N.Y.C., State Budget Outlooks Dim as Wall Street Falters

NEW YORK -- New York state and city each predicted widening budget shortfalls as Wall Street profits plunge and the real estate market cools, Bloomberg News reported.

Mayor Michael Bloomberg Tuesday ordered department heads to freeze hiring and cut spending this year and next in anticipation of less revenue, Bloomberg News reported.

City Budget Director Mark Page wrote in a memorandum to department heads Tuesday that New York's budget shortfall would reach $2.7 billion in fiscal 2009, $1.15 billion more than he projected in July at the start of the current fiscal year. For 2010, he estimated a $4.8 billion gap, $1.4 billion more than the administration had anticipated. The $6.5 billion deficit now expected for fiscal 2011 is $2.1 billion more than previously calculated, Bloomberg News reported.

Bloomberg Tuesday ordered agency heads to stop hiring except for positions paid for by the federal or state government, or jobs with an immediate impact upon public health and safety. He also called for budget cuts of 2.5 percent this year and 5 percent next year for a savings of $1.5 billion, Bloomberg News reported.

Meanwhile, state budget officials said Tuesday that deficits for the next three fiscal years would be higher than expected, owing to a slump on Wall Street and the decrease in income tax revenues that will probably result, The New York Times reported.

According to figures released by the Budget Division, the state budget is expected to remain balanced during the current fiscal year, which ends March 31, but the next year’s deficit will increase by about $651 million, to $4.3 billion, from a $3.6 billion gap projected in July, the paper reported.

The deficits are expected to grow by an average of about $1 billion during each of the next two years, leaving deficits totaling $6.2 billion in 2009 and $7.9 billion in 2010, the paper reported.

Meanwhile, a report Tuesday from the New York state comptroller's office said Wall Street's 2007 bonus pool will be smaller than the 2006 record due to turmoil in the housing and credit markets after three-and-half years of gains, even though the strong first half to the year will insulate the drop, The Wall Street Journal reported.

But the crunch in credit markets and the mortgage business is still being felt. Profits for broker-dealer operations of New York Stock Exchange member firms are expected to fall to $14.8 billion this year from more than $20 billion last year, worse than the office had expected, the paper reported.

Next year's budget for New York City could be affected if the credit market turmoil continues and hits the city's real-estate market, the report warned. And the impact on New York state could be even greater, because the state is more reliant on Wall Street as a source of revenue, the paper reported citing the report.

The fourth quarter is of paramount importance, because it will "determine the outcome for the year and set the stage for 2008," the report concluded, according to the paper.

-- NYSSCPA.org News Staff

Posted on 10/31/07