NY: Projected budget gap $3B to $3.5B

New York's worsening economic picture has increased next year's projected budget gap to between $3 billion and $3.5 billion, the state Division of Budget said Monday.

The report, a midyear budget update that was due on Oct. 31, was delayed because of the European debt crisis and swings on Wall Street, Gov. Andrew M. Cuomo said. "There's been so much volatility that I want to make sure we're not making decisions based on incorrect information," he said in a radio interview.

The governor has said for months that a projected $2.38 billion deficit could grow. Monday's report puts it at $3.25 billion, the halfway point between the high and low estimates. not including the current fiscal year deficit, which the state projects at $350 million.

Cuomo could call a special session of the legislature if actions to close the gap fall short. Division of Budget spokesman Morris Peters said that state agencies will be asked to review discretionary payments and avoid hiring new staff.

Last November, former Gov. David A. Paterson called a special session to close a $315 million deficit, but the legislature did not act on his recommendations. The gap was closed by higher than expected revenue and lower than expected spending, according to budget documents.

State personal income tax receipts had come in better than expected as the fiscal year began, but have since dropped from 35 percent above last year in April to 5 percent better in September, according to data from the state comptroller's office. The state relies on the financial services industry for about 20 percent of its tax revenue, which means that it is vulnerable to projected drops in profits, employment and year-end bonuses in that sector.

The governor has the authority to limit state agency spending, but changes to school aid or local assistance would require legislative approval, said Robert Ward, deputy director of the Rockefeller Institute of Government.

"It seems much more likely that the gap from this year would be solved by the executive branch," Ward said. "If it becomes significantly larger, another option would be dealing with it in the context of next year's budget."

Under the "quick start" budget statute, the governor's office, Senate, Assembly and comptroller's office are to meet publicly on or before Nov. 15 to review the economic forecast and projected revenue and spending for the next budget. Senate Majority Republicans and Assembly Majority Democrats are reviewing the budget update and will release their own versions in the near future, spokesmen said.

Cuomo said he wouldn't speculate on whether the state would able to make expected 4 percent increases in school aid and Medicaid spending next year.