Cuomo: Projected 2012 deficit could grow

The recession may be over, but the weak recovery has state officials worrying again about how far next year's budget will go into the red.

Gov. Andrew M. Cuomo recently warned that a projected $2.4 billion budget deficit for next year could grow as revenue slows.

"The economy was stronger than anticipated earlier in the year; the revenues were coming in better than anticipated," Cuomo said. "Then the economy went flat. Now the economy is down."

Though personal income tax collections were up 35 percent in April over last year, reflecting the strengthening economy in 2010, that growth slowed to 9 percent in August. Tax collection data for September are expected this week.

"People are feeling the economy is slowing down and we see that in our collections," Cuomo said.

Still, the governor cautioned against reading too much into the latest dip on the economic roller coaster. The state has not revised its projection of 7.9 percent revenue growth.

"Right now the revenues are plus or minus on a marginal basis where we thought we would be, but there's still time on the clock," he said. "We have to see what happens with the economy." Because of that uncertainty, Cuomo has declined to speculate on whether the state would need to cut health care, education and other big areas of spending next year.

Economic volatility has become the new normal, adding uncertainty to state and local budgets already straining under high unemployment.

State Comptroller Thomas DiNapoli added another fear factor. In a report last week, he said Wall Street could lose 10,000 jobs next year because of the sluggish U.S. economy and the uncertainty of the European debt crisis. The securities industry already has lost 4,100 jobs since April and profits declined by 10.8 percent to $12.6 billion in the first half of calendar 2011, the comptroller's office reported.

These "are high-paying jobs and in terms of the money that's spent on the economy and the taxes that are paid, that has an impact," DiNapoli said.

The financial sector "is still a very profitable part of our economic picture," he said. But "a lot of forces are dampening some of what had been perceived to be very strong gains at the beginning of the year."

Nationally, states' finances have been improving but expiring federal stimulus funding presents a challenge.

In 2009, the federal government began pumping billions into state governments through the Medicaid program under the American Recovery and Reinvestment Act. New York received $13.5 billion, of which $9.6 billion went to state government, according to the state Budget Division. That program ended in June.

Declining revenue and the loss of stimulus money worries Peter Baynes, executive director of the New York Conference of Mayors and Municipal Officials.

Local governments are using up their general funds to live within the 2 percent tax cap enacted this year, "with the hope that next year there will be more of a commitment from the state to provide additional state aid, and/or provide significant mandate relief," he said.

Further cuts in state aid could force more localities to try to override the tax cap, he said.

"Are we going to continue to provide police fire, water, sewer, streets, things that people and businesses rely upon?" he said. "There are no easy solutions."