the Legislature each January, inpreparation for the startof the fiscalyearonApril1. (The submissiondate isFebruary1 inyearsfollowingagubernatorialelection.)TheGeneralFundmustbebalancedonacashbasis,as described below, and must be accompanied by bills that (a) set forth all proposedappropriationsand reappropriations, (b)provide foranynewormodified revenuemeasures,and (c) make any other changes to existing law necessary to implement the Budgetrecommended by the Governor. The Division of the Budget (DOB) prepares amultiyearFinancialPlan(StateFinancialPlanorFinancialPlan)aspartoftheExecutiveBudget. TheStateFinancialPlansetsforthprojectedreceiptsanddisbursementsforthecurrentfiscalyear,the budget year (i.e., the upcoming fiscal year), and the three subsequent fiscal years(outyears).

InactingonthebillssubmittedbytheGovernor,theLegislaturehascertainpowerstoaltertherecommendedappropriationsandproposedchangestoexistinglaw.TheLegislaturemaystrikeorreducean itemofappropriationrecommendedbytheGovernor. TheLegislaturemayadddistinct new items of appropriation, provided such additions are stated separately. TheseadditionalitemsarethensubjecttolineitemvetobytheGovernor.IftheGovernorvetoesanappropriation or a bill (or a portion thereof) related to the budget, these items can be

INTRODUCTION


reconsidered in accordance with the rules of each house of the Legislature. If, uponreconsideration, the items are approvedby twothirdsof themembersof eachhouse, suchitemswillbecomelawnotwithstandingtheGovernorsveto.

Oncetheappropriationbillsandotherbudgetbillsbecomelaw,DOBrevisestheStateFinancialPlan to reflect theLegislaturesactions,andbegins theprocessof implementing theEnactedBudget.Throughoutthefiscalyear,DOBmonitorsactualreceiptsanddisbursements,andmayadjusttheestimatesandprojectionsintheStateFinancialPlan.Adjustmentsmayalsobemadeto the State Financial Plan to reflect changes in the economic outlook, updated data onprogramactivities,newactionstakenbytheGovernorortheLegislature,andotherfactors.AsrequiredbytheStateFinanceLaw,DOBupdatestheStateFinancialPlanquarterly.

Once theBudget isadopted for the fiscalyear, theLegislaturemayenactonemultipurposeappropriation bill and additional singlepurpose appropriation bills or revenue measures(includingtaxlawchanges)duringanyregularsessionor,ifcalledintosessionforthatpurpose,any special session. In the event additional appropriation bills or revenue measures aredisapprovedbytheGovernor,theLegislaturemayoverridetheGovernorsvetouponthevoteof twothirdsof themembersofeachhouseof the Legislature. TheGovernormaypresentdeficiency appropriations to the Legislature in any fiscal year to supplement existingappropriationsor toprovidenewappropriations forpurposesnot consideredby the regularandsupplementalappropriations.

BUDGET PROJECTIONS TheStateFinancialPlanprojectionsforfutureyearstypicallyshowbudgetgapsintheGeneralFund. Budget gaps represent the difference between: (a) the projected General Funddisbursements, including transfers toother funds,needed tomaintaincurrent services levelsand specific commitments, and (b) the expected level of resources to pay for them. TheGeneralFundgapestimatesarebasedonanumberofassumptionsandprojectionsdevelopedbytheDOBinconjunctionwithotherStateagencies.1Someprojectionsarebasedonspecific,known information (i.e.,astatutoryrequirementto increasepaymentstoaprescribed level),whileothersarebasedonmoreuncertainorspeculativeinformation(i.e.,thepaceatwhichanew program will enroll recipients). In addition, the Financial Plan typically assumes thatmoneyappropriatedinonefiscalyearwillcontinuetobeappropriatedinfutureyears,evenforprogramsthatwerenotcreatedinpermanentlawandthattheStatehasnoobligationtofund.Funding levels for nearly all State programs are made (or, in the case of twoyearappropriations, reviewed) annually, taking into account the current and projected fiscalpositionoftheState.

1SeeDOBsEconomic,Revenue,andSpendingMethodologies,November2013,atwww.budget.ny.gov.

INTRODUCTION


BUDGETARY/ACCOUNTING PRACTICES TheStatesGeneralFundreceivesthemajorityofStatetaxesandallincomenotearmarkedforaparticularprogramoractivity.StatelawrequirestheGovernortosubmit,andtheLegislatureto enact, aGeneral Fund budget that is balanced on a cash basis of accounting. The StateConstitutionandStateFinanceLawdonotprovideaprecisedefinitionofbudgetbalance. Inpractice,theGeneralFundisconsideredbalancedifsufficientresourcesare,orareexpectedtobe,availableduring the fiscalyear for theState to: (a)makeallplannedpayments, includingPersonal Income Tax (PIT) refunds, without the issuance of deficit notes or bonds orextraordinary cash management actions, (b) restore the balances in the Tax StabilizationReserveandRainyDayReservetolevelsatorabovethelevelsondepositwhenthefiscalyearbegan,and(c)maintainotherreserves,asrequiredbylaw.Forpurposesofcalculatingbudgetbalance,theGeneralFundincludestransferstoandfromotherfunds.TheGeneral Fund is the sole financing source for the School Tax Relief (STAR) Fund and istypicallythefinancingsourceoflastresortfortheStatesothermajorfunds,whichincludetheHealthCareReformAct(HCRA)funds,theDedicatedHighwayandBridgeTrustFund(DHBTF),and the Lottery Fund. Therefore, the General Fund projections account for any estimatedfunding shortfalls in these funds. Since theGeneral Fund is the fund that is required tobebalanced, the focusof theStatesbudgetaryandgapclosingdiscussion isgenerallyweightedtowardtheGeneralFund.Fromtimetotime,DOBwillinformallydesignateunrestrictedbalancesintheGeneralFundforspecificfinancialmanagementandpolicygoals(i.e.,thepaymentofcostsrelatedtopotentiallaborcontractscoveringpriorcontractperiods). Theseamounts, typically identifiedwith thephrase"reserved for,"arenotheld indistinctaccountswithin theGeneralFundandmaybeusedforotherpurposes.StateOperatingFundsisabroadermeasureofspendingforoperations(asdistinctfromcapitalpurposes)thatisfundedwithStateresources.Thismeasureincludesfinancialactivitynotonlyin theGeneral Fund, but also in Statefunded special revenue funds and debt service funds(both the General Fund and State Operating Funds exclude spending from Capital ProjectsFunds and Federal Funds). DOB views StateOperating Funds to be amore comprehensivemeasure than the General Fund of Statefunded activities for operating purposes that arefundedwithStateresources(i.e.,taxes,assessments,fees,tuition).TheStateOperatingFundsperspectivehastheadvantageofeliminatingcertaindistortionsinoperatingactivitiesthatmaybecausedby,amongotherthings,theState'scomplex fundstructure,thetransferofmoneyamong funds,and theaccountingofdisbursementsagainstappropriations indifferent funds.Forexample, theState funds itsshareof theMedicaidprogram fromboth theGeneralFundand from State Special Revenue Funds, including HCRA funds. The State Operating Fundsperspective capturesMedicaid disbursements from both of these fund types, giving amorecomplete accounting of StatefundedMedicaid disbursements. For such reasons, the State

INTRODUCTION


Financial Plan discussion of disbursement projections often emphasizes the StateOperatingFundsperspective.The State also reports disbursements and receipts activity for AllGovernmental Funds (AllFunds),whichincludesspendingfromCapitalProjectsFundsandStateandFederalOperatingFunds, providing themost comprehensive view of the cashbasis financial operations of theState. The State accounts for receipts and disbursements by the fund inwhich the activitytakesplace(suchastheGeneralFund),andthebroadcategoryorpurposeofthatactivity(suchasStateOperations). TheFinancialPlantablessortStateprojectionsandresultsbyfundandcategory.FundtypesoftheStateinclude:theGeneralFund;StateSpecialRevenueFunds,whichreceivecertaindedicatedtaxes,feesandotherrevenuesthatareusedforaspecifiedpurpose;FederalSpecialRevenueFunds,whichreceivecertainFederalgrants;StateandFederalCapitalProjectsFunds,whichaccountforcostsincurredintheconstructionandrehabilitationofroads,bridges,prisons,university facilities,andother infrastructureprojects;andDebtServiceFunds,whichaccountforthepaymentofprincipal,interestandrelatedexpensesfordebtissuedbytheStateanditspublicauthorities.StateFinanceLawalsorequiresDOBtoprepareaproformafinancialplanusing,totheextentpracticable,GenerallyAcceptedAccountingPrinciples(GAAP),althoughthisrequirementisforinformationalpurposesonly.TheGAAPbasisfinancialplanisnotusedbyDOBasabenchmarkformanagingStatefinancesduringthefiscalyearandisnotupdatedonaquarterlybasis.TheGAAPbasis financial plan follows, to the extent practicable, the accrualmethodologies andfundaccountingrulesappliedbytheOfficeoftheStateComptroller(OSC)inpreparationoftheaudited Basic Financial Statements. However, GAAP is a financial reporting regime, not abudgetingsystem.RISKS AND UNCERTAINTIES The factorsaffecting theState's financialconditionarecomplex. ThisFinancialPlancontainsforecasts,projections,andestimates thatarebasedonexpectationsandassumptionswhichexistedat the time theywereprepared. Sincemany factorsmaymateriallyaffect fiscalandeconomic conditions in the State, the inclusion in this Executive Budget Financial Plan offorecasts, projections, and estimates should not be regarded as a representation that suchforecasts,projections,andestimateswilloccur. Forecasts,projectionsandestimatesarenotintendedasrepresentationsoffactorguaranteesofresults.Thewordsexpects,forecasts,projects, intends, anticipates, estimates, and analogous expressions are intended toidentifyforwardlookingstatements intheFinancialPlan. Anysuchstatements inherentlyaresubjecttoavarietyofrisksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyand adversely from those projected. Such risks and uncertainties include, among others,general economic and business conditions; changes in political, social, economic, and

INTRODUCTION


environmentalconditions,includingclimatechangeandextremeweatherevents;impedimentsto the implementation of gapclosing actions; regulatory initiatives and compliance withgovernmental regulations; litigation;actionby theFederalgovernment to reduceordisallowexpected aid; and various other events, conditions and circumstances,many of which arebeyondthecontroloftheState. Theseforwardlookingstatementsspeakonlyasofthedatetheywereprepared.

Financial Plan Overview


FinancialPlanOverview

REVISIONS TO THE EXECUTIVE BUDGET FINANCIAL PLAN

The Executive Budget Financial Plan projections set forth herein reflect the impact of theGovernors amendments, as well as revisions to the multiyear forecast of receipts anddisbursementsbasedonupdatedinformation.ThetablebelowsummarizestherevisionstotheFinancialPlandatedJanuary21,2014.

FY2014 FY2015 FY2016 FY2017 FY2018

TOTALREVISIONSTOEXECUTIVEBUDGET 0 0 (15) (9) (3)

ExecutiveAmendments 0 (30) (37) (38) (38)EliminationofNetIncomeTaxRateonUpstateManufacturers 0 (18) (18) (19) (19)RentCapInitiativeforIndividualswithHIV/AIDS 0 (9) (9) (9) (9)FamilyPlanning/CancerServices 0 (2) (8) (8) (8)EmergencyManagementStaffing 0 (1) (1) (1) (1)SUNYCapital 0 0 (1) (1) (1)

Reestimates 0 30 22 29 35RealEstateTransferTax 18 18 18 19 19OtherChanges (18) 12 4 10 16

GENERALFUNDSUMMARYOFCHANGESTOEXECUTIVEBUDGETSAVINGS/(COST)

(millionsofdollars)

ThefollowingamendmentstotheFY2015ExecutiveBudgethaveafiscalimpactthathasbeenreflectedinthemultiyearFinancialPlan. EliminationofNetIncomeTaxRateonUpstateManufacturers:TheExecutiveBudget

proposed the elimination of the net income tax rate on upstatemanufacturers. Anamendment is proposed thatwould also apply the benefit to upstate firms that sellproductsintheMTAregion,buthavenopropertyoremploymentintheregion.

RentCapInitiativeforIndividualswithHIV/AIDS:Anewappropriationandchangesto

lawareproposedthatwouldcaptherentcontributionfor individualswithHIV/AIDS inNewYorkCitywho receivepublicassistanceat30percentof the individuals income.TheStatecommitmentforthisinitiativewouldbecappedat$9million,andthecosttoNewYorkCityisexpectedtobeapproximately$17million.

FINANCIALPLANOVERVIEW


Family Planning/Cancer Services: The Executive Budget assumed that certain Statecosts for familyplanningandcancerserviceswouldbepaid forby increasedrevenuesfrom commercial insurance carriers as a result of health care reform. AdditionalGeneral Fund support for family planning and cancer services is now proposed toaddressapotentialmismatchbetweenexpectedrevenuesandcosts,andtoensurethattherearenounintendedprogramimpacts.

EmergencyManagement Staffing: The Budget proposes an additional 20 FullTime

Equivalents (FTEs) for Homeland Security to support the Office of EmergencyManagement,includingauditors,disasterprogramcoordinators,andotherstaff.

SUNY Capital: An amendment is included that provides a new $19million capitalmaintenance appropriation for Stony Brook University for facility rehabilitation andresearch laboratoryrenovations. Thenewcapitalspending isexpected toresult inanincreaseindebtservicecosts.

Thefollowingrevisionstoestimatesofreceiptsanddisbursementshavebeenreflected inthemultiyearFinancialPlan. Tax Receipts: Reflects a multiyear increase in the Real Estate Transfer Tax (RETT)

receiptsbasedonresultstodate,whichisoffsetinFY2014byanincreaseinestimatedPITrefundpayments.

OtherChanges: Reflects revisions toestimated transfers from fundsandaccounts tothe General Fund, debt service costs in later fiscal years, and various technicaladjustmentstotransfersanddisbursements.



ThefollowingtableprovidescertainFinancialPlaninformationforFY2013throughFY2015.

FY2013Results1 MidYear Current

BeforeChanges2

ExecutiveAmended

STATEOPERATINGFUNDSDISBURSEMENTSSizeofBudget $88,844 $90,669 $90,498 $93,837 $92,040AnnualGrowth 1.9% 2.1% 1.9% 3.7% 1.7%

OTHERDISBURSEMENTMEASURESGeneralFund(withTransfers) $58,960 $61,450 $61,460 $64,606 $63,575

4.4% 4.2% 4.2% 5.1% 3.4%

StateFunds(IncludingCapital) $94,523 $96,815 $96,624 $100,317 $98,8941.4% 2.4% 2.2% 3.8% 2.3%

CapitalBudget(FederalandState) $7,539 $7,986 $7,992 $8,133 $8,5333.8% 5.9% 6.0% 1.8% 6.8%

FederalOperatingAid(ExcludingExtraordinaryFederalAid)* $36,137 $36,609 $36,860 $36,961 $36,6156.1% 1.3% 2.0% 0.3% 0.7%

AllFunds(ExcludingExtraordinaryFederalAid)* $132,520 $135,264 $135,350 $138,931 $137,1880.7% 2.1% 2.1% 2.6% 1.4%

CapitalBudget(Including"OffBudget") $8,903 $9,438 $9,431 $9,555 $9,4643.5% 6.0% 5.9% 1.3% 0.3%

AllFunds(Including"OffBudget"Capital)* $133,884 $136,716 $136,789 $140,353 $138,1190.7% 2.1% 2.2% 2.6% 1.0%

INFLATION(CPI) 1.8% 1.5% 1.4% 1.7% 1.8%

ALLFUNDSRECEIPTS

Taxes $66,302 $69,324 $69,414 $71,101 $70,7943.1% 4.6% 4.7% 2.4% 2.0%

MiscellaneousReceipts $24,030 $24,175 $23,850 $25,003 $25,3100.8% 0.6% 0.7% 4.8% 6.1%

FederalGrants* $42,266 $41,723 $41,991 $40,953 $40,8195.3% 1.3% 0.7% 2.5% 2.8%

TotalReceipts* $132,598 $135,222 $135,255 $137,057 $136,9230.1% 2.0% 2.0% 1.3% 1.2%

GENERALFUNDRESERVES $1,610 $1,803 $1,803 $1,778 $1,743Stabilization/RainyDayReserveFunds $1,306 $1,306 $1,306 $1,306 $1,306AllOtherReserves/FundBalances $304 $497 $497 $472 $437

119,756 120,520 119,413 N/A 119,173

DEBTDebtServiceas%AllFundsReceipts 5.0% 4.7% 4.7% 4.4% 4.3%StateRelatedDebtOutstanding $55,692 $56,846 $55,572 $57,905 $57,126DebtOutstandingas%PersonalIncome 5.3% 5.3% 5.2% 5.1% 5.1%

1

2 Beforeproposals/actionstoeliminatetheprojectedbudgetgapinFY2015.

*

FINANCIALPLANATAGLANCE:KEYMEASURES(millionsofdollars)

FY2015FY2014

ResultsasreportedbytheStateComptroller'sAnnualReporttotheLegislatureonStateFundsCashBasisofAccountingreleasedonJuly30,2013.

STATEWORKFORCEFTEs(SubjecttoDirectExecutiveControl)

AllFundsandFederalOperatingFundsreceiptsanddisbursementsexcludeFederaldisasteraidforSuperstormSandy(estimatedat$577millioninFY2013;$5.1billioninFY2014and$2.4billioninFY2015),andadditionalFederalaidundertheAffordableCareAct(estimatedatapproximately$400millioninFY2014and$2.6billioninFY2015).Includingdisbursementsforthesepurposes,AllFundsdisbursementsareexpectedtototal$142.2billioninFY2015,anincreaseof0.9percent.



EXECUTIVE SUMMARY Inthecurrentfiscalyear(FY2014),DOBestimatesthattheStateisontracktorecorda

GeneralFundcashsurplusof$310million.Theestimatedsurplusreflectsstrongerthanexpected tax collections throughmidJanuary 2014. The surplus is expected to becarriedforwardintoFY2015.

Results through January 2014 were generally in line with expectations. The onesignificantnegativevariancewas inPITcollections. However,virtuallyallthevarianceappears tobeattributable to the timingofcertainbonuspaymentsby financial firms,and the variance observed in January was eliminated by the third business day ofFebruary2014andstrongresultshavecontinuedthroughoutthemonth.

TheExecutiveBudgetforFY2015,whichtheGovernorintroducedonJanuary21,2014,and amended through February 20, 2014, provides for balanced operations in theGeneralFund,asrequiredbylaw.

The Executive Budget continues the disciplined approach to fiscalmatters that has

defined the Governors first three budgets. It proposes recurring savings throughtargetedreforms,aswellascontinuationofthespendingcontrolsandcostcontainmentput in place in prior years. Agency operations are generally expected to remain atcurrentlevelsacrosstheFinancialPlanperiod.Reservesareexpectedtoremainintact.

TheExecutiveBudgetagainlimitstheannualgrowthinStateOperatingFundsspending

to2percentor less,consistentwith thespendingbenchmarkadopted inFY2012. Inaddition,theGovernorisexpectedtopropose,andtheLegislatureisexpectedtoenact,balancedbudgetsinfutureyearsthatcontinuetolimitannualgrowthinStateOperatingFundstonogreaterthan2percent.

Thereceiptsforecastcontinuestoprovideconservativeoutyearprojectionsbasedonamodesteconomicgrowthforecast.

The combination of effective budgetmanagement and adherence to the 2 percent

spendingbenchmark ineachof thenext four fiscalyearswouldproduce surpluses infutureyears,basedoncurrentprojections.2Thefollowingchartshowsthecalculationofthesurplusesthatwouldbeexpectedtooccur.

2BeforetaxreductionplanproposedinFY2015ExecutiveBudget.



2014 2015 2016 2017 2018GrowthRate

StateOperatingFundsSpending(1) 90.5 92.3 94.1 96.0 97.9 2.0%

AvailableResources(2) 90.5 92.8 95.5 98.3 100.6 2.7%

Surplus(3) 0.0 0.5 1.4 2.3 2.7

1

2

3 Surplusthatcouldbeexpectedtooccurunderthespendingandresourceassumptionsdescribedabove.

SpendingcalculationbasedoncurrentFY2014estimate.ExecutiveBudgetproposesanannualincreaseoflessthan2percentinFY2015.Surplusshownintablewouldbelargerif2percentcalculationwasmadefromFY2015proposedlevel.

Availableresourcesbeforeproposedtaxreductionplan.ResourcesincludeStateOperatingFundstaxreceipts,miscellaneousreceipts,andnetotherfinancingsources,butexcluderesourcesindedicatedfunds(SROanddebtservice)notavailabletotheGeneralFund.AssumesFY2014surplusof$310millioniscarriedforwardintoFY2015.

ADHERENCETO2PERCENTSTATEOPERATINGFUNDSSPENDINGBENCHMARKSURPLUSCALCULATION(billionsofdollars)

The Executive Budget proposes a multiyear tax reduction plan for individuals andbusinesses,which has been sized to absorb themajority of the surplus thatwouldotherwise occur between projected receipts, using current projections, anddisbursementsthatgrowat2percentannuallyovertheFinancialPlanperiod.

The following table summarizes themultiyear impactonGeneralFundoperationsofthe FY 2015 Executive Budget proposal, including the tax reduction plan. Theprojectionsassumeadherencetothe2percentspendingbenchmarkinfutureyears.



FY2015 FY2016 FY2017 FY2018

MIDYEARBUDGETSURPLUS/(GAP)ESTIMATE (1,742) (2,889) (2,948) (3,887)

SpendingChanges 1,930 4,246 5,347 6,724AgencyOperations 358 708 990 1,342LocalAssistance 1,622 1,968 2,259 2,096DebtManagement 116 114 128 174Initiatives/Investments (166) (243) (405) (510)Adherenceto2%StateOperatingFundsSpendingBenchmark1 n/a 1,699 2,375 3,622

ResourceChanges 316 49 (134) (110)ResourceChanges 6 49 (134) (110)SurplusAvailablefromFY2014 310 0 0 0

BUDGETSURPLUS/(GAP)BEFORETAXACTIONS 504 1,406 2,265 2,727

TaxActions (504) (1,662) (2,101) (2,143)TaxCreditTiming 410 (410)

EXECUTIVEBUDGETSURPLUS/(GAP) 0 154 164 174

1

(millionsofdollars)

GENERALFUNDBUDGETARYBASISSURPLUS/(GAP)PROJECTIONS

GAPCLOSINGPLANEXECUTIVEBUDGET

Savingsestimatedfromlimitingannualspendinggrowthinfutureyearsto2percent.CalculationbasedoncurrentFY2014estimate.TheGovernorisexpectedtopropose,andnegotiatewiththeLegislaturetoenact,budgetsineachfiscalyearthatholdStateOperatingFundsspendinggrowthto2percent.Assumesallsavingsfromholdingspendinggrowthto2percentaremadeavailabletotheGeneralFund.

Consistent with the Governor's approach in balancing his first three budgets, all ofwhich emphasized spending restraint, the Executive Budget Financial Plan reducesspendinginFY2015bynearly$2billioncomparedtopriorprojections.Thesavingsarerecurringandareexpectedtogrowinvalueinsubsequentyears.

AgencyOperations:SincetheGovernortookofficeinJanuary2011,thecostsof

operatingStateagencieshavebeensignificantlyreducedthroughongoingStateagency redesignandcostcontrolefforts. Theseeffortshave includedclosuresand consolidations of facilities to reduce excess capacity; strict controls onattritionandhiring;enterprisewideconsolidationofprocurement, informationtechnology (IT), and workforce management functions; and a range ofoperational measures to improve efficiency. The FY 2015 Executive Budgetproposes to hold spending for Executive agency operations constant over theFinancialPlanperiod,with limitedexceptions. Thisprovides$358million inFY2015 savingscompared topriorprojections. Inaddition, theStatesprojectedcosts forhealth insuranceandpensionshavebeen loweredbasedonupdatedinformation.



Local Assistance: Reductions in State spending from prior projections areexpectedtogenerate$1.6billioninGeneralFundsavings.3Savingsareexpectedfrom, among other things, the elimination of FY 2015 automatic health andhumanservicescostoflivingincreases,andupdatedcostestimatesforarangeof State programs, reflecting the impact of the spending controls and costcontainmentenactedinprioryears.

MedicaidandSchoolAidare theStates largestaidprograms,comprisingover40percentoftheStateOperatingFundsbudget. Consistentwiththe intentofthe reformsenacted inFY2012,bothprogramsare recommended togrowatcomparablerates,excludinggrowthattributabletotheSmartSchoolsbondact.

DebtManagement:Savingsareexpectedthroughcontinueduseofcompetitivebondsales,refundings,andconsolidationofdebtissuances.

Initiatives/Investments:TheExecutiveBudgetproposesseveralnewinitiatives,

themostsignificantofwhichisincreasedfundingforastatewideUniversalFullDayPreKindergartenprogramandincreasedafterschoolprogramsbothphasedinoverthenextfiveyears.

TheBudgetalsoproposessignificantnewcapital initiatives. These include theSmart Schools general obligation bond act for education that would fundenhancedtechnologyinschools($2billion)andacapitalprogramtomodernizehealthcarefacilities($1.2billion).

Resources:TheBudgetincludesuseofthe$310millionsurplusfromFY2014to

fundFY2015initiatives.

TaxActions: TheExecutiveBudgetproposes taxandassessment reductions thatwillprovide property, business, and estate tax relief. Property tax relief consists of aresidential property tax freeze credit, a residential real property tax credit, and arenter's credit. Business tax reliefconsists of an elimination of the tax rate on netincome forcorporateupstatemanufacturers,a20percentrealproperty taxcredit formanufacturers, and corporate tax reform. The estate tax filing threshold will beincreased, and the top rate decreased, over four years. Finally, the 18a temporaryutility assessmentwillbeeliminated immediately for industrialcustomersandphasedoutmorequicklyforallremainingcustomers.

3 Local assistance includes payments for School Aid, STAR, Medicaid, public assistance, child welfare, local governmentassistanceandarangeofotherpurposes.



ANNUAL SPENDING GROWTH TheExecutiveBudgetproposalholdsFY2015annualspendinggrowthinStateOperatingFundsto1.7percent,belowthe2percentspendingbenchmark. AllFundsspending,which includesspendingfromcapitalfundsandFederalfunds,isexpectedtoincreaseby1.4percentfromthelevelestimatedfor2014,excludingextraordinaryFederalaidrelatedtoSuperstormSandy4andtheimplementationoftheAffordableCareAct(ACA).

FY2013Results

Annual%Change

FY2015Proposed

AnnualChange

Annual%Change

STATEOPERATINGFUNDS 88,844 90,498 1.9% 92,040 1,542 1.7%GeneralFund(excludingothertransfers) 52,166 52,941 1.5% 54,903 1,962 3.7%OtherStateFunds 30,496 31,457 3.2% 31,405 (52) 0.2%DebtServiceFunds 6,182 6,100 1.3% 5,732 (368) 6.0%

ALLGOVERNMENTALFUNDS 132,520 135,350 2.1% 137,188 1,838 1.4%StateOperatingFunds 88,844 90,498 1.9% 92,040 1,542 1.7%CapitalProjectsFunds 7,539 7,992 6.0% 8,533 541 6.8%FederalOperatingFunds 36,137 36,860 2.0% 36,615 (245) 0.7%

ALLGOVERNMENTALFUNDS(INCL.EXTRAORDINARYFEDERALAID)

133,097 140,865 5.8% 142,161 1,296 0.9%

FederalDisasterAidforSuperstormSandy 577 5,110 785.6% 2,406 (2,704) 52.9%FederalAffordableCareAct 0 405 2,567 2,162 533.8%

GENERALFUND(INCLUDINGTRANSFERS) 58,960 61,460 4.2% 63,575 2,115 3.4%

STATEFUNDS 94,523 96,624 2.2% 98,894 2,270 2.3%

FY2014Current

TOTALDISBURSEMENTS(millionsofdollars)

4 InOctober 2012, Superstorm Sandy causedwidespread flooding, power failures, andwinddamage to public and privateproperty inNewYorkCity, Long Island,andotherdownstateareas. Public infrastructure, includingmass transit systems,public schools, and municipal buildings, sustained serious damage. The Executive Budget reflects Federal aidwhichwillflowtolocalgovernments,publicauthorities,andnotforprofitsoverthenextthreeyearstocontinuetheState'srecoveryfromSuperstormSandy.(SeeBudgetRisksandUncertaintiestotheFinancialPlanFederalIssuesherein.)



Thefollowingtable illustratesthemajorsourcesofannualchange inStatespendingbymajorprogram,purpose,andfundtype.

FY2015$ % Proposed $ %

LOCALASSISTANCE 59,495 62,219 2,724 4.6% 60,811 1,316 2.2%SchoolAid(StateFiscalYearBasis) 20,420 21,692 1,272 6.2% 21,469 1,049 5.1%DOHMedicaid(InclOperationalCosts)1 16,421 16,978 557 3.4% 16,962 541 3.3%Transportation 4,737 4,831 94 2.0% 4,833 96 2.0%MentalHygiene 2,833 3,450 617 21.8% 2,910 77 2.7%STAR 3,389 3,602 213 6.3% 3,429 40 1.2%SocialServices 2,964 3,050 86 2.9% 2,882 (82) 2.8%HigherEducation 2,813 2,911 98 3.5% 2,874 61 2.2%PublicHealth/Aging 1,788 1,997 209 11.7% 1,829 41 2.3%FSHRP 384 0 (384) 100.0% 0 (384) 100.0%Special/OtherEducation 2,032 2,091 59 2.9% 2,052 20 1.0%LocalGovernmentAssistance 764 769 5 0.7% 764 0 0.0%DisasterAssistanceReimbursement 25 (55) (80) 320.0% (55) (80) 320.0%AllOther2 925 903 (22) 2.4% 862 (63) 6.8%

STATEOPERATIONS/FRINGEBENEFITS 24,931 25,808 877 3.5% 25,535 604 2.4%StateOperations 17,955 18,275 320 1.8% 18,168 213 1.2%PersonalService: 12,376 12,642 266 2.1% 12,585 209 1.7%ExecutiveAgencies 7,029 7,126 97 1.4% 7,109 80 1.1%DisasterAssistance (25) 0 25 100.0% 0 25 100.0%UniversitySystems 3,526 3,562 36 1.0% 3,603 77 2.2%ElectedOfficials 1,846 1,954 108 5.9% 1,873 27 1.5%

NonPersonalService: 5,579 5,633 54 1.0% 5,583 4 0.1%ExecutiveAgencies 2,843 2,838 (5) 0.2% 2,812 (31) 1.1%DisasterAssistanceReimbursement (18) 0 18 100.0% (25) (7) 38.9%UniversitySystem 2,203 2,215 12 0.5% 2,215 12 0.5%ElectedOfficials 551 580 29 5.3% 581 30 5.4%

FringeBenefits/FixedCosts 6,976 7,533 557 8.0% 7,367 391 5.6%PensionContribution 1,960 2,256 296 15.1% 2,244 284 14.5%HealthInsurance 3,247 3,476 229 7.1% 3,355 108 3.3%OtherFringeBenefits/FixedCosts 1,769 1,801 32 1.8% 1,768 (1) 0.1%

DEBTSERVICE 6,061 5,805 (256) 4.2% 5,689 (372) 6.1%CAPITALPROJECTS 11 5 (6) 54.5% 5 (6) 54.5%

TOTALSTATEOPERATINGFUNDS 90,498 93,837 3,339 3.7% 92,040 1,542 1.7%

CapitalProjects(StateFunds) 6,126 6,480 354 5.8% 6,854 728 11.9%

TOTALSTATEFUNDS 96,624 100,317 3,693 3.8% 98,894 2,270 2.3%

FederalAid(IncludingCapitalGrants)3 38,726 38,614 (112) 0.3% 38,294 (432) 1.1%

TOTALALLGOVERNMENTALFUNDS4 135,350 138,931 3,581 2.6% 137,188 1,838 1.4%

1

2

3,4 AllFundsandFederalOperatingFundsreceiptsanddisbursementsexcludeFederaldisasteraidforSuperstormSandy(estimatedat$5.1billioninFY2014and$2.4billioninFY2015),andadditionalFederalaidundertheACA(estimatedatapproximately$400millioninFY2014and$2.6billioninFY2015).Includingdisbursementsforthesepurposes,AllFundsdisbursementsareexpectedtototal$142.2billioninFY2015,anincreaseof0.9percent.

STATESPENDINGMEASURES:BEFOREANDAFTERACTIONS(millionsofdollars)

FY2014Current

FY2015Base

AnnualChange AnnualChange

DepartmentofHealthMedicaidspendingonly(excludesotherStateagencyspendingandtransfers).Fordisplaypurposes,includesMedicaidoperationalspendingthatsupportscontractsrelatedtothemanagementofMedicaidandthecostsofadministrativetakeover."AllOther"includesanadjustmentforMedicaidoperationalcoststoavoiddistortingFinancialPlancategorytotals,aswellaslocalaidspendinginanumberofotherprograms,includingeducation,parksandtheenvironment,economicdevelopment,andpublicsafety.

General Fund Financial Plan


GeneralFundFinancialPlan

CURRENT FISCAL YEAR UPDATE DOBestimates that the Statewillend the current fiscalyear (FY2014)withaGeneral Fundoperatingsurplusof$310milliononacashbasisofaccounting.5Theestimatedsurplusreflectsstrongerthanexpectedtaxreceiptstodate.DOBexpectsthesurplustobecarriedforwardintoFY2015,whereitwouldbeusedtofundinitiativesproposedwiththeExecutiveBudget.General Fund receipts, including transfers from other funds, are expected to total $61.96billion, an increase of $320 million from the estimate in the MidYear Update, beforeaccounting fortransactionstomaketheFY2014surplusavailable inFY2015,asdescribed inmoredetailbelow. Theestimate forannualtaxreceiptshasbeen increasedby$432million,reflectinghigherestimatedPITpaymentsandestate taxpayments todate,partiallyoffsetbydeclinesinbusinessandothertaxreceiptstodate.6

Inaddition,highercostsfordebtserviceon

theStatesPITbondsresultsinadecreaseintaxreceiptstransferredtotheGeneralFundafterpaymentofdebtservice.TheincreaseinPITdebtservicemainlyreflectstherefundingwithPITbondsofhighercostdebtthathadbeenissuedunderolderStatebondprograms,andisoffsetby lowertransferstotheGeneraldebtservice fund. Theestimate formiscellaneousreceiptshasbeen loweredby$55million,basedonareviewofcollectionstodate. Nontaxtransfershavebeenreducedby$57million,basedonareviewofbalancesandexpectedneeds. ThesurplusinFY2014isexpectedtobemadeavailableinFY2015throughthepaymentofanadditional$310millionintaxrefundsinthecurrentfiscalyear,whichhastheeffectofreducingnettaxcollectionsinthecurrentyearandincreasingnettaxcollectionsbythesameamountinFY 2015. After accounting for these payments,General Fund receipts are expected to total$61.65billioninFY2014,or$10millionabovethelevelestimatedintheMidYearUpdate.General Fund disbursements, including transfers to other funds, are expected to total$61.46billion, an increaseof$10million from thatestimated in theMidYearUpdate. Themodest increase isduetoanumberof factors. Estimateddisbursements for localassistancehavebeenincreasedby$125million,reflectinganincreaseintheshareofMedicaidexpensesthatareexpectedtobepaid fromtheGeneralFund insteadofHCRA (dueto lowerexpectedreceipts inHCRA),offset inpartby lowerthanexpectedspendingacrossarangeofprogramsandactivities.TheestimateforStateOperations,includingfringebenefits,hasbeenincreasedby $68 million, due mainly to costs incurred by the State in the first instance related toSuperstormSandy(thesecostsareexpectedtobereimbursedbytheFederalgovernmentinFY2015and2016)andincreasedovertimecostsattheDepartmentofCorrectionsandCommunitySupervision(DOCCs).Estimatedtransferstootherfundshavebeenreduced,reflecting,among 5 See"BudgetRisksandUncertaintiestotheFinancialPlan"herein. 6EstimatedGeneralFundtaxreceiptsareaffectedbychanges intheestimated levelofdebtserviceneededforPITRevenueBonds,SalesTaxRevenueBonds,LocalGovernmentAssistanceBonds,andCleanAir/CleanWater(CW/CA)bonds.

GENERALFUNDFINANCIALPLAN


otherthings,savingsfromrefundings,thetimingandsizingofbondsales,andthefinancingmixforcapitalprojects.Thefollowingtablesummarizestherevisions.

MIDYEARBUDGETSURPLUS/(GAP)ESTIMATE 0

ReceiptsRevisions 320TaxReceipts1 432MiscellaneousReceipts (55)OtherNonTaxTransfers (57)

SpendingRevisions (10)LocalAssistance (125)AgencyOperations(inclGSCs) (68)TransferstoOtherFunds 183

NETCHANGES 310

CarryForwardSurplustoFY2015 (310)

REVISEDBUDGETSURPLUS/(GAP)ESTIMATE 0

SUMMARYOFCHANGESFROMMIDYEARUPDATESAVINGS/(COSTS)(millionsofdollars)

FY2014GENERALFUNDBUDGETARYBASISSURPLUS/(GAP)

1Includestransfersfromotherfundsafterrevisionstoestimateddebtservicecosts.ExcludescarryforwardofsurplustoFY2015.

DOBestimatesthattheStatewillendFY2014withaGeneralFundcashbalanceof$1.8billion,unchangedfromtheestimate intheMidYearUpdate. Thebalanceconsistsof$1.3billion instabilizationreserves,$363milliondesignated fordebtmanagementpurposes,$68million inthe Community Projects Fund, $45million for the costs of labor settlements covering priorperiods,and$21millionintheContingencyReserveFund.Riskstobudgetbalanceremaininthecurrentfiscalyear.Forexample,whiletaxreceiptshaveexceededexpectations,collectionsaresubjecttosignificantvolatilityinthefinalquarterofthefiscal year. In addition, there canbe no assurance that Federal aid for health care,mentalhygiene,andotherpurposeswillbereceivedatthe levelsoronthetimetableassumed intheFinancialPlan. These andother risks anduncertainties aredescribedmore fully later in thisFinancialPlan.(seeBudgetRisksandUncertaintiestotheFinancialPlanherein.)



FY 2015 FINANCIAL PLAN DOB estimates that the Executive Budget proposal for FY 2015 would, if enacted withoutmodification,provide forbalancedoperations in theGeneralFund,asprovidedby law. Thefollowingtablesummarizestheprojectedannualchangesinreceipts,disbursements,andfundbalancesintheGeneralFundfromFY2014toFY2015.

AnnualChangeFY2014Current

FY2015Proposed $ %

OpeningFundBalance 1,610 1,803 193 12.0%

ReceiptsTaxes(AfterDebtService) 57,386 58,582 1,196 2.1%MiscellaneousReceipts/FederalGrants 3,253 3,857 604 18.6%OtherTransfers 1,014 1,076 62 6.1%

TotalReceipts 61,653 63,515 1,862 3.0%

DisbursementsLocalAssistanceGrants 40,383 41,797 1,414 3.5%DepartmentalOperations:PersonalService 5,704 5,880 176 3.1%NonPersonalService 1,950 1,961 11 0.6%

GeneralStateCharges 4,904 5,265 361 7.4%TransferstoOtherFunds 8,519 8,672 153 1.8%DebtService 1,628 1,119 (509) 31.3%CapitalProjects 1,078 1,439 361 33.5%StateShareofMentalHygieneMedicaid 1,813 1,488 (325) 17.9%SUNYOperations 971 970 (1) 0.1%AllOther 3,029 3,656 627 20.7%TotalDisbursements 61,460 63,575 2,115 3.4%

Excess(Deficiency)ofReceiptsOverDisbursements 193 (60) (253) 131.1%

ClosingFundBalance 1,803 1,743 (60) 3.3%

StatutoryReservesTaxStabilizationReserveFund 1,131 1,131 0 0.0%RainyDayReserveFund 175 175 0 0.0%CommunityProjectsFund 68 0 (68) 100.0%ContingencyReserveFund 21 21 0 0.0%

FundBalanceReservedfor:PriorYearLaborAgreements(20072011) 45 53 8 17.8%DebtManagement 363 363 0 0.0%

GENERALFUNDFINANCIALPLAN(millionsofdollars)



RECEIPTS GeneralFundreceipts,includingtransfersfromotherfunds,areexpectedtototal$63.5billioninFY2015,anannualincreaseof$1.9billion(3.0percent).Taxcollections,includingtransfersof tax receipts to the General Fund after payment of debt service, are expected to total$58.6billion,anincreaseof$1.2billion(2.1percent).General Fund PIT receipts, including transfers after payment of debt service on State PITRevenue Bonds, are expected to increase by $1.3 billion (3.5 percent) from FY 2014. Thisprimarilyreflectsincreasesinwithholdingandestimatedpaymentsattributabletothe2014taxyear, partially offset by an expected decline in extension payments attributable to Tax Year2013.GeneralFunduser taxesand fees, including transfersafterpaymentofdebt serviceonNewYork Local Government Assistance Corporation (LGAC) and Sales Tax Revenue Bonds, areestimated to total $12.3 billion in FY 2015, an increase of $260million (2.2 percent) fromFY 2014, reflecting projected spending increases across a broad range of consumptioncategories.General Fund business tax receipts are estimated at $5.6 billion in FY 2015, a decrease of$376million(6.3percent)fromFY2014results. Theestimatereflectsadecline incorporatefranchisetaxreceiptsresultingfromthefirstyearofrepaymentofdeferredtaxcredits,partlyoffsetbygrowthinallotherbusinesstaxes.OthertaxreceiptsintheGeneralFund,includingtransfers,areexpectedtototalapproximately$1.9billioninFY2015,anincreaseof$3million(0.2percent)fromFY2014.Thismainlyreflectsadeclineinexpectedestatetaxreceipts,theresultofExecutiveBudgetlegislationthatwillcuttheestatetax.General Fund miscellaneous receipts are estimated at $3.9 billion in FY 2015, an annualincreaseof$606million.The increase largelyreflects theexpecteddepositof$1billion fromtheState InsuranceFund(SIF)reserverelease inconnectionwithWorkers'Compensation lawchangesenactedintheFY2014budget.Nontax transfers to the General Fund are expected to total $1.1 billion, an increase of$62million(6.1percent),largelyduetochangesinaccountingofcertainreceiptsandresourcesexpectedtobeavailablefromotherfundbalances.GeneralFund receiptsareaffectedby thedepositofdedicated taxes inother funds fordebtservice andotherpurposes, the transferofbalancesbetween fundsof the State, andotherfactors. For a more comprehensive discussion of the State's projections for tax receipts,miscellaneousreceipts,andtransfers,seeMultiYearFinancialPlanProjectionsherein.



DISBURSEMENTS General Fund disbursements, including transfers to other funds, are expected to total$63.6billioninFY2015,anincreaseof$2.1billion(3.4percent)fromFY2014estimates.Localassistancegrantsareexpected to total$41.8billion,anannual increaseof$1.4billion(3.5 percent). Included within local assistance grants, General Fund disbursements areexpectedtoincreaseby$1billionforSchoolAid7and$153millionforMedicaid.Allotherlocalassistancegrants,which include,amongotherthings,paymentsforarangeofsocialservices,public health, education, and general purpose aid programs, are expected to increase by$246million.State operations disbursements in the General Fund are expected to total $7.8 billion inFY2015,anannualincreaseof$187million(2.4percent).Personalservicecostsareexpectedto increaseby$176million,mainly reflecting theconsolidationof staffunder the ITServicesthatwerepreviouslyreflected innonGeneralFundaccounts. Nonpersonalservicecostsareexpected to increase by $11million in FY 2015, in large part due to increased support forindigentlegalservicesandcivillegalservices.GeneralStateCharges(GSCs)areexpectedtototal$5.3billioninFY2015,anannualincreaseof$361million(7.4percent)fromthecurrentfiscalyear.TheState'sannualpensionpaymentisexpectedtoincreaseby$284million,reflectingbothgrowthinnormalcostsandrepaymentofamountsamortized inprioryears. TheStateexpectstocontinuetoamortizepensioncosts inexcess of the amortization thresholds established in law. In FY 2015, costs in excess of13.5percentofpayroll for theEmployeesRetirementSystem (ERS)and21.5percent for thePoliceandFireRetirementSystem(PFRS)areexpectedtobeamortized.General Fund transfers to other funds are expected to total $8.7 billion in FY 2015, anincreaseof$153millionfromthecurrentfiscalyear.Thegrowthincludesincreasedsupportforcapital projects and nonMedicaidMental Hygiene services, partly offset by declines in theStateshareofMedicaid forMentalHygieneanddebtservicedue to theplannedpayment inFY2014ofexpensesdueinFY2015.GeneralFunddisbursementsareaffectedby the levelof financing sourcesavailable inotherfunds, transfersofbalancesbetween fundsof the State,andother factors thatmay changefrom year to year. For a more comprehensive discussion of the State's disbursementsprojectionsbymajoractivity,seeMultiYearFinancialPlanProjectionsherein.

7 SchoolAidisreportedhereonaStateFiscalYearbasis.



CLOSING BALANCE FOR FY 2015 DOBprojectsthattheStatewillendFY2015withaGeneralFundcashbalanceof$1.7billion,adecrease of $60million from the FY 2014 estimate. The Community Projects Fund, whichfinancesdiscretionarygrantsallocatedbytheLegislatureandGovernor,isexpectedtodecreaseby $68 million in FY 2015, reflecting disbursements from prioryear appropriations. Thisdecreaseisoffsetbyan$8millionincreaseinamountssetasideforthecostsofprioryearlaboragreements,asdescribedbelow.Balances intheStatesprincipal"rainyday"reserve funds,theTaxStabilizationReserveFundandtheRainyDayReserveFund,areexpectedtoremainunchangedinFY2015.Thecombinedbalance of the two funds is equal to approximately 2.2 percent of estimatedGeneral FunddisbursementsinFY2015.TheFinancialPlancontinuestosetasidemoneyintheGeneralFundbalancetocoverthecostsofpotentialretroactive laborsettlementswithunionsthathavenotagreedtotermsforpriorcontractperiods. Theamount identified is calculatedbasedon the pattern settlement forFY2008 throughFY2011 thatwasagreed toby theStates largestunions. Theamount setaside is expected to be reduced as labor agreements for prior periods are reached withunsettledunions.The Executive Budget proposes to reserve $363million for debtmanagement purposes inFY2015,unchangedfromthelevelcurrentlyreservedinFY2014.



FY 2015 DETAILED GAP-CLOSING PLAN Thefollowingtableandnarrativeprovidesasummaryoftheproposedgapclosingplan.

FY2015 FY2016 FY2017 FY2018

MIDYEARBUDGETSURPLUS/(GAP)ESTIMATE (1,742) (2,889) (2,948) (3,887)

SPENDINGCHANGES 1,930 4,246 5,347 6,724AgencyOperations 358 708 990 1,342ExecutiveAgencies 208 346 446 570IndependentOfficials 104 233 245 240FringeBenefits/FixedCosts 46 129 299 532

LocalAssistance 1,622 1,968 2,259 2,096HumanServicesCOLA 105 108 109 110MentalHygiene 164 333 331 (37)HealthCare 130 152 199 264DOHGlobalCap 300 448 638 688Education 457 335 405 525STAR 172 230 237 296SocialServices/Housing 166 204 231 199AllOther 128 158 109 51

CapitalProjects/DebtManagement 116 114 128 174Initiatives (166) (243) (405) (510)SchoolAid/EducationAidInitiatives (104) (153) (159) (167)RoswellParkCenterInstitute (25) (25) (25) (25)DebtServiceforNewInitiatives (5) (24) (170) (219)STEMScholarship (8) (17) (26) (34)

RentCapinitiativeforIndividualswithHIV/AIDS (9) (9) (9) (9)AllOther (15) (15) (16) (56)

Adherenceto2%StateOperatingFundsSpendingBenchmark1 n/a 1,699 2,375 3,622

RESOURCECHANGES 316 49 (134) (110)TaxReceipts (107) 45 319 319MiscellaneousReceipts 33 67 (379) (345)Extenders/Other (3) (15) (31) (28)AllOther 83 (48) (43) (56)SurplusAvailablefromFY2014 310 0 0 0

SURPLUS/(GAP)ESTIMATEBEFORETAXACTIONS 504 1,406 2,265 2,727

TaxActions (504) (1,252) (2,101) (2,553)

SURPLUS/(GAP)ESTIMATEAFTERTAXACTIONS 0 154 164 174

1

FY2015EXECUTIVEBUDGETGENERALFUNDGAPCLOSINGPLANSAVINGS/(COSTS)(millionsofdollars)

Savingsestimatedfromlimitingannualspendinggrowthinfutureyearsto2percent.TheGovernorisexpectedtopropose,andnegotiatewiththeLegislaturetoenact,budgetsthatholdStateOperatingFundsspendinggrowthto2percent.AssumesallsavingsfromholdingspendinggrowtharemadeavailabletotheGeneralFund.



SPENDING CHANGES AGENCY OPERATIONS Operating costs for State agencies include salaries,wages, fringebenefits, andnonpersonalservice costs (i.e., supplies, utilities). These costs have significantly declined over the pastseveralyearsthroughongoingStateagencyredesignandcostcontrolefforts.Reductionsfromthepriorprojections foragencyoperationscontribute$358million to theGeneralFundgapclosingplan.Specifically: ExecutiveAgencies: TheBudgetproposes toholdpersonal serviceandnonpersonal

servicespending flatwith limitedexceptions,suchascostsattributable toNYStateofHealthmarketplaceandITconsolidationefforts. Agenciesareexpectedtocontinuetoutilize less costly forms of service deliveries, improve administrative practices andpursue statewide solutions, particularly at Stateoperated facilities in the areas ofmental hygiene and public protection. The size of the Executive Stateworkforce isprojectedat119,173FTEs,adeclineof240FTEs.

IndependentOfficials:SpendingforJudiciarypersonalserviceandnonpersonalserviceexpenses isprojected togrowby2.8percent to supportmandated courtoperations,statutory salary increases, and additional Family Court Judges. Spending for theDepartment of Audit and Control is expected to grow by 1.4 percent to supportadditionalpreschoolspecialeducationaudits. SpendingfortheDepartmentofLaw isexpected to increaseby2percent. Spending in futureyears isexpected to remainatFY2015levelsforallindependentofficials.

Fringe Benefits/Fixed Costs: Estimates for the States health insurance and pensioncostshavebeenreviseddownwardtoreflecttheimpactofthe2014EmpirePlanaction,andrevisedpensioncontributionestimates.Inaddition,savingsareexpectedfromtheproposedeliminationofMedicarePartBreimbursementsforhighincomeretireesandarevisedWorkersCompensationassessmentmethod.



LOCAL ASSISTANCE Local assistance spending includes financial aid to local governments and nonprofitorganizations, as well as entitlement payments to individuals. Reductions from the priorprojectionsforlocalassistancespendingareexpectedtogenerate$1.6billioninGeneralFundsavings.8 Savingsareexpectedfrombothtargetedactionsandcontinuationofprioryearcostcontainmentactions.Specifically: HumanServicesCostof LivingAdjustment (COLA): TheExecutiveBudgetdefers the

plannedtwopercentannualhumanservicesCOLAandmaintainsexistingratesforotherprograms.

Mental Hygiene: Program spending is reduced to reflect revised forecasts forcommunitybasedbeddevelopmentandexpansion;efforts to return individuals frommore costly outofstate placements; and continued efforts to expand communityservicestoreduceinstitutionalcosts.

Healthcare: Lower spending reflects a downward trend in reimbursement of claimssubmitted by local governments under the General Public Health Works (GPHW)programandutilizingotherinsuranceforprenatalcareservices;andlowerChildHealthPlus(CHP)costsexpectedpursuanttothetransferofratesettingresponsibilitiesfromtheDepartmentofFinancialServices(DFS)totheDepartmentofHealth(DOH)toalignwith theprogrammaticoversight,consistentwith theoversightofMedicaidManagedCareandFamilyHealthPlus(FHP).Inaddition,projectedspendingundertheMedicaidGlobal Cap has been adjusted in each year of the Financial Plan to reflect updatedestimatesofthemedicalcomponentoftheCPIindex.

DOH Global Cap: The Budget includes $300million in annual StateshareMedicaidsavingsbeginning inFY2015(growingto$688million inFY2018)achievedthoughtheshift of certain Office for People with Developmental Disabilities (OPWDD)relatedMedicaid costs toDOH under theMedicaidGlobal Cap. Projected savings from thecontinuation of successfulMedicaid Redesign Team (MRT) initiatives, improved cashmanagement,andutilizationofFederalresourcesassociatedwithACAareexpectedtofullyaccommodatethischangeinfunding.

Education:TheExecutiveBudgetproposesspecialeducationprogramreformstargeted

to improve fiscal practices and service delivery. Estimated spending has also beenreviseddownwardbasedonrevisedschooldistrictdata.

8 Local assistance includes payments for School Aid, STAR,Medicaid, public assistance, child welfare, local governmentassistanceandarangeofotherpurposes.



STAR: TheBudgetproposeseliminatingthe incomethreshold inflationadjustmentforenhancedSTARbenefits.Inaddition,spendinghasbeenreducedtoreflectareductionintheestimatednumberofSTARexemptionrecipients.AspartoftheState'sreviewofrecipient data to ensure unlawful exemptions are excluded from State payments,existingSTARrecipientswerealsorequiredtoreregisterfortheirbenefitbytheendofcalendaryear2013.

Social Services/Housing: Lower spending is expected in several programs, includingChild Welfare Services, Adult Protective Services and Domestic Violence, PublicAssistanceandSupplementalSecurityIncome(SSI)benefits,basedonupdatedclaimingdataandrevisedgrowth(caseload)assumptions,andsavingsfromtheStatetakeoverofadministeringtheSSIsupplementationprogram.

AllOther: Spendingreductionsareexpectedtobeachievedacrossmultiple functionsandprogramareas including: eliminationofcertainmiscellaneous financialassistanceto local governments; utilization of capital financing for eligible homeland securitycapitalneeds;revisionstodisasterassistanceaid;andeliminationofcertain legislativegrants.

CAPITAL PROJECTS/DEBT MANAGEMENT Capital/DebtRevisions:Savingsareexpectedtobeachievedthroughavarietyofdebt

management actions, including continuing the use of competitive sales, refunding ofhighercostdebt,asmarketconditionspermit,andefficienciesfromtheconsolidationofbond sales. In addition, projections reflect the impact of revised capital spendingestimatesandfuturebondingassumptions.

MetroMassTransportationOperatingAid(MMTOA)DebtServiceOffset:TheBudgetproposestooffsetGeneralFundsupportfortheMetropolitanTransportationAuthority(MTA) debt service costs by utilizing $40 million in dedicated resources from theMMTOA account to the General Debt Service Fund, with $20 million in resourcesavailableforthesamepurposeonanannualbasisbeginninginFY2016.



INITIATIVES

SchoolAid/EducationAid Initiatives: TheExecutiveBudgetprovidesan$807millionincrease in education aid for the 201415 school year (SY), $608million ofwhich isprovided toschooldistrictsas formulabasedSchoolAid. TheStatewillprovide$300million in funding for the universal prekindergarten program through FY 2016. Inaddition,theStatewillprovide$160milliontoexpandafterschoolprogramsinFY2016.

Roswell Park Cancer Institute (RPCI): The Budget proposes $25million in additionalState support to theRPCI to replaceexpiringcapitalgrant fundingandmaintain totalannualsupportatprioryearlevels.

DebtService forNew Initiatives: TheFinancialPlan reflects thecostsofnew capitalinitiatives,themostsignificantofwhicharetheSmartSchoolsbondactandHealthCareFacilityRestructuring.

SmartSchoolsBondAct: Reflects theestimateddebt servicecostsassociatedwith theproposed$2.0billionSmartSchoolsbondact. Ifapprovedbyvoters,theSmartSchoolsbondactwillfundenhancededucationtechnologyinschools,witheligibleprojectsincludinginfrastructureimprovementstobringhighspeedbroadbandtoschoolsandcommunitiesintheirschooldistrictandthepurchaseof classroom technology foruseby students. Additionally, Smart Schoolswillenable longterm investments in full day prekindergarten through theconstructionofnewprekindergartenclassroomspace.

HealthCareFacilityRestructuring:Reflectstheprojecteddebtserviceimpactof$1.2billion incapitalprojects initiatives thatwill improve the financialviabilityand efficiency of the States health care delivery system. Fundingwould betargeted for longterm care,hospitals,primary care,andbehavioral/substanceabuse services. Priority projects will include those that: align hospital andnursinghomebedcapacitytoregionalneeds,enablefacility integration,mergeand consolidate facilities,expandprimary careand facilitate transformation tocaremanagementmodels.

Science,Technology,EngineeringandMath(STEM)Scholarship: TheBudgetincludesanewfulltuitionSTEMscholarshipforhighschoolstudentswhograduate inthetop10percentoftheirclasstoanyStateUniversityofNewYork(SUNY)ortheCityUniversityofNewYork(CUNY)collegeoruniversityiftheypursueaSTEMcareerandagreetothenwork in New York State for five years. The new STEM scholarship is designed toencouragetoprankedstudentstopursueSTEMrelatedcollegedegreesandbuildtheircareersinNewYorkState,inoneofthefastestgrowingsectorsoftheeconomy.



RentCapInitiativeforIndividualswithHIV/AIDS:Anewappropriationandchangestolawareproposedthatwouldcaptherentcontributionfor individualswithHIV/AIDS inNewYorkCitywho receivepublicassistanceat30percentof the individuals income.TheStatecommitmentforthisinitiativewouldbecappedat$9millionandthecosttoNewYorkCityisexpectedtobeapproximately$17million.

Election Law Enforcement: The Executive Budget provides $5.3million for a new,independentDivisionofElectionLawEnforcement topromote increasedenforcementof,and compliancewith, the States campaign financeandelection laws. Inaddition,legislationaccompanyingtheExecutiveBudgetestablishesapubliccampaignfinancingprogramaswellasotherreforms.

RESOURCES TaxReceipts:Theestimateforannualtaxreceiptshasbeenrevisedtoreflectupdated

economic forecast data, and includes downward adjustments to business tax andcigarettetaxcollections,partlyoffsetbyupwardchangestopersonalincomeandestatetaxcollections.

Miscellaneous Receipts: The estimate formiscellaneous receipts has been revisedbasedonareviewofcollectionstodate,theprojectedreceiptofvariousbankingandinsurance related settlements and recoveries, and other transactions. In addition,resources will are expected to be made available through transfers from publicauthoritiesandtheexpectedsaleofsurplusproperties.

Extenders/Initiatives: The Executive Budget proposes extending the following creditsthatimpacttheGeneralFund:AlternativeFuelsTaxExemptions;NonCustodialEarnedIncome Tax Credit (EITC); and Commercial Production Tax Credit. In addition, theExecutiveBudgetproposestheauthorizationofaProfessionalandBusinessLicenseTaxClearance thatwould decrease tax avoidance by refusing to issue a professional orbusinesslicensetoanapplicantwhohasoutstandingtaxliabilities.



TAX ACTIONS

TheExecutiveBudgetproposesasetoftaxreductionsvaluedat$2billionwhenfullyphasedinwithinthreeyears.Theseproposalsaredesignedtosimplifythetaxcodeandareestimatedtoresultinanetreductiontotaxesandassessmentsof$504millioninFY2015,and$1.6billioninFY2016.

Establish theRealPropertyTaxFreezePITCredit:TheExecutiveBudgetproposes to

freezepropertytaxesfortwoyears,subjecttotwoconditions.Inyearone(FY2015),theState would provide tax credits only to homeowners, with qualifying incomes of$500,000or less,who live ina jurisdictionthatstayswithinthe2percentpropertytaxcap(thecap).Inyeartwo(FY2016),theStatewouldprovidetaxcreditsonlytohomeownerswholiveinalocalitythatstayswithinthecapandalsoagreestoimplementasharedservicesoradministrativeconsolidationplanthatwouldgeneratesavingsequalto3percentofthepropertytaxlevy.InFY2016,theprogramwouldbenefit2.8millionhomeownersforatotalcostof$976million,yieldinganaveragebenefitof$354perhousehold.NewYorkCityhomeownerswouldnotbeeligible,astheCityisnotsubjecttothecap.

Establish theResidentialRealPropertyPITCredit:TheExecutiveBudgetproposes tocreatearefundabletaxcreditagainstthePITtoprovidetargetedrealpropertytaxreliefbasedonanindividualhomeownersabilitytopay.Thecreditisavailablestatewide,butinareasoutsideofNewYorkCity,onlyresidentsofjurisdictionsthatadheretothecapwouldqualify.When fullyphased in, theprogram, valued at almost $1billionwouldbenefitabout2millionhomeownersyieldinganaveragebenefitof$500.

EstablishaRenter'sPITCredit. TheExecutiveBudgetproposestocreatearefundable

credit.Thistaxreliefwouldbecomposedofabasecreditthatdeclineswithqualifyingincomesup to$100,000 formarried taxpayerswhoare filing jointlyandhave relateddependents, taxpayers filing as head of household, andmarried seniors filing jointly.Singleseniorswith incomesup to$50,000wouldalsoqualify. Nonseniorsinglesandmarried taxpayers without related dependents would be ineligible. The base creditwould be supplementedwith an additional credit per Federal exemption,where thevalueof the supplementwould alsodeclinewith income. When fullyphased in, theprogramwouldsaveapproximately1.3millionhouseholds,atotalof$400million.



CorporateTaxReform:TheExecutiveBudgetwould combine the corporate franchiseand bank taxes to provide tax simplification and relief, and improve voluntarycompliance.Further,thetaxrateonnetincomewouldbereducedfrom7.1percentto6.5percent,thelowestratesince1968.

Establish a 20 Percent Real Property Tax Credit forManufacturers: The ExecutiveBudgetwouldprovidearefundablecreditequalto20percentofpropertytaxespaidbymanufacturerswhoownorleaseproperty.

Eliminate the Net Income Tax on Upstate Manufacturers. The Executive Budgetproposestoeliminatethetaxrateon incomeforUpstatemanufacturers(currently5.9percent)incalendaryear2014andthereafter.

Eliminate Section 18a Temporary Assessment for Industrial Customers, AcceleratePhaseOutforAllOthers:ThetemporaryassessmentisscheduledtobeeliminatedbyMarch 2017, but the Executive Budget proposes to eliminate the assessment onindustrialcustomersimmediately,andacceleratethephaseoutforallothercustomers.Thephaseoutwould savebusinesses and residents$600millionover thenext threeyears.

Reform the Estate Tax: The Executive Budget proposes to increase the exclusion

threshold of the estate tax from $1million to $5.25million over four years, then toconformwiththeFederalexemptionamountbeginningin2019,andtoreducethetoprate from 16 to 10 percent over four years. These actionswould be coupledwithproposalsthatwouldrequirethevalueofgiftstobeaddedbacktotheestate.

StreamlineCorporateAuditProcedures:TheExecutiveBudgetproposestoimplementvarious initiatives which would increase audit efficiency and improve voluntarycompliance.

ReformtheInvestmentTaxCredit(ITC):NewYorkoffersataxcredittobusinessesforinvestments in buildings and tangible personal property including assets acquired bypurchase,withausefullifeoffouryearsormoreandusedinproduction.Thisproposalwould tightenexistingeligibilitycriteria inorder tomoreeffectively target theStatesinvestmenttowardoriginallyintendedandmoreproductiveuses.Forexample,acreditwouldno longerbeallowedforassetsacquiredbypurchasewhenaformerownerhasclaimedtheITCforinvestmentsinthoseassets.



RepealtheFinancialServicesITC:Thiscomplexcreditusedbyanarrowsegmentofthefinancialservicesindustrywouldbeeliminated.Inthemostrecentyearforwhichdataareavailable,only28filersavailedthemselvesofthiscredit.

Close the Resident Trust Loophole: In general, a trust is a legal agreement thatrepresentsaplacewhereassetsfromanestateareheld.Thetrustprovidescertaintaxandlegalbenefitsnotavailableiftheassetsarenotplacedintrust.Currently,NewYorkconformstoFederal law,whichresults inNewYorkPIT immunityforthetrustgrantorand the trust beneficiary. This proposal would decouple New York from FederaltreatmentoftrustsandimposethePITonthetrustgrantor.

Budget Risks And Uncertainties to the

Financial Plan


BudgetRisksandUncertaintiestoTheFinancialPlan

GENERAL The ExecutiveBudget is subject tomany complex economic, social, financial, environmentaland political risks and uncertainties,many ofwhich are outside the ability of the State tocontrol. DOB believes that the projections of receipts and disbursements in the ExecutiveBudgetarebasedonreasonableassumptions,buttherecanbenoassurancethatactualresultswillnotdiffermateriallyandadversely from theseprojections. Incertain fiscalyears,actualreceiptscollectionshavefallensubstantiallybelowthe levelsforecast intheFinancialPlan. Inaddition,theExecutiveBudgetprojectionsarebasedontheassumptionthatannualgrowthinStateOperatingFunds in futureyears is limited to2percent,and thatall savings that resultfromthe2percentlimitaremadeavailabletotheGeneralFund.TheExecutiveBudget isbasedonnumerousassumptions, includingtheconditionoftheStateandnationaleconomiesandtheconcomitantreceiptofeconomicallysensitivetaxreceipts intheamountsprojected. Otheruncertaintiesand risks concerning theeconomicand receiptsforecastsincludetheimpactof:nationalandinternationalevents,ongoingfinancialinstabilityintheEuroZone;changes inconsumerconfidence,oilsuppliesandoilprices;climatechangeand extremeweather events; Federal statutory and regulatory changes concerning financialsector activities; changes concerning financial sector bonus payouts, as well as any futurelegislationgoverningthestructureofcompensation;shiftsinmonetarypolicyaffectinginterestrates and the financialmarkets; financial and real estatemarket developmentswhichmayadverselyaffectbonusincomeandcapitalgainsrealizations;andhouseholddebtreductiononconsumerspendingandStatetaxcollections.Amongotherfactors,theFinancialPlanissubjecttouncertaintiesandcontingenciesrelatingto:theextent,ifany,towhichwageincreasesforStateemployeesexceedtheannualwagecostsassumed;changes inthesizeoftheStatesworkforce;therealizationoftheprojectedrateofreturn for pension fund assets and current assumptions with respect to wages for StateemployeesaffectingtheState'srequiredpensionfundcontributions;thewillingnessandabilityoftheFederalgovernmenttoprovidetheaidcontemplatedbytheExecutiveBudget;theabilityof the State to implement cost reduction initiatives, including reductions in State agencyoperations,andthesuccesswithwhichtheStatecontrolsexpenditures;andtheabilityoftheStateand itspublicauthorities tomarket securities successfully in thepublic creditmarkets.Some of these specific issues are described in more detail herein. The projections andassumptions contained in the Financial Plan are subject to revisions which may involvesubstantial change. No assurance canbe given that theseestimates andprojections,whichincludeactionstheStateexpectstobetakenbutwhicharenotwithintheState'scontrol,willberealized.

BUDGETRISKSANDUNCERTAINTIESTOTHEFINANCIALPLAN


There canbenoassurance that the StatesGeneral Fundoperatingpositionwillnot changemateriallyandadversely fromcurrentprojections. If thiswere tooccur, theStatewouldberequiredtotakeadditionalgapclosingactions. Suchactionsmay include,butarenot limitedto,additionalreductions inStateagencyoperations;delaysorreductions inpaymentsto localgovernmentsorother recipientsofStateaid;delays inor suspensionofcapitalmaintenanceandconstruction;extraordinaryfinancingofoperatingexpenses;orothermeasures. Insomecases,theabilityoftheStatetoimplementsuchactionsrequirestheapprovaloftheLegislatureandcannotbeimplementedsolelybytheactionoftheGovernor.The Executive Budget projections generally assume that School Aid and MedicaiddisbursementswillbelimitedtothegrowthinStatepersonalincomeandthetenyearaveragegrowthintheMedicaidcomponentoftheConsumerPriceIndex(CPI),respectively.However,theFY2014EnactedBudgetauthorized spending forSchoolAid to increase inexcessof thegrowth inpersonal income for School Year (SY)2014.Aproposal is included in the FY2015ExecutiveBudgetthatwouldallowSchoolAidtogrowatapproximately4percentinSY2015,inparity with Medicaid, but above the 3.1 percent growth in personal income that wouldotherwisebeusedtocalculateSchoolAid increases. Spending foreducationabovethis levelmayoccurifvotersapprovetheSmartSchoolsbondactinNovember2014.State lawgrantstheGovernorcertainpowerstoachievetheMedicaidsavingsassumed intheExecutiveBudgetFinancialPlan.However,therecanbenoassurancethatthesepowerswillbesufficienttolimittherateofannualgrowthinDOHStateFundsMedicaidspendingtothelevelsestimated in the Executive Budget Financial Plan. In addition, savings are dependent upontimely Federal approvals, revenue performance in the States HCRA fund (which financesapproximatelyonethirdof theDOH Stateshare costsofMedicaid),and theparticipationofhealthcareindustrystakeholders.The forecast contains specific transaction risks and other uncertainties including, but notlimitedto,thereceiptofcertainpaymentsfrompublicauthorities;thereceiptofmiscellaneousrevenues at the levels expected in the Executive Budget Financial Plan, including paymentspursuanttotheTribalStateCompactthathave failedtomaterialize inprioryears,butwhichwerereceivedinthecurrentyearaspartofanagreementbetweentheStateandcertaintribalnations;andtheachievementofcostsavingmeasuresincluding,butnotlimitedto,thetransferofavailablefundbalancestotheGeneralFundatthelevelscurrentlyprojected.Suchrisksanduncertainties, if they were tomaterialize, could have an adverse impact on the ExecutiveBudgetFinancialPlaninthecurrentyearorfutureyears.



FEDERAL ISSUES The State receives a substantial amount of Federal aid for health care, education,transportation, and other governmental purposes, as well as Federal funding to addressresponsetoandrecoveryfromsevereweatherevents.AnyreductioninFederalfundinglevelscouldhaveamateriallyadverseimpactontheExecutiveBudgetFinancialPlan.Inaddition,theExecutive Budget Financial Plan may be adversely affected by other actions taken by theFederalgovernment,includingaudits,disallowances,andchangestoFederalparticipationratesorotherMedicaidrules.Issuesofparticularconcernaredescribedbelow. MEDICAID REDESIGN TEAM MEDICAID WAIVER PursuanttodiscussionswiththeFederalGovernment,theCentersforMedicareandMedicaidServices (CMS) and the State have reached an agreement in principle authorizing up to$8billioninFederalfunding,overmultipleyears,foruseintransformingNewYorkshealthcaresystem. The final terms of this agreement are still being negotiated and upon final CMSapprovalwill be reflected as an amendment to the States Partnership Plan 1115Medicaidwaiver. FEDERAL REIMBURSEMENT FOR STATE MENTAL HYGIENE SERVICES Pursuant to discussions with the Federal government, the State has lowered MedicaiddevelopmentaldisabilitycenterpaymentrateseffectiveApril1,2013. Full implementationofthis change will reduce Federal funding to the State by approximately$1.1 billion annually, beginning in FY 2014. The 2014 Enacted Budget included a plan toaddressthelossinFederalaid,including$90millioninOPWDDsavingsassociatedwithreducedadministrativecosts,enhancedauditrecoveriesandimprovedprogramefficiencies.Theplanissubject to implementation risks and is dependent, in part, on the approval of the Federalgovernment. In addition, as described below, the Federal CMSmay seek to retroactivelyrecoverFederalfundspaidtotheStateregardingthismatter. AUDIT DISALLOWANCE Inadditiontotheratereductiondescribedabove,onFebruary8,2013,theU.S.DepartmentofHealth&HumanServicesOfficeoftheInspectorGeneral,atthedirectionoftheFederalCMS,begana review todetermine theallowabilityofMedicaidcosts forservicesprovided inprioryearstotheMedicaidpopulation inNewYorkStateOperated IntermediateCareFacilities fortheDevelopmentallyDisabled (ICF/DD). The initial reviewperiod includesclaims forservicesprovidedfromApril1,2010throughMarch31,2011.Asaresultofthisreview,CMSmayseek



torecoverFederalfundsforanypaymentsthatitdeterminestohavebeeninexcessofFederalrequirements. The State has attempted to address CMS concerns regarding its prospectivepayments to ICF/DDswithaStateplanchangeeffectiveApril1,2013,andcontinues tohavediscussionswithCMS to resolve theconcernsrelated to theApril1,2010 throughMarch31,2011 period. As noted above, the changes begun in FY 2014 are expected to result in areduction in Federal aid of an estimated $1.1 billion annually beginning in FY 2014. AcomparableamountofFederalaidisatriskforanypriorperiodthatmaybepursuedbyCMS.Matters of this type are sometimes resolved with a prospective solution (as alreadycommencedby theState),and theState isnotawareofanysimilarattemptsby theFederalgovernmenttoretroactivelyrecoverFederalaidofthismagnitudethatwaspaidpursuanttoanapproved State plan. The State continues to seek CMS approval to proceed with thedevelopment of a sustainable system of service funding and delivery for individuals withdevelopmental disabilities. However, there can be no assurance that Federal action in thismatterwillnotresultinmateriallyadversechangestotheExecutiveBudgetFinancialPlan.BUDGET CONTROL ACT TheFederalBudgetControlAct (BCA)of2011 imposedannual capsonFederaldiscretionaryspendingoveratenyearperiodandmandatedanadditional$1.2trillion indeficitreduction,which, ifnotenacted,wouldbeachievedthroughthesequestrationoffunds inFederalFiscalYear (FFY) 2013 and lowered discretionary spending caps in the following years. As therequireddeficitreductionwasnotachievedbytheMarch1,2013deadline,anacrosstheboard5percent reduction inFFY2013 funding forFederalnondefensediscretionaryprogramswasimplemented. In December 2013, the spending caps for FFY 2014 and 2015were revisedupward by the Bipartisan Budget Act (BBA) of 2013. While the BBA provided minordiscretionarycapreliefover twoyears,BCAcaps in theremainingyearswerenotaddressed.Although specific funding levelswillbedetermined through theannualcongressionalbudgetprocessiftheloweredspendingcapsremaininplace.DOBestimatesthatNewYorkStateandlocal governments could lose approximately $5 billion in Federal funding over nine years,including reductions in Federal funding that passes through the State budget for schooldistricts,aswellasenvironmental,criminaljusticeandsocialservicesprograms.DEBT CEILING InOctober2013,an impasse inCongresscauseda temporaryFederalgovernment shutdownand raised concern for a time that the Federaldebt ceilingwouldnotbe raised in a timelymanner.AFederalgovernmentdefaultonpayments,particularlyifitpersistedforaprolongedperiod,couldhaveamateriallyadverseeffecton thenationalandstateeconomies, financialmarkets,andintergovernmentalaidpayments.



Thespecificeffectson theExecutiveBudgetFinancialPlanofaFederalgovernmentpaymentdefault in the future are unknown and impossible to predict. However, data from pasteconomicdownturnssuggestthattheStatesrevenuelosscouldbesubstantialiftheeconomygoesintoarecessionduetoaFederaldefault.ApaymentdefaultbytheUnitedStates(U.S.)mayadverselyaffectthemunicipalbondmarket.Municipalissuers,aswellastheState,couldfacehigherborrowingcostsandimpairedmarketaccess. This would jeopardize planned capital investments in roads and bridges, highereducation facilities, hazardous waste remediation, environmental projects, and economicdevelopmentprojects.Additionally,themarketforandmarketvalueofoutstandingmunicipalobligations,includingmunicipalobligationsoftheState,couldbeadverselyaffected.HEALTH INSURANCE COMPANY CONVERSIONS State law permits a health insurance company to convert its organizational status from anotforprofit toa forprofitcorporation (ahealthcareconversion),subject toanumberofterms,conditions,andapprovals. UnderState law,theState isentitledtoproceedsfromthemonetizationofahealthservicecorporation,fromanotforprofittoaforprofitcorporation,andsuchproceedsmustbeusedbytheStateforhealthcarerelatedexpenses.Inrecentyears,the FinancialPlanhas countedon proceeds from conversions ($175million in FY 2014, and$300millionannuallyinFY2015,FY2016,andFY2017intheFY2014EnactedBudget),whichhavenotbeenrealized. Forplanningpurposes,theExecutiveBudgetFinancialPlanno longercountsonconversionproceeds. STATUS OF CURRENT LABOR NEGOTIATIONS (CURRENT CONTRACT PERIOD) TheStatehassettledcollectivebargainingagreementsforthecontractperiodcommencing inFY2012with90percentof the Stateworkforce, andnearly theentireworkforce subject todirectExecutivecontrol. FiveyearagreementswerereachedwiththeCivilServiceEmployeesAssociation (CSEA), theUnitedUniversityProfessions (UUP), theNewYorkStateCorrectionalOfficersandPoliceBenevolentAssociation(NYSCOPBA),andCouncil82.Fouryearagreementswere reached with the Public Employees Federation (PEF) and the New York State PoliceBenevolentAssociation(NYSPBA).The settled agreements yielded wage and benefit concessions in exchange for contingentemployeejobprotectionthroughtherespectivecontractperiods. Nevertheless,reductions inforcemaybeauthorized iftheStatesfiscalcircumstanceschangemateriallyorunexpectedly,orifsuchreductionsareassociatedwiththeclosureorrestructuringoffacilitiesauthorizedbylegislation or by a Spending and Government Efficiency Commission (SAGE) Commissiondetermination.



Theagreementshaveprovided:twoyearDeficitReductionPlan(DRP)savingsof$300million;no general salary increases for the threeyearperiod FY2012 through FY2014; a2percentgeneralsalary increase inFY2015;anda2percentgeneralsalary increase inFY2016 fortheemployees with fiveyear agreements. Additionally, the agreements provided fullannualhealthbenefit savingsof$230million resulting from increases toemployee/retireepremiumshares,copays,outofnetworkdeductiblesandcoinsurance.Two lumpsumpayments$775 inFY2014and$225 inFY2015wereorwillbepaid toemployees representedbyCSEA,NYSPBA,NYSCOPBAandCouncil82. PEFdidnotnegotiatethese lump sum payments, but covered employees will receive repayment for all DRPreductionsoveranextendedtimeattheendofthecontractterm.Theemployeesrepresentedby unionswhich negotiated the lump sum paymentswill be repaid a portion of their DRPreductions over an extended term at the end of their respective contract terms. UUPemployeesmayreceivelumpsumpaymentsofsimilarvalueintheformofChancellorsPowerofSUNYAwardsandPresidentialDiscretionaryAwards.The unions representing Graduate Students, State Police Troopers, Investigators andCommissioned/NonCommissioned Officers, as well as employees represented by DistrictCouncil37 (Housing) in theDivisionofHomes andCommunityRenewal (DHCR), continue tohaveunsettledcontractsforthecurrentcontractperiod. TheExecutiveBudgetFinancialPlandoesnotincludeaGeneralFundreserveforthispurpose.LABOR SETTLEMENTS FOR PRIOR CONTRACT PERIODS TheExecutiveBudgetFinancialPlancontinuesto includeaGeneralFundreservetocoverthecostsofapatternsettlement forunsettledcontractspriortoFY2011. There isnoassurancethisreservewillfullyfundtheseunsettledcontracts.Inaddition,theStatesabilitytofundallfutureagreementsinFY2015andbeyonddependsontheachievementofbalancedbudgetsinthoseyears.



CURRENT CASH-FLOW PROJECTIONS TheStateauthorizestheGeneralFundtoborrowresourcestemporarilyfromavailablefundsintheShortTerm InvestmentPool(STIP)foruptofourmonths,ortotheendofthefiscalyear,whicheverperiod isshorter. Theamountof resources thatcanbeborrowedby theGeneralFund is limited to the available balances in STIP, as determined by the State Comptroller.Available balances includemoney in the States governmental funds and a relatively smallamountofothermoneysbelongingtotheState. Severalaccounts inDebtServiceFundsandCapitalProjectsFundsthatarepartofAllGovernmentalFundsareexcludedfromthebalancesdeemedavailableinSTIP.Theseexcludedfundsconsistofbondproceedsandmoneyobligatedfordebtservicepayments.DOBexpectsthattheStatewillhavesufficientliquiditytomakepaymentsastheybecomeduethroughouttheremainderofFY2014andFY2015,butthattheGeneralFundmay,fromtimetotimeonadailybasis,needtoborrowresourcestemporarilyfromotherfunds inSTIP. TheState continues to reservemoney on a quarterly basis for debt service payments that arefinanced with General Fund resources. Money to pay debt service on bonds secured bydedicated receipts, including PIT bonds and Sales Tax bonds, continues to be set aside asrequiredby lawandbondcovenants. ThefollowingtableprovidesanestimateofmonthendbalancesforFY2015.

General Other AllFund Funds Funds

April 5,605 3,265 8,870May 3,070 3,662 6,732June 3,022 3,613 6,635July 3,175 4,266 7,441August 2,756 4,359 7,115September 6,162 2,097 8,259October 4,639 3,061 7,700November 3,288 3,389 6,677December 5,404 1,829 7,233January 7,534 3,143 10,677February 7,547 3,815 11,362March 1,743 2,309 4,052

PROJECTEDALLFUNDSMONTHENDCASHBALANCES

(millionsofdollars)FY2015



PENSION AMORTIZATION UnderlegislationenactedinAugust2010,theStateandlocalgovernmentsmayamortize(deferpaying)aportionoftheirannualpensioncostsbeginninginFY2011.Amortizationtemporarilyreduces thepension costs thatmustbepaidbypublicemployers in a given fiscal year,butresultsinhighercostsoverallwhenrepaidwithinterest.The 2010 legislation enacted a formula to set an amortization threshold for each year. Theamortization threshold (the graded rate)may increaseor decrease in the direction of theactuarialcontributionrate(thenormalrate)byuptoonepercentagepointannually.Pensioncontributioncostsinexcessofthegradedratemaybeamortized.Amortizationispermittedinall years if thenormal rate isgreater than thegraded rate.However,when thegraded rateequalsorexceedsthenormalrate,amortizationisnotallowed. InFY2015, thegradedcontribution rates for theERSand thePFRSwillbe13.5percentand21.5percent,respectively.TheExecutiveBudgetFinancialPlanassumestheStatewillcontinuetoamortizeitspensioncostsinFY2015attheserates.Overthepastfouryears,thenormalratesandtheamortizationrateswereasfollows:

FiscalYear(FY)

ERSAverageNormalRate

ERSAmortizationRate

PFRSAverageNormalRate

PFRSAmortizatonRate

FY2011 11.9 9.5 18.1 17.5FY2012 15.9 10.5 21.5 18.5FY2013 18.5 11.5 25.8 19.5FY2014 20.5 12.5 28.8 20.5

ForbothERSandPFRS,DOBprojectstheFY2016gradedrateswillbeequalto,ormorethan,thenormalcontributionrates.Assuch,continuedamortizationisnotexpected.Furthermore,DOBprojects thegraded rateswillexceed thenormal contribution rates inFY2017 throughFY2020.Intheseyears,contributionsthatexceedthenormalcontributionswillbeusedtopayoutstanding cost of prior year amortizations, as required by statute. These projections arebased on projectedmarket returns and numerous actuarial assumptions. The next fiveyearexperiencestudyconductedbytheRetirementSystemsActuary isscheduledtotakeplace in2015andcouldchangetheseprojectionsmaterially.The State is required to begin repayment on each new amortization in the fiscal yearimmediately following the year in which the deferral wasmade. The full amount of theamortization,with interest,mustbe repaidwithin tenyears,but theamountcanbepaidoff



sooner.TheannualinterestrateoneachnewamortizationisdeterminedbyOSC,andisfixedfortheentiretermofthedeferral.InFY2013,theStatemadepensionpaymentstotheNewYorkState&LocalRetirementSystem(NYSLRS) of $1.217 billion, ofwhich $674.1millionwas amortized. In addition, the StatesOffice of CourtAdministration (OCA)made its pension payment of $189.4million, ofwhich$104.4millionwasamortized. Thetotaldeferredamount$778.5millionwillberepaidwithinterestoverthenexttenyears,beginninginFY2014.Foramountsamortized inFY2011,FY2012,FY2013,andFY2014,theStateComptrollersetinterest rates of 5 percent, 3.75 percent, 3 percent, and 3.67 percent, respectively. TheExecutiveBudget FinancialPlan assumes thatboth the State andOCAwillelect to amortizepensioncosts infutureyears,consistentwiththeprovisionsoftheauthorizing legislation,andrepaysuchamountsatan interestcostassumedbyDOBtobe3.67percent(perannum)overtenyearsfromthedateofeachdeferredpayment,consistentwiththeinterestratechargedontheFY2014amortizedamounts.Thefollowingtable,summarizespensioncontributionsandprojectionsforGSCsandOCAovertheperiodFY2011toFY2028. TheNormalCostscolumnshowstheamountoftheStatespensioncontributionpriortoamortization.TheNewAmortizedAmounts/PaymentonPriorDeferralscolumnshowsnewamountsdeferredorpaymentsmadeonpriordeferrals ineachfiscalyear.TheNewAmortizationCostscolumnprovidetheaggregatecostofamortizationinagiven fiscalyear (principaland interestonallpriordeferrals). TheTotalcolumnprovidestheStatespensioncontribution,netofamortization.Consistentwith these amortization assumptions,Part TTofChapter57of the Lawsof 2010requires that: (a)theStatemakeadditionalcontributions inupcoming fiscalyears,above theactuarially required contribution, and (b) once all outstanding amortizations are paid off,additionalcontributionsbesetasideasreservesforrateincreases,tobeinvestedbytheStateComptrollerandusedtooffsetfuturerateincreases.



Asnotedabove,DOBsmostrecentpensioncontributionrateforecastassumesthatthenormalcontributionratewillequalthegradedrate inFY2016. Therefore,theStatewouldnothavetheoptiontoamortizeanyofitspensioncostsin2016,orintheimmediatelysucceedingfiscalyears. Inaddition,this forecastassumestheStatewillmakeamortizationpaymentsonpriordeferralspursuanttotheformulainstatute.ThesepaymentsareprojectedtooccurinFY2017through FY 2021. Projections in the following table are based on certain DOB assumptionsaboutactuarialfactorsoninvestmentearningsandbenefitstobepaid,andwhileDOBbelievessuchassumptions tobe reasonable,actual resultsmayvary from theprojectionsprovided inthefollowingtable,andsuchvariancescouldbesubstantial.

FiscalYear NormalCosts2

NewAmortizedAmounts/PaymentonPriorDeferrals

NewAmortization

Costs Total

2011Results 1,552.8 (249.6) 0.0 1,303.22012Results 2,041.7 (562.9) 32.3 1,511.12013Results 2,085.3 (778.5) 100.9 1,407.72014Projected 2,507.8 (937.0) 192.1 1,762.92015Projected 2,481.5 (742.6) 305.8 2,044.72016Projected 1,730.4 0.0 395.8 2,126.22017Projected 1,477.9 117.3 395.8 1,991.02018Projected 1,355.8 171.9 364.1 1,891.82019Projected 1,315.7 178.7 363.5 1,857.92020Projected 1,312.7 96.6 295.0 1,704.32021Projected 1,389.1 3.6 207.2 1,599.92022Pr

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New York State - OpenBudget.ny.gov · New York State FY 2015 Executive Budget Financial ... ANDREW M. CUOMO, GOVERNOR ... the estimated impact of the Governor’s Executive Budget