Pension increase in FY2012 is $1 Billion reserve Agency Spending increase is primarily increase in education spending.

NOTES Includes 10 rounds of cuts starting with January 2008 plan. Net restorations Includes revenue actions: raising fees (parking), enhancements (enforcements - block the box, audits), funding shifts Analysis of PEGs since Nov 2008 showed that about 1/3 of PEG value came from revenues

New York City & New York State Budget Briefing October 13th, 2011 1

2 Overview Budget Calendars & Economic Indicators New York State New York City

City and State Budget Calendars The City’s fiscal year begins on July 1 Key budget milestones are: January – Preliminary Budget April – Executive Budget June – Adopted Budget November – Quarterly Modification 3 The State’s fiscal year begins on April 1 Key budget milestones are: January – Governor’s Executive Budget March – Adopted Budget July – First Quarterly Update October – Mid-year Update

Employment 1990 - 2015 4 Indexed Growth from 1990

Personal Income 2001 - 2015 5 Indexed Growth From 2001

Economic Indicators 2010 - 2015 6 Indexed Growth From 2010

Composition of NYS Receipts Fiscal Year 2012 7

Composition of NYS Spending Fiscal Year 2012 8 CBC “Big Three” 63% of State Spending

NYS K-12 and Medicaid Spending Far Exceed National Averages 9

Historic Spending Growth has Outpaced Economic Growth 10 Average Annual Percent Growth, FY00-FY11 Total State Spending Ave. Annual = 5.6%

Fiscal Year 2012 Budget Reversed Trends 11 Budget Highlights Closed $10 billion budget gap with $8B in spending reductions Enacted authority to contain long-term Medicaid spending Limited fiscal gimmicks No big revenue increases and assumed high-income tax surcharge will expire State Spending Reduced 0.8% $0

Almost 80% of FY12 Gap Closing Plan was Spending Reductions 12

State Budget Mid-Year Status Tax collections $800m above projections for April-June, but $276m below projections for July-August State agency spending $140m above projections for 1st 5 months of fiscal year $377m of $450 labor concessions not finalized Large state union (PEF) rejected contract: if renegotiations fail, 3,500 people to be laid off Medicaid spending $173m (2.5%) under cap through August Medicaid enrollment up 72,300 (1.5%) since April Governor must propose how to close FY13 $2.4B gap in January 13

State Fiscal Year 2013 Outlook 14 Optimistic cost saving assumptions already built into forecast Calls to extend high-income surcharge past Dec 31 have begun Uncertainties from federal government Deficit reduction super committee, jobs bill, disaster relief, fed. transportation funding Signs of another recession State tax revenue lags swings in economic activity Ballooning spending for economic development without needed reforms New 2% property tax cap enhances need for equitable state education aid and state mandate relief, esp. pensions and Medicaid funding

Composition of NYC Revenues Fiscal Year 2012 15 $71.2B

Composition of Expenditures Fiscal Year 2012 *Adjusted for impact of prepayments 16

Pensions, Fringes and Debt Service Drive Budget Growth 17

Prior Year Surpluses Used to Support Spending in Recession Years 18 $ in billions $1.0 Billion $2.5 Billion $2.4 Billion $2.0 Billion $1.3 Billion $2.0 Billion

Ten Rounds of PEGs Save $5.4B in FY 2012 19 Cumulative Savings From Program to Eliminate the Gap (PEG)

Large Out-Year Gaps Could Grow Even Bigger 20 Last week, the Mayor asked agencies to submit plans to cut spending by 2% in 2012 and 6% in 2013 for up to $2 billion in savings by 2013. Stay tuned.

CBC on FY2012 Budget 21 Potential double-dip recession means economic assumptions are less conservative than usual Drawdowns from the Retiree Health Benefit Trust fund likely to be proposed again Some layoffs averted with uncertain one-time concessions that cannot be repeated No active proposals for debt reductions or health insurance contributions Pension reform still needed Actuarial changes may lead to greater than anticipated pension costs Unresolved labor contracts could force the city to pay retroactive raises and limit productivity savings

Sources Historic Employment: U.S. Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages. Historic Personal Income: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Accounts. Forecasted NYC and U.S. Employment and Personal Income; NYC Financial Data: New York City Office of Management and Budget, Executive Budget, Fiscal Year 2012, Message of the Mayor, May 5, 2011. Forecasted NYS Employment and Personal Income; NYS Financial Data: New York State Division of Budget, Enacted Budget Financial Plan for Fiscal Year 2012, May 6, 2011. K-12 Spending Comparison: U.S. Census Bureau, Public Education Finances. Medicaid Spending Comparison: Centers for Medicare and Medicaid Services, Medicaid Statistical Information System (MSIS) State Summary Datamart.