State eyes shrinking Wall Street bonuses

ALBANY - Wall Street profits were sky-high, but year-end cash bonuses - which New York had relied on heavily for tax revenue - have fallen as companies shift to paying higher salaries and offering stock options, State Comptroller Thomas DiNapoli said Wednesday.

In his annual report on Wall Street bonuses, DiNapoli said Wall Street paid out $20.8 billion in cash bonuses in late 2010 and early this year, down 8 percent from 2009. The average bonus fell to about $128,000.

But that doesn't mean Wall Street isn't healthy, DiNapoli said. New York Stock Exchange profits hit $27.6 billion in 2010, the second-highest on record, and overall compensation at a sampling of stock brokerages and securities dealers was up 6 percent, the report said.

"While cash bonuses are down, it is not an indication that Wall Street is weakened," DiNapoli told reporters.

DiNapoli said the financial crisis and new regulations have prompted more banks and brokerages to give stock options and other deferred compensation instead of big year-end cash payouts.

The report comes as chief executives at major companies also have seen their base salaries increase from the hundreds of thousands into the millions, while receiving smaller bonuses. In the first six months of 2010, wages on Wall Street were up 22 percent, the report said.

Overall, DiNapoli said, the trend was positive and long-term. "The state and the city will benefit in coming years when the taxes are paid out on this deferred compensation," he said.

Big Wall Street wages provide a direct boost to the economies of Nassau and Suffolk, especially on the East End, said Martin Cantor, director of the Long Island Economic and Social Policy Institute at Dowling College.

"This is the second-home group, the financial people who rent expensive homes in the Hamptons," Cantor said. "When Wall Street prospers, the East End of Long Island prospers. It's a direct connection between Wall Street and Main Street."

Though Wall Street profits were up, the report revealed signs that the state's basic formula for raising revenue was changing.

Wall Street, which once accounted for 20 percent of all state tax revenue, now makes up about 13 percent of tax collections, DiNapoli said, a result of about 30,700 job losses in the New York City securities industry since the recession started in late 2008.

"It is not the driver of our revenue and our economy that it had been . . . but it is still very significant," DiNapoli told the Garden City Chamber of Commerce Wednesday.

But DiNapoli said the drop in bonuses won't blow a hole in this year's budget or next year's. He called current projections "right on."

"We do not believe there is a budgetary risk," DiNapoli said.

With William Murphy