Tax collections through the first half of the state fiscal year (SFY) fell $1.3 billion (3.5 percent) to $36.9 billion from the same period a year ago as personal income tax (PIT) receipts, the state’s largest source of revenue, lagged expectations, according to a mid-year report on revenue and monetary settlements released today by New York State Comptroller Thomas P. DiNapoli. The state’s General Fund mid-year balance was $9.6 billion, primarily reflecting receipt of settlement money the state has largely committed for various uses.
“Personal income tax collections continue to fall short of expectations, making the state’s revenue picture uncertain,” DiNapoli said. “The state has not seen the level of growth needed to meet year-end projections. At the same time, the use of some settlement resources for ongoing spending and to boost the state’s bottom line may be obscuring New York’s true fiscal position, and leaving uncertainty for the commitments already made. Going forward careful attention will be needed to monitor the state’s revenue and fiscal position.”
Tax collections through September 30, the mid-point of the fiscal year, were below collections in five of the first six months of last year. Collections were $918.7 million lower than original projections in the Enacted Budget Financial Plan, but $11.3 million higher than the most recent projections.
Through the mid-year of SFY 2016-17, PIT collections totaled just under $23.5 billion, a drop of 3 percent, or $734.3 million, from the same period in SFY 2015-16. PIT collections were $1.2 billion below initial projections and $422.7 million below updated projections. To meet current year-end projections, PIT collections will have to increase 11.1 percent, or $2.5 billion, through the end of the year, compared to the same period last year.
Through September, business tax collections declined $364.7 million, or 9.8 percent, from the same period in SFY 2015-16, to nearly $3.4 billion, but exceeded initial and updated projections. The decline is due largely to corporate tax reforms made in 2015, decreased audit collections in the current year, and other tax law changes that may have changed taxpayer behavior and the timing of estimated payments.
Collections of consumption and use taxes totaled just over $8.2 billion through the first six months of the fiscal year, an increase of $130.4 million, or 1.6 percent, from the same period in SFY 2015-16. Year-to-date collections are $95.9 million higher than current projections and $127.9 million over initial projections.
The largest component of consumption and use taxes is the sales and use tax. Through the mid-year, sales and use tax collections totaled just over $7 billion, an increase of $135.7 million, or 2 percent from the same period in SFY 2015-16.
DiNapoli’s report notes that since the start of the 2014-15 state fiscal year through the mid-year of SFY 2016-17, New York state has received, or is expected to receive, nearly $9 billion in largely non-recurring monetary fines, settlements, forfeitures or restitutions from 22 entities.
The planned use of these settlement resources has evolved over time. The SFY 2015-16 Enacted Budget Financial Plan indicated that monetary settlement resources would be used to fund one-time purposes, with a large share expected to be used to fund new capital investments, although more than $625 million in settlement dollars have been used for general budget support.
The SFY 2015-16 Enacted Budget included language creating the Dedicated Infrastructure Investment Fund (DIIF), a capital projects fund. The DIIF was characterized as a mechanism to allow the settlement dollars to be set aside for intended purposes. Appropriations from the DIIF total nearly $7.4 billion, including $1 billion for the planned Javits Center expansion, which will be initially funded with settlement dollars but eventually with bond proceeds.
The SFY 2016-17 Executive Budget Financial Plan issued in January 2016 identified $6.4 billion to be transferred from the General Fund to the DIIF, including over $4.5 billion before the end of the 2015-16 fiscal year and the remainder by the end of the current state fiscal year. However, just $856.9 million was transferred to the DIIF in SFY 2015-16, allowing the General Fund to close with a balance of $8.9 billion. The plan included in the First Quarterly Update anticipates that approximately 28 percent of the monies initially planned for transfer to the DIIF through SFY 2016-17 will actually be transferred in that time frame.
As a result, a large portion of these monies are now anticipated to remain in the General Fund or be used for other purposes until they are needed in the DIIF through SFY 2020-21. This provides the state with additional budgetary flexibility, but adds uncertainty for the appropriated uses of the settlement resources, according to DiNapoli’s report.
For example, to partially offset additional costs and lower than anticipated tax revenues, the first quarterly update to the Financial Plan includes a delay, until SFY 2017-18, of the transfer of $450 million from the General Fund to DIIF intended for the Thruway Authority for the replacement of the Tappan Zee Bridge project. According to the First Quarterly Update, the Thruway Authority issued bonds and will use those resources for the project in advance of a transfer from the DIIF.
The nearly $9 billion in settlement resources received, or expected to be received, since April 2014 would most appropriately be used for capital investments and other one-time purposes. To date, at least one in every six settlement dollars has been or is planned to be used on non-capital purposes.
Going forward, policy makers should make every effort to ensure that remaining settlement dollars pay for essential capital and other one-time investments, according to DiNapoli’s report.
Read the report, or go to: http://www.osc.state.ny.us/reports/budget/2016/2016-17_midyear_report.pdf
For access to state and local government spending and more than 50,000 state contracts, visit www.openbooknewyork.com. The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.