Capitol Notes

Proposed actions to address state cash crunch

Drastic measures are being considered in the Capitol to address an expected drop in state tax revenues and disruption in the government cash flow, according to multiple Assembly Democrats briefed Tuesday on issues under discussion for the state budget.

The steps under consideration include the issuance of short-term bond anticipation notes – backed by personal income tax receipts – in order to provide temporary liquidity, enabling the state’s Dormitory Authority to access a temporary line of credit, increasing access to dedicated state fund balances and empowering the executive branch to delay or reduce state aid to local governments.

The proposals were outlined in materials provided to Assembly Democrats, which also highlighted about two dozen outstanding topics for the budget, such as education funding, marijuana legalization and adding “E Pluribus Unum” to the state coat of arms.

Uncertainty about state revenues is due to downward projections for sales taxes, user fees and other non-tax receipts due to reduced economic activity. Additionally, the three-month extension for filing income taxes will adversely impact the state’s available cash reserves, as the financial plan anticipated nearly $18 billion in income tax receipts during the first quarter of the fiscal year, which starts in April.

In the middle of March, at the request of Gov. Andrew Cuomo, state Comptroller Tom DiNapoli issued a revised revenue forecast for the coming fiscal year that projected the state could see a drop of more than $7 billion in revenue from what was projected by the state Division of Budget in January. State Budget Director Robert Mujica told the Wall Street Journal on Tuesday that the drop be as much as $15 billion.

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