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Smaller bank bonuses create wide state budget gap

New York's budget gap next year will be 10 percent wider than projected two weeks ago because Wall Street's cash bonuses are less than forecast, Gov. David Paterson said Wednesday.

Paterson proposed a $134-billion spending plan for the state last month to close a $7.4-billion deficit that relied in part on a 5.4 percent increase in personal income-tax revenue. That gap is now estimated to be $750 million bigger, at $8.2 billion, he said Wednesday in a statement.

Personal income tax collections in January were $1 billion below the $7.08 billion the state forecast. Last month, President Barack Obama called for a crackdown on "obscene" Wall Street bonuses. Political pressure on banks to slash the payouts hurts New York, which relies on bankers for 20 percent of its tax revenue, Paterson has said.

"We know that the big guys typically pay us at the end of January," Robert Megna, the state budget director, said at a news conference in Albany. "Last week, after the budget came out, they didn't pay us."

Paying bonuses in stock rather than cash, and spreading the distributions out rather than in lump sums, may explain some of the January shortage, he said.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.'s investment bank cut their compensation in the fourth quarter. They set aside $39.9 billion for pay in 2009, below the 2007 record of $44.7 billion. The total fell short of the $46.1 billion five analysts expected earlier in January, and almost $10 billion less than what some analysts estimated in October.

Much of January's $1-billion gap in personal tax payments may be recouped later in the year, Megna said. Still, the state has reduced its forecast for what it will receive in income tax collections by $550 million by the end of March 2011.

Calls to banks have yielded little information, Megna said. "I think they're a little reticent to tell us what the bonus payout policy is," he said.

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