Fy 2015 Enacted Budget

New York State

FY 2015 Enacted Budget Financial Plan

ANDREWM.CUOMO,GOVERNOR

ROBERTL.MEGNA,BUDGETDIRECTOR

May2014

FY 2015 ENACTED BUDGET FINANCIAL PLAN

INTRODUCTION..................................................................................................................1 TheStateBudgetProcess................................................................................................1 BudgetProjections..........................................................................................................2 BudgetaryAndAccountingPractices..............................................................................2 RisksandUncertainties...................................................................................................4FINANCIALPLANOVERVIEW..............................................................................................7 FinancialPlanAtAGlance:KeyMeasures.....................................................................7 ExecutiveSummary.........................................................................................................8GENERALFUNDFINANCIALPLAN....................................................................................19 FY2014YearEndSummary..........................................................................................19 FY2015FinancialPlan...................................................................................................20 FY2015DetailedGapClosingPlan...............................................................................24BUDGETRISKSANDUNCERTAINTIESTOTHEFINANCIALPLAN.....................................35MULTIYEARFINANCIALPLANPROJECTIONS..................................................................55FY2014PRELIMINARYYEARENDRESULTS...................................................................111FISCALIMPACTONLOCALGOVERNMENTS..................................................................127GLOSSARYOFACRONYMS.............................................................................................133FINANCIALPLANTABLESANDACCOMPANYINGNOTES..............................................139

TableofContents

Introduction

FY2015EnactedBudgetFinancialPlan 1

IntroductionThis Enacted Budget Financial Plan for Fiscal Year (FY) 2015 (the Enacted Budget FinancialPlanor Current FinancialPlan) summarizes the StateofNew Yorksofficial FinancialPlanprojectionsforFY2015throughFY2018.TheStatesFY2015beganonApril1,2014andendsonMarch31,2015.THE STATE BUDGET PROCESS The requirements of the State budget process are set forth in Article VII of the StateConstitution,theStateFinanceLaw,andtheLegislativeLaw.Theannualbudgetprocessbeginswith theGovernors submission of the Executive Budget to the Legislature each January, inpreparation for the startof the fiscalyearonApril1. (The submissiondate isFebruary1 inyearsfollowingagubernatorialelection.)TheGeneralFundmustbebalancedonacashbasis,as described below, and must be accompanied by bills that (a) set forth all proposedappropriationsand reappropriations, (b)provide foranynewormodified revenuemeasures,and (c) make any other changes to existing law necessary to implement the Budgetrecommended by the Governor. The Division of the Budget (DOB) prepares a multiyearFinancialPlan(StateFinancialPlanorFinancialPlan)aspartoftheExecutiveBudget. TheStateFinancialPlansetsforthprojectedreceiptsanddisbursementsforthecurrentfiscalyear,the budget year (i.e., the upcoming fiscal year), and the three subsequent fiscal years(outyears).

InactingonthebillssubmittedbytheGovernor,theLegislaturehascertainpowerstoaltertherecommendedappropriationsandproposedchangestoexistinglaw.TheLegislaturemaystrikeorreducean itemofappropriationrecommendedbytheGovernor. TheLegislaturemayadddistinct new items of appropriation, provided such additions are stated separately. TheseadditionalitemsarethensubjecttolineitemvetobytheGovernor.IftheGovernorvetoesanappropriation or a bill (or a portion thereof) related to the budget, these items can bereconsidered in accordance with the rules of each house of the Legislature. If, uponreconsideration, the items are approvedby twothirdsof themembersof eachhouse, suchitemswillbecomelawnotwithstandingtheGovernorsveto.

Oncetheappropriationbillsandotherbudgetbillsbecomelaw,DOBrevisestheStateFinancialPlan to reflect theLegislaturesactions,andbegins theprocessof implementing theEnactedBudget.Throughoutthefiscalyear,DOBmonitorsactualreceiptsanddisbursements,andmayadjusttheestimatesandprojectionsintheStateFinancialPlan.Adjustmentsmayalsobemadeto the State Financial Plan to reflect changes in the economic outlook, updated data onprogramactivities,newactionstakenbytheGovernorortheLegislature,andotherfactors.AsrequiredbytheStateFinanceLaw,DOBupdatestheStateFinancialPlanquarterly.

Once theBudget isadopted for the fiscalyear, theLegislaturemayenactonemultipurposeappropriation bill and additional singlepurpose appropriation bills or revenue measures(includingtaxlawchanges)duringanyregularsessionor,ifcalledintosessionforthatpurpose,any special session. In the event additional appropriation bills or revenue measures aredisapprovedbytheGovernor,theLegislaturemayoverridetheGovernorsvetouponthevote

INTRODUCTION


of twothirdsof themembersofeachhouseof the Legislature. TheGovernormaypresentdeficiency appropriations to the Legislature in any fiscal year to supplement existingappropriationsor toprovidenewappropriations forpurposesnot consideredby the regularandsupplementalappropriations.

BUDGET PROJECTIONS TheStateFinancialPlanprojectionsforfutureyearstypicallyshowbudgetgapsintheGeneralFund. Budget gaps represent the difference between: (a) the projected General Funddisbursements, including transfers toother funds,needed tomaintaincurrent services levelsand specific commitments, and (b) the expected level of resources to pay for them. TheGeneralFundgapestimatesarebasedonanumberofassumptionsandprojectionsdevelopedbytheDOBinconjunctionwithotherStateagencies.1Someprojectionsarebasedonspecific,known information (i.e.,astatutoryrequirementto increasepaymentstoaprescribed level),whileothersarebasedonmoreuncertainorspeculativeinformation(i.e.,thepaceatwhichanew program will enroll recipients). In addition, the Financial Plan typically assumes thatmoneyappropriatedinonefiscalyearwillcontinuetobeappropriatedinfutureyears,evenforprogramsthatwerenotcreatedinpermanentlawandthattheStatehasnoobligationtofund.Funding levels for nearly all State programs are made (or, in the case of twoyearappropriations, reviewed) annually, taking into account the current and projected fiscalpositionoftheState.

BUDGETARY AND ACCOUNTING PRACTICES TheStatesGeneralFundreceivesthemajorityofStatetaxesandallincomenotearmarkedforaparticularprogramoractivity.StatelawrequirestheGovernortosubmit,andtheLegislatureto enact, aGeneral Fund budget that is balanced on a cash basis of accounting. The StateConstitutionandStateFinanceLawdonotprovideaprecisedefinitionofbudgetbalance. Inpractice,theGeneralFundisconsideredbalancedifsufficientresourcesare,orareexpectedtobe,availableduringthefiscalyearfortheStateto: (a)makeallplannedpayments, includingPersonal Income Tax (PIT) refunds, without the issuance of deficit notes or bonds orextraordinary cash management actions, (b) restore the balances in the Tax StabilizationReserveandRainyDayReservetolevelsatorabovethelevelsondepositwhenthefiscalyearbegan,and(c)maintainotherreserves,asrequiredbylaw.Forpurposesofcalculatingbudgetbalance,theGeneralFundincludestransferstoandfromotherfunds.TheGeneralFundisthesolefinancingsourcefortheSchoolTaxRelief(STAR)Fund.Inaddition,itistypicallythefinancingsourceoflastresortfortheStatesothermajorfunds,whichincludethe Health Care Reform Act (HCRA) funds, the Dedicated Highway and Bridge Trust Fund(DHBTF), and the Lottery Fund. Therefore, the General Fund projections account for any 1SeeDOBsEconomic,Revenue,andSpendingMethodologies,November2013,athttp://www.budget.ny.gov/pubs/supporting/supporting.html

INTRODUCTION


estimatedfundingshortfallsinthesefunds.SincetheGeneralFundisthefundthatisrequiredto be balanced, the focus of the States budgetary and gapclosing discussion is generallyweightedtowardtheGeneralFund.Fromtimetotime,DOBwillinformallydesignateunrestrictedbalancesintheGeneralFundforspecificpolicygoals (e.g., thepaymentof costs related topotential labor contracts coveringpriorcontractperiods).Theseamountsaretypicallyidentifiedwiththephrasereservedfor,and are not held in distinct accounts within the General Fund and may be used for otherpurposes.StateOperatingFundsisabroadermeasureofspendingforoperations(asdistinctfromcapitalpurposes) that is fundedwith State resources. It includes financial activity not only in theGeneralFund,butalsoStatefundedspecial revenue fundsandDebtServiceFunds (both theGeneral Fund and StateOperating Funds exclude spending from Capital Projects Funds andFederalFunds).DOBviewsStateOperatingFundstobeamorecomprehensivemeasurethantheGeneralFundofStatefundedactivitiesforoperatingpurposesthatarefundedwithStateresources (i.e., taxes,assessments, fees, tuition). TheStateOperatingFundsperspectivehastheadvantageofeliminatingcertaindistortions inoperatingactivitiesthatmaybecausedby,amongother things, theState'scomplex fundstructure, the transferofmoneyamong funds,and theaccountingofdisbursementsagainstappropriations indifferent funds. Forexample,theStatefundsitsshareoftheMedicaidprogramfromboththeGeneralFundandfromStateSpecialRevenueFunds,includingHCRAfunds.TheStateOperatingFundsperspectivecapturesMedicaiddisbursementsfrombothofthesefundtypes,givingamorecompleteaccountingofStatefunded Medicaid disbursements. For such reasons, the discussion of disbursementprojectionsoftenemphasizestheStateOperatingFundsperspective.The State also reports disbursements and receipts activity forAllGovernmental Funds (AllFunds),which includesspendingfromCapitalProjectsFundsandStateandFederaloperatingfunds, providing themost comprehensive view of the cashbasis financial operations of theState. The State accounts for receipts and disbursements by the fund inwhich the activitytakesplace(suchastheGeneralFund),andthebroadcategoryorpurposeofthatactivity(suchasStateOperations). TheFinancialPlantablessortStateprojectionsandresultsbyfundandcategory.FundtypesoftheStateinclude:theGeneralFund;Statespecialrevenuefunds,whichreceivecertaindedicatedtaxes,feesandotherrevenuesthatareusedforaspecifiedpurpose;FederalSpecialRevenueFunds,whichreceivecertainFederalgrants;StateandFederalCapitalProjectsFunds,whichaccountforcostsincurredintheconstructionandrehabilitationofroads,bridges,prisons,university facilities,andother infrastructureprojects;andDebtServiceFunds,whichaccountforthepaymentofprincipal,interestandrelatedexpensesfordebtissuedbytheStateanditspublicauthorities.

INTRODUCTION


StateFinanceLawalsorequiresDOBtoprepareaproformafinancialplanusing,totheextentpracticable,generallyacceptedaccountingprinciples (GAAP),althoughthisrequirement is forinformationalpurposesonly.TheGAAPbasisfinancialplanisnotusedbyDOBasabenchmarkformanagingStatefinancesduringthefiscalyearandisnotupdatedonaquarterlybasis.TheGAAPbasis financial plan follows, to the extent practicable, the accrualmethodologies andfundaccountingrulesappliedbytheOfficeoftheStateComptroller(OSC)inpreparationoftheaudited Basic Financial Statements. However, GAAP is a financial reporting regime, not abudgetingsystem.RISKS AND UNCERTAINTIES The factorsaffecting theState's financialconditionarecomplex. ThisFinancialPlancontainsforecasts,projections,andestimates thatarebasedonexpectationsandassumptionswhichexistedat the time such forecastswereprepared. Sincemany factorsmaymateriallyaffectfiscalandeconomicconditionsintheState,theinclusioninthisEnactedBudgetFinancialPlanof forecasts,projections,andestimatesshouldnotberegardedasarepresentationthatsuchforecasts,projections,andestimateswilloccur. Forecasts,projectionsandestimatesarenotintendedasrepresentationsoffactorguaranteesofresults.Thewordsexpects,forecasts,projects, intends, anticipates, estimates, and analogous expressions are intended toidentifyforwardlookingstatementsintheEnactedBudgetFinancialPlan.Anysuchstatementsinherentlyaresubjecttoavarietyofrisksanduncertaintiesthatcouldcauseactualresultstodiffer materially and adversely from those projected. Such risks and uncertainties include,amongothers,generaleconomicandbusinessconditions;changesinpolitical,social,economic,and environmental conditions, including climate change and extreme weather events;impediments to the implementation of gapclosing actions; regulatory initiatives andcompliancewith governmental regulations; litigation; actions by the Federal government toreduceordisallowexpectedaid includingFederalaidauthorizedorappropriatedbyCongress,butsubjecttosequestration,administrativeactions,orotheractionsthatwouldreduceaidtothe State; and variousotherevents, conditions and circumstances,on a State,national, andinternationallevel,manyofwhicharebeyondthecontroloftheState.TheseforwardlookingstatementsspeakonlyasofthedateofthisEnactedBudgetFinancialPlan.

Financial Plan Overview


FinancialPlanOverview ThefollowingtableprovidescertainFinancialPlaninformationforFY2014andFY2015.

Revised1 ResultsExecutiveAmended2 Enacted

STATEOPERATINGFUNDSDISBURSEMENTSSizeofBudget $90,498 $90,631 $92,040 $92,234AnnualGrowth 1.9% 2.0% 1.6% 1.8%

OTHERDISBURSEMENTMEASURESGeneralFund(withTransfers) $61,460 $61,243 $63,575 $63,142

4.2% 3.9% 3.8% 3.1%

StateFunds(IncludingCapital) $96,624 $96,355 $98,894 $98,9952.2% 1.9% 2.6% 2.7%

CapitalBudget(FederalandState) $7,992 $7,751 $8,533 $8,4656.0% 2.8% 10.1% 9.2%

FederalOperatingAid(ExcludingExtraordinaryFederalAid)* $36,860 $37,492 $36,615 $37,2012.0% 3.7% 2.3% 0.8%

AllFunds(ExcludingExtraordinaryFederalAid)* $135,350 $135,874 $137,188 $137,9002.1% 2.5% 1.0% 1.5%

CapitalBudget(Including"OffBudget") $9,431 $9,104 $9,464 $9,3935.9% 2.3% 4.0% 3.2%

AllFunds(Including"OffBudget"Capital)* $136,789 $137,227 $138,119 $138,8282.2% 2.5% 0.7% 1.2%

INFLATION(CPI) 1.4% 1.5% 1.8% 1.9%

ALLFUNDSRECEIPTS

Taxes $69,414 $69,690 $70,794 $70,1884.7% 5.1% 1.6% 0.7%

MiscellaneousReceipts $23,850 $24,234 $25,310 $25,6720.7% 0.8% 4.4% 5.9%

FederalGrants* $41,991 $42,137 $40,819 $41,7250.7% 0.3% 3.1% 1.0%

TotalReceipts* $135,255 $136,061 $136,923 $137,5852.0% 2.6% 0.6% 1.1%

GENERALFUNDRESERVES $1,803 $2,235 $1,743 $2,055Stabilization/RainyDayReserveFunds $1,306 $1,481 $1,306 $1,481AllOtherReserves/FundBalances $497 $754 $437 $574

119,413 118,492 119,173 118,961

DEBTDebtServiceas%AllFundsReceipts 4.7% 5.0% 4.3% 4.3%StateRelatedDebtOutstanding $55,572 $55,165 $57,126 $55,923DebtOutstandingas%PersonalIncome 5.2% 5.2% 5.1% 5.0%

1

2 TheannualpercentagechangecalculationsintheFY2015"ExecutiveAmended"columnhavebeenupdatedforFY2014yearendresults.

*

FINANCIALPLANATAGLANCE:KEYMEASURES(millionsofdollars)

FY2015FY2014

UpdatedaspartoftheFY2015ExecutiveBudget,asamended.

STATEWORKFORCEFTEs(SubjecttoDirectExecutiveControl)

AllFundsandFederalOperatingFundsreceiptsanddisbursementsexcludeFederaldisasteraidforSuperstormSandy(estimatedat$577millioninFY2013,$1.2billioninFY2014and$1.5billioninFY2015),andadditionalFederalaidundertheAffordableCareAct(estimatedatapproximately$400millioninFY2014and$2.6billioninFY2015).Includingdisbursementsforthesepurposes,AllFundsdisbursementsareexpectedtototal$142billioninFY2015,anincreaseof3.2percent.

FINANCIAL PLAN OVERVIEW


EXECUTIVE SUMMARY FY2014Results

The State ended FY 2014 with a General Fund balance of $2.24 billion, which was$432millionabovetheestimateintheExecutiveBudgetFinancialPlan.2GeneralFundreceiptswere $215million above the Executive Budget estimate, reflecting strongerthanexpected tax collections. GeneralFunddisbursementswere$217millionbelowplannedlevels,duemainlytolowerspendinginlocalassistanceandagencyoperations.(See FY 2014 Preliminary YearEnd Results herein.) In addition,DOBmade certainprepayments at the end of FY 2014, above those planned in the Executive BudgetFinancialPlan.ThishadtheeffectofmakingadditionalresourcesavailableforFY2015andthereafter.

TheStateused$312millionofthe$432millioninexcessresourcestobolsterreserves.

At the closeof the fiscal year, $175millionwasdeposited into the States rainydayreserves,bringing thebalance to$1.5billion,or2.4percentofFY2014GeneralFundspending.Another$137millionwassetasidefordebtmanagementpurposes,bringingtheamountdesignatedforthispurposeto$500million.

Of the remaining $120 million in excess resources, $62 million is expected to fund

disbursementsthatwereoriginallyexpectedtooccurinFY2014butarenowbudgetedforFY2015,and$58millionhasbeentransferredtoa fiduciary fundestablishedwiththe FY2015Budget toaccount forproceeds realized froma settlementbetween J.P.MorganandtheState.ThissettlementisdescribedmorefullylaterinthisFinancialPlan(seeBudgetRisksandUncertaintiestotheFinancialPlanherein).

State Operating Funds spending for FY 2014 totaled $90.6 billion, an increase of

2percentfromFY2013results.ThisisconsistentwiththeStates2percentbenchmarkforannualspendinggrowthestablishedbythecurrentAdministrationinFY2012.

FY2015Budget

OnMarch31,2014,theLegislaturecompleted finalactiononthebudget forFY2015.OnApril11,2014,theGovernorcompletedhisreviewofallbudgetbills, includingthevetoof certain lineitemappropriations,noneofwhichhadamaterial impacton theFinancialPlan. Consistentwithpastpractice, theLegislatureenacted theannualdebtserviceappropriations,withoutamendment,inadvanceoftheotherappropriations(thedebtserviceappropriationswerepassedonMarch19,2014).

2ExecutiveBudgetFinancialPlan(asamended)datedFebruary2014.



TheEnactedBudgetFinancialPlan forFY2015provides forbalancedoperationsonacashbasisintheGeneralFund,asrequiredbylaw.TheEnactedBudgetreflectssavingsfromthecontinuationofspendingcontrolsandcostcontainmentmeasuresputinplaceinprioryears.Fundingforagencyoperationsisgenerallyexpectedtoremainatcurrentlevelsacross theFinancialPlanperiod (excluding the timingof cashdisbursements inFY2014).Reservesareexpectedtoremainintact.

During negotiations, the Executive and Legislature agreed to $610 million in gross

spendingrestorationsandadditionstotheExecutiveBudgetproposal.Theyalsoagreedtocertain tax lawchanges that increasecostsby$220million inFY2015,but reducecostsinfutureyears,comparedtotheExecutiveproposal.

DOB expects relatively modest economic growth in FY 2015, consistent with othereconomic forecasters. Total tax receipts in FY2015, adjusted for the accelerationofcertain income tax refunds intoFY2014,areexpected todeclineby0.2percent fromFY2014.

Personal income tax collections for FY 2014were inflated by a onetime increase in

receiptsduetoan increase inFederaltaxratesbeginning incalendaryear2013. Thiscausedtaxpayerstorealizeincomeincalendaryear2012toavoidthehighertaxrates,whichinturnsubstantiallyincreasedtheStatestaxcollectionsinApril2013.However,italsoledtolargerefundpaymentsbytheStatethroughouttheremainderof2013,assomehigh incometaxpayersrealizedthattheyhadoverpaid inApril. DOBanticipatedthat this situationwould reverse itself in2014. Thishasoccurredbut thedecline inestimated tax payments in April 2014 was greater than expected in the ExecutiveBudgetFinancialPlan. Atthesametime,refundpaymentswere lowerthanexpected,which is apositivedevelopment. DOBexpects that theunanticipatedportionof thedecline incollectionsobserved inAprilwill reverse itself later inFY2015. Tomanagerisks and maintain a conservative receipts forecast, however, DOB is making a netdownwardrevisionof$343milliontotheGeneralFundreceiptsestimateforFY2015,asdescribedbelow. Thisrevision is fullyoffsetbyothersavingsandwillnot impingeonthe States ability to fullymeet the commitments in the FY 2015 Enacted Budget infuturebudgetyears.

DOBhasidentified$1.2billioninnewresourcestofullyfundtherestorations,additions,

taxlawchanges,andrevisionstotaxreceipts.Theseincludesavingsfromacombinationofprepayments inFY2014,above the levelplanned in theFY2015ExecutiveBudget,andreestimatestoestimateddisbursementsandtransfersbasedonareviewofFY2014results ($643 million); and management of debt and capital resources includingreimbursement,fromplannedbondsalesandexistingbondproceeds,offirstinstancecapitaltransfersmadebytheGeneralFundinprioryears($530million).



The Enacted Budget for FY 2015 limits estimated annual growth in State OperatingFunds spending to 1.8 percent, consistent with the States 2 percent spendingbenchmark.

The Financial Plan projections for FY 2016 and thereafter set forth in this EnactedBudgetFinancialPlanreflectanassumptionthattheGovernorwillcontinuetopropose,and theLegislaturewillcontinue toenact,balancedbudgets in futureyears that limitannualgrowthinStateOperatingFundstonogreaterthan2percent.

By adhering to the 2 percent spending benchmark, DOB expects that the State ispositioned to fully fund the taxreductionsandspendingcommitments in theFY2015Enacted Budget and accrue surpluses in future years, based on updated projections.(ThesavingsthatwouldbeachievediftheStateadherestothespendingbenchmarkarelabeled in theFinancialPlan tablesasAdherence to2percentStateOperatingFundsSpendingBenchmark.)



SUMMARY OF FY 2015 ENACTED BUDGET GAP-CLOSING PLAN The following table summarizes the multiyear impact of the FY 2015 Enacted Budget onGeneralFundoperations.Thepointofcomparisonistothecurrentservicesbudgetgapsthatwerepublished in theMidYearUpdate to the FY 2014 FinancialPlan. The EnactedBudgetFinancialPlanprojectionsassume theStateadheres to the2percentspendingbenchmark infutureyears,asshowninthetablebelow.

FY2015 FY2016 FY2017 FY2018

MIDYEARBUDGETSURPLUS/(GAP)ESTIMATE (1,742) (2,889) (2,948) (3,887)

SpendingChanges 2,275 4,402 5,430 6,765AgencyOperations 494 734 940 1,240LocalAssistance 1,825 1,939 2,046 1,699CapitalProjects/DebtManagement 671 745 382 409Initiatives (715) (1,110) (1,323) (1,499)Adherenceto2%StateOperatingFundsSpendingBenchmark1 n/a 2,094 3,385 4,916

SurplusAvailablefromFY2014 353 0 0 0

OtherResourceChanges (161) (282) (106) (246)

BUDGETSURPLUS/(GAP)BEFORETAXACTIONS 725 1,231 2,376 2,632

TaxActions (725) (1,338) (1,271) (744)TaxCreditTiming 410 (410)

EXECUTIVEBUDGETSURPLUS/(GAP) 0 303 1,105 1,478

1

(millionsofdollars)

GENERALFUNDBUDGETARYBASISSURPLUS/(GAP)PROJECTIONS

GAPCLOSINGPLANSAVINGS/(COSTS)ENACTEDBUDGET

Savingsestimatedfromlimitingannualspendinggrowthinfutureyearsto2percent.CalculationbasedoncurrentFY2015estimate.TheGovernorisexpectedtopropose,andnegotiatewiththeLegislaturetoenact,budgetsineachfiscalyearthatholdStateOperatingFundsspendinggrowthto2percent.Assumesallsavingsfromholdingspendinggrowthto2percentaremadeavailabletotheGeneralFund.



SPENDING CHANGES

TheEnactedBudgetFinancialPlanreducesspendinginFY2015by$2.3billioncomparedtoourbaselineforecastbeforeanyreflectingenactedbudgetactions. Thesavingsarerecurringandareexpectedtogrowinvalueinsubsequentyears.

AgencyOperations:SincetheGovernortookofficeinJanuary2011,thecostsof

operating State agencies have been reduced through ongoing State agencyredesign and costcontrol efforts. These efforts have included closures andconsolidationsof facilitiestoreduceexcesscapacity;strictcontrolsonattritionand hiring; enterprisewide consolidation of procurement, informationtechnology (IT), and workforce management functions; and a range ofoperationalmeasurestoimproveefficiency.TheFY2015EnactedBudgetholdsspendingforExecutiveagencyoperationsconstantovertheFinancialPlanperiod(excludingthetimingofcashdisbursementsinFY2014),withlimitedexceptions.This isexpected toprovide$494million inFY2015 savings compared topriorprojections.Inaddition,theStatesprojectedcostsforpensionsandotherfringebenefitshavebeenloweredbasedonupdatedinformation.

Local Assistance: Reductions in State spending from prior projections are

expectedtogenerate$1.8billioninGeneralFundsavings.3Savingsareexpectedfrom,amongotherthings,updatedcostestimatesforarangeofStateprograms,reflectingthe impactofthespendingcontrolsandcostcontainmentenacted inprioryears.

CapitalProjects/DebtManagement: Savings are expected through continued

useofcompetitivebondsales,refundings,consolidationofdebt issuances, thetimingofbondsales,the levelofPayAsYouGo(PAYGO)capitalspending,andother debt management actions. In addition, first instance capital transfersmadeinprioryearsareexpectedtobereimbursedfromplannedbondsalesandexistingbondproceeds. Thesavingsfromdebtmanagement inFY2015andFY2016 also reflect actual and planned prepayments of debt service, based onDOBsestimateofavailableresources. TheEnactedBudgetFinancialPlandoesnotreflecttheuseofthe$500millioninGeneralFundresourcesdesignatedfordebtmanagement.DOBexpects tomakeadecision later in the fiscalyearonusing those resources, based onmarket conditions, Financial Plan needs, andotherfactors.

3 Local assistance includes payments for School Aid, STAR, Medicaid, public assistance, child welfare, local governmentassistanceandarangeofotherpurposes.



Initiatives: TheEnactedBudgetFinancialPlan includes spendingadditions forSchool Aid, higher education, and human services. It also includes fundingincreases for a rangeofotherprograms, allofwhich aremanagedwithin theparametersof2percentspendinggrowth.

Inaddition,theEnactedBudgetauthorizesseveralnewcapitalinitiatives.Theseinclude the Smart Schools bond act for education thatwould fund enhancedtechnologyinschools($2billion)andacapitalprogramtomodernizehealthcarefacilities ($1.2 billion) to be used in conjunctionwith the $8 billionMedicaidwaiver approved by the Federal government. The Smart Schools bond act issubject to referendum in November 2014. The estimated debt service fromthesecapitaladditionsisreflectedintheFinancialPlan.

RESOURCE CHANGES

TheEnactedBudgetincludestheuseof$353millioninGeneralFundsurplusresourcesfrom FY 2014. The surplus resources, as reported here, consist of the $310 millionidentifiedintheExecutiveBudgetFinancialPlanforFY2015and$43millionofthe$432million in excess General Fund resources that became available from General Fundoperations,asdescribedabove.

Other resource changes include revisions to tax receipts and miscellaneous receiptsbasedonFY2014results,theApriltaxsettlement,andupdatedeconomicdata,offsetby savings from reestimates to planned transfers based on a review of FY 2014operatingresultsandotherupdatedinformation.

TAX ACTIONS

TheEnactedBudget includestaxcutsthatare intendedtoprovideproperty,business,andestate tax relief. Property taxactionsconsistofa residentialproperty tax freezecredit,andaresidentialrealpropertytaxcredit(withinNYC).Businesstaxreliefconsistsofaneliminationofthetaxrateonnetincomeforcorporatemanufacturers,eliminationof the capital base tax for corporations, a 20 percent real property tax credit formanufacturers,andsignificantcorporatetaxreform.Theestatetaxfilingthresholdwillbe increasedover fouryears. Finally,theplannedphaseoutof18atemporaryutility assessmentwillbeacceleratedforallcustomers.



ANNUAL SPENDING GROWTH DOB estimates that annual spending in State Operating Funds will grow at 1.8 percent inFY 2015, consistent with the 2 percent spending benchmark adopted by the currentAdministrationinFY2012.AllFundsspending,whichincludesspendingfromcapitalfundsandFederal funds, isexpected to increaseby1.5percent from FY2014,excludingextraordinaryFederalaidrelated toSuperstormSandy4and the implementationof theAffordableCareAct(ACA).

FY2014Results

FY2015Enacted

AnnualChange

Annual%Change

STATEOPERATINGFUNDS 90,631 92,234 1,603 1.8%GeneralFund(excludingothertransfers) 52,148 55,040 2,892 5.5%OtherStateFunds 32,046 31,503 (543) 1.7%DebtServiceFunds 6,437 5,691 (746) 11.6%

ALLGOVERNMENTALFUNDS 135,874 137,900 2,026 1.5%StateOperatingFunds 90,631 92,234 1,603 1.8%CapitalProjectsFunds 7,751 8,465 714 9.2%FederalOperatingFunds 37,492 37,201 (291) 0.8%

ALLGOVERNMENTALFUNDS(INCL.EXTRAORDINARYFEDERALAID)

137,526 141,964 4,438 3.2%

FederalDisasterAidforSuperstormSandy 1,247 1,497 250 20.0%FederalAffordableCareAct 405 2,567 2,162 533.8%

GENERALFUND(INCLUDINGTRANSFERS) 61,243 63,142 1,899 3.1%

STATEFUNDS 96,355 98,995 2,640 2.7%

TOTALDISBURSEMENTS(millionsofdollars)

4 InOctober 2012, Superstorm Sandy causedwidespread flooding, power failures, andwinddamage topublic and privateproperty inNewYorkCity, Long Island,andotherdownstateareas. Public infrastructure, includingmass transit systems,public schools, and municipal buildings, sustained serious damage. The Executive Budget reflects Federal aidwhichwillflowto localgovernments,publicauthorities,andnotforprofitsoverthenextfiveyearstocontinuetheState'srecoveryfromSuperstormSandy.(SeeBudgetRisksandUncertaintiestotheFinancialPlanFederalIssuesherein.)



Thefollowingtable illustratesthemajorsourcesofannualchange inStatespendingbymajorprogram,purpose,andfundtype.

FY2015Enacted $ %

LOCALASSISTANCE 59,406 61,181 1,775 3.0%SchoolAid(StateFiscalYearBasis)1 20,420 21,671 1,251 6.1%DOHMedicaid(InclOperationalCosts)2 16,382 16,962 580 3.5%Transportation 4,722 4,817 95 2.0%MentalHygiene 2,777 2,925 148 5.3%STAR 3,357 3,429 72 2.1%SocialServices 3,101 2,777 (324) 10.4%HigherEducation 2,817 2,916 99 3.5%PublicHealth/Aging 2,179 1,868 (311) 14.3%Special/OtherEducation 2,003 2,146 143 7.1%LocalGovernmentAssistance 756 779 23 3.0%AllOther2 892 891 (1) 0.1%

STATEOPERATIONS/FRINGEBENEFITS 24,822 25,405 583 2.3%StateOperations 17,864 18,199 335 1.9%PersonalService: 12,300 12,593 293 2.4%

ExecutiveAgencies 6,989 7,134 145 2.1%UniversitySystems 3,478 3,586 108 3.1%ElectedOfficials 1,833 1,873 40 2.2%

NonPersonalService: 5,564 5,606 42 0.8%ExecutiveAgencies 2,753 2,789 36 1.3%UniversitySystem 2,298 2,235 (63) 2.7%ElectedOfficials 513 582 69 13.5%

FringeBenefits/FixedCosts 6,958 7,206 248 3.6%PensionContribution 2,086 2,136 50 2.4%HealthInsurance 3,253 3,355 102 3.1%OtherFringeBenefits/FixedCosts 1,619 1,715 96 5.9%

DEBTSERVICE 6,400 5,648 (752) 11.8%CAPITALPROJECTS 3 0 (3) 100.0%

TOTALSTATEOPERATINGFUNDS 90,631 92,234 1,603 1.8%

CapitalProjects(StateFunds) 5,724 6,761 1,037 18.1%

TOTALSTATEFUNDS 96,355 98,995 2,640 2.7%

FederalAid(IncludingCapitalGrants)4 39,519 38,905 (614) 1.6%

TOTALALLGOVERNMENTALFUNDS5 135,874 137,900 2,026 1.5%

1

2

3

4,5 AllFundsandFederalOperatingFundsreceiptsanddisbursementsexcludeFederaldisasteraidforSuperstormSandy(estimatedat$577millioninFY2013;$1.2billioninFY2014and$1.5billioninFY2015),andadditionalFederalaidundertheAffordableCareAct(estimatedatapproximately$400millioninFY2014and$2.6billioninFY2015).Includingdisbursementsforthesepurposes,AllFundsdisbursementsareexpectedtototal$142billioninFY2015,anincreaseof3.2percent.

STATESPENDINGMEASURES(millionsofdollars)

FY2014Results

AnnualChange

DepartmentofHealthMedicaidspendingonly(excludesotherStateagencyspendingandtransfers).Fordisplaypurposes,includesMedicaidoperationalspendingthatsupportscontractsrelatedtothemanagementofMedicaidandthecostsofadministrativetakeoverfromlocalgovernments."AllOther"includesanadjustmentforMedicaidoperationalcoststoavoiddistortingFinancialPlancategorytotals,aswellaslocalaidspendinginanumberofotherprograms,includingeducation,parksandtheenvironment,economicdevelopment,andpublicsafety.

SchoolAidgrowthonaschoolyearbasisis$1.1billionor5.3%anddoesnotincludeaidforStatewideUniversalFullDayPreKindergartenprograms.

General Fund Financial Plan


GeneralFundFinancialPlan FY 2014 YEAR-END SUMMARY GeneralFundreceipts,includingtransfersfromotherfunds,totaled$61.9billion,anincreaseof$215millionfromtheestimateintheExecutiveBudget.Taxreceipts,includingthetransferoftaxreceiptstotheGeneralFundafterpaymentofdebtservice,5were$372millionhigherthanprojected in the Executive Budget, reflecting an increase in all major tax categories.Miscellaneous receipts and Federal grantswere $34million lower than estimated. Nontaxtransferswere$123millionbelowplannedlevels,duetothetimingofcertaintransactionsthatarenowexpectedtooccurinFY2015.General Fund disbursements, including transfers to other funds, totaled$61.2billion,adecreaseof$217millionfromtheExecutiveBudgetestimate. Thedecrease isdue to a number of factors. Spending for local assistance across a range of programs andactivities ($443 million), agency operations ($350 million), and transfers to support mentalhygienecostsandvariousotherprograms ($126million)was lower thanexpected. ThiswaspartlyoffsetbyhighertransfersrelatedtotheprepaymentofcertainFY2015expenses($344million)andtothetimingofbondreimbursementsforfirstinstancecapitalspendingfromtheGeneralFund($358million).TheStateendedFY2014withaGeneralFundbalanceof$2.2billion,whichwas$432millionabovetheestimate intheExecutiveBudgetFinancialPlan.TheStateused$312millionofthe$432millioninexcessresourcestobolsterreserves.Oftheremaining$120million,$62millionisexpectedtobeusedtofunddisbursementsthatwereoriginallyexpectedtooccurinFY2014butarenowbudgeted forFY2015,and$58millionhasbeen transferred toa fiduciary fundestablished with the FY 2015 Budget to account for proceeds realized from a settlementbetweenJ.P.MorganandtheState.

5EstimatedGeneralFundtaxreceiptsareaffectedbychanges intheestimated levelofdebtserviceneededforPITRevenueBonds,SalesTaxRevenueBonds,NewYorkLocalGovernmentAssistanceCorporation(LGAC)Bonds,andCleanWater/CleanAir(CW/CA)bonds.

GENERAL FUND FINANCIAL PLAN


FY 2015 FINANCIAL PLAN DOBestimates that theEnactedBudget forFY2015provides forbalancedoperations in theGeneral Fund, as required by law. The following table summarizes the projected annualchangesfromFY2014toFY2015inGeneralFundreceipts,disbursements,andfundbalances.

AnnualChangeFY2014Results

FY2015Enacted $ %

OpeningFundBalance 1,610 2,235 625 38.8%

Taxes(AfterDebtService) 57,758 57,994 236 0.4%MiscellaneousReceipts/FederalGrants 3,219 3,815 596 18.5%OtherTransfers 891 1,153 262 29.4%TotalReceipts 61,868 62,962 1,094 1.8%

LocalAssistanceGrants 39,940 42,118 2,178 5.5%DepartmentalOperations:

PersonalService 5,563 5,890 327 5.9%NonPersonalService 1,746 1,960 214 12.3%

GeneralStateCharges 4,899 5,072 173 3.5%TransferstoOtherFunds 9,095 8,102 (993) 10.9%TotalDisbursements 61,243 63,142 1,899 3.1%

Excess(Deficiency)ofReceiptsOverDisbursements

625 (180) (805) 128.8%

ClosingFundBalance 2,235 2,055 (180) 8.1%

StatutoryReserves:"RainyDay"ReserveFunds 1,481 1,481 0 0.0%CommunityProjectsFund 87 0 (87) 100.0%ContingencyReserveFund 21 21 0 0.0%

FundBalanceReservedfor:DebtManagement 500 500 0 0.0%PriorYearLaborAgreements(20072011) 45 53 8 17.8%J.P.MorganSettlementProceeds 58 0 (58) 100.0%UndesignatedReserve 43 0 (43) 100.0%

GENERALFUNDFINANCIALPLAN(millionsofdollars)



RECEIPTS GeneralFundreceipts,includingtransfersfromotherfunds,areexpectedtototal$63billioninFY2015,anannualincreaseof$1.1billion(1.8percent).Taxcollections,includingtransfersoftax receipts to the General Fund after payment of debt service, are expected to total$58billion in FY2015, an increaseof$236million (0.4percent). Before accounting for theaccelerationofanestimatedtaxrefundsintoFY2014tomakesurplusresourcesavailableinFY2015,estimated tax collectionswoulddecreaseby$384million (0.7percent) from FY2014levels.6General Fund Personal Income Tax (PIT) receipts, including transfers after payment of debtserviceonStatePITRevenueBonds,areexpected to increaseby$724million fromFY2014.ThisprimarilyreflectsincreasesinwithholdingpaymentsandthepaymentofadditionalrefundsinFY2014thatwereplannedforFY2015,partiallyoffsetbyadecline inextensionpaymentsattributabletothe2013taxyear.GeneralFundusertaxesandfeereceipts,includingtransfersafterpaymentofdebtserviceonLGACandSalesTaxRevenueBonds,areestimatedtototal$12.2billioninFY2015,anincreaseof $123million (1 percent) from FY 2014, reflecting projected consumer spending increasesacrossabroadrangeofconsumptioncategories,offsetbydeclinesincigaretteconsumption. General Fund business tax receipts are estimated at $5.4 billion in FY 2015, a decrease of$608million(10.1percent)fromFY2014results.Theestimatereflectsadeclineincorporatefranchisetaxreceiptsresultingfromthefirstyearofrepaymentofdeferredtaxcreditsandtaxlawchanges,partlyoffsetbybasegrowthinbankandinsurancetaxes.Other tax receipts in theGeneral Fund areexpected to totalnearly$2billion in FY 2015, adecreaseof$3million(0.2percent)fromFY2014.Theestimatereflectsadeclineinexpectedestatetaxreceipts,theresultofEnactedBudgetlegislationthatreducestheestatetax,partiallyoffsetbyanincreaseinrealestatetransfertaxreceipts.General Fund miscellaneous receipts are estimated at $3.8 billion in FY 2015, an annualincreaseof$596million. The increase largelyreflectstheexpecteddepositof$1billionfromtheState InsuranceFund(SIF)reserverelease inconnectionwithWorkers'Compensation lawchanges enacted in the FY 2014 budget, partly offset by the accelerated phaseout of thetemporaryutilityassessmentandlargesettlementpaymentsreceivedinFY2014.

6 TheExecutiveBudgetFinancialPlan identifiedaFY2014surplusof$310million,whichwasexpectedtobecarried intoFY2015 through the acceleration of income tax refunds. This had the effect of reducing net PIT receipts in FY 2014 andincreasingtheminFY2015.Theaccelerationoccurredasplanned.



Nontax transfers to the General Fund are expected to total $1.2 billion, an increase of$262million, largelydue to the timingof transactions and changes in accountingof certainreceiptsandresourcesexpectedtobeavailablefromotherfunds.GeneralFund receiptsareaffectedby thedepositofdedicated taxes inother funds fordebtservice andotherpurposes, the transferofbalancesbetween fundsof the State, andotherfactors. For a more comprehensive discussion of the State's projections for tax receipts,miscellaneous receipts, and transfers, presented on a State Funds and All Funds basis, seeMultiYearFinancialPlanProjectionsherein.DISBURSEMENTS General Fund disbursements, including transfers to other funds, are expected to total$63.1billioninFY2015,anincreaseof$1.9billion(3.1percent)fromFY2014spendinglevels.Localassistancegrantsareexpected to total$42.1billion,anannual increaseof$2.2billion(5.5percent).GeneralFunddisbursementsareexpectedtoincreaseby$1.4billionforSchoolAid7 and other education programs. Other local assistance increases include, among otherthings, payments for a range of social services, public health, and general purpose aidprograms, as well as accounting reclassifications that have the effect of moving spendingbetweenfinancialplancategories,mainlyforMedicaidpaymentstoStateoperatedfacilities.State operations disbursements in the General Fund are expected to total $7.9 billion inFY 2015, an annual increaseof $541million (7.4percent). The largest increases reflect theaccounting of Information Technology (IT) services in the General Fund as a result ofconsolidating, reflected in nonGeneral Fund accounts ($200 million); the takeover of localMedicaid administrative functions by the Department of Health (DOH) ($99 million), andincreasedsupportforindigentlegalservicesandcivillegalservicesintheJudiciarybudget($60million).GeneralStateCharges(GSCs)areexpectedtototal$5.1billioninFY2015,anannualincreaseof$173million(3.5percent)fromFY2014.Healthinsurancecostsareprojectedtoincrease$102million or 3.1 percent. The State's annual pension payment is expected to increase by $50million,reflectingbothgrowth innormalcostsandrepaymentofamountsamortized inprioryears, partly offset by the payment of certain obligations in FY 2014. The State expects tocontinuetoamortizepensioncostsinexcessoftheamortizationthresholdsestablishedinlaw.InFY2015, costs inexcessof13.5percentofpayroll for theEmployeesRetirementSystem(ERS)and21.5percent for thePoliceandFireRetirementSystem (PFRS)areexpected tobeamortized.

7 SchoolAidisreportedhereonaStateFiscalYearbasis.



GeneralFundtransferstootherfundsareexpectedtototal$8.1billioninFY2015,adecreaseof$993millionfromFY2014.TheannualchangeisattributabletotheprepaymentinFY2014ofdebtservicedueinFY2015andreducedGeneralFundsupportforcapitalprojectsspendingdue to the timingofavailablebondproceeds. Thesedeclinesarepartlyoffsetby increasedsupportfornonMedicaidMentalHygieneservices.GeneralFunddisbursementsareaffectedby the levelof financing sourcesavailable inotherfunds, transfersofbalancesbetween fundsof the State,andother factors thatmay changefrom year to year. For a more comprehensive discussion of the State's disbursementsprojections by major activity, presented on a State Operating Funds basis, see MultiYearFinancialPlanProjectionsherein.CLOSING BALANCE FOR FY 2015 DOBprojectsthattheStatewillendFY2015withaGeneralFundcashbalanceof$2.1billion,adecreaseof $180million from the FY 2014 closingbalance. Thebalance in theCommunityProjectsFund,whichfinancesdiscretionarygrantsallocatedbytheLegislatureandGovernor,isexpectedtobeexpended inFY2015,reflectingdisbursementsfromprioryearappropriations($87million).Inaddition,thereductioninthebalanceincludesthetransferoffundsreceivedin FY 2014 related to the J.P. Morgan settlement to a new fiduciary fund, the MortgageSettlementProceedsTrustFund ($58million),and theuseofexcess resources fromFY2014($43million).Thesedeclinesarepartlyoffsetbyan$8millionincreaseinamountssetasideforthepotentialcostsofprioryearlaboragreements,asdescribedbelow.BalancesintheStatesprincipal"rainyday"reserves,theTaxStabilizationReserveFundandtheRainyDayReserveFund,areexpectedtoremainunchangedinFY2015.TheFinancialPlancontinuestosetasidemoneyintheGeneralFundbalancetocoverthecostsofpotentialretroactive laborsettlementswithunionsthathavenotagreedtotermsforpriorcontractperiods. Theamount identified is calculatedbasedon the pattern settlement forFY2008 throughFY2011 thatwasagreed toby theStates largestunions. Theamount setaside is expected to be reduced as labor agreements for prior periods are reached withunsettledunions.The Enacted Budget reserves $500 million for debt management purposes inFY2015,unchangedfromthelevelheldattheendofFY2014.DOBwillmakeadecisionontheuseofthesefundsbasedonmarketconditions,FinancialPlanneeds,andotherfactorsduringtheyear.



FY 2015 DETAILED GAP-CLOSING PLAN ThefollowingtableandnarrativeprovideasummaryoftheEnactedBudgetgapclosingplan.

FY2015 FY2016 FY2017 FY2018

MIDYEARBUDGETSURPLUS/(GAP)ESTIMATE1 (1,742) (2,889) (2,948) (3,887)

SPENDINGCHANGES 2,275 4,402 5,430 6,765AgencyOperations 494 734 940 1,240ExecutiveAgencies 85 194 256 328IndependentOfficials 104 233 245 240FringeBenefits/FixedCosts 305 307 439 672

LocalAssistance 1,825 1,939 2,046 1,699HumanServicesCostofLivingAdjustment(COLA) 92 125 127 128MentalHygiene 199 368 366 (2)HealthCare 152 98 (43) (161)DOHMedicaid 270 448 638 688Education 450 335 404 526STAR 172 227 232 286SocialServices/Housing 341 201 228 196AllOther 149 137 94 38

CapitalProjects/DebtManagement 671 745 382 409Initiatives2 (715) (1,110) (1,323) (1,499)

Adherenceto2%StateOperatingFundsSpendingBenchmark3 n/a 2,094 3,385 4,916

SURPLUSAVAILABLEFROMFY2014 353 0 0 0

OTHERRESOURCECHANGES (161) (282) (106) (246)TaxReceipts (450) (88) 249 311OtherResourceChanges 289 (194) (355) (557)

SURPLUS/(GAP)ESTIMATEBEFORETAXACTIONS 725 1,231 2,376 2,632

TaxActions (725) (928) (1,271) (1,154)

SURPLUS/(GAP)ESTIMATEAFTERTAXACTIONS 0 303 1,105 1,478

1

2

3

FY2015ENACTEDBUDGETGENERALFUNDGAPCLOSINGPLANSAVINGS/(COSTS)(millionsofdollars)

Savingsestimatedfromlimitingannualspendinggrowthinfutureyearsto2percent.TheGovernorisexpectedtopropose,andnegotiatewiththeLegislaturetoenact,budgetsthatholdStateOperatingFundsspendinggrowthto2percent.AssumesallsavingsfromholdingspendinggrowtharemadeavailabletotheGeneralFund.

AllforecastrevisionsmadesincethereleaseoftheoriginalExecutiveBudgetproposalareaccountedforintheappropriatecategoriesofthegapclosingplan(e.g.,spendingreestimatesinthecategoryentitled"SpendingChanges").

IncludesdistinctnewspendingadditionstotheExecutiveBudgetagreedtoduringnegotiations.RestorationstoExecutiveBudgetproposalsarereflectedintheappropriate"SpendingChanges,""ResourceChanges"and"TaxActions"categories.



SPENDING CHANGES AGENCY OPERATIONS Operating costs for State agencies include salaries,wages, fringebenefits, andnonpersonalservice costs (i.e., supplies,utilities). These costshavedeclinedover thepast several yearsthrough ongoing State agency redesign and costcontrol efforts. Reductions from the priorprojectionsforagencyoperationscontribute$494milliontotheGeneralFundgapclosingplan.Specifically:

Executive Agencies: The Budget holds personal service and nonpersonal servicespending flatwith limitedexceptions,suchascostsattributabletothephaseinoftheNew York State of Health marketplace and IT consolidation efforts. Agencies areexpected to continue to utilize less costly forms of service deliveries, improveadministrativepracticesandpursuestatewidesolutionstocommonproblems.

Independent Officials: Spending growth for the Judiciary is expected to support

mandated court operations, statutory salary increases, and additional Family CourtJudges. Higherspending fortheDepartmentofAuditandControlsupportsadditionalpreschoolspecialeducationaudits.SpendingfortheDepartmentofLawisexpectedtoincreaseinpartduetothelowerthanexpectedspendinginFY2014.SpendinginfutureyearsisexpectedtoremainatFY2015levelsforallindependentofficials.

FringeBenefits/FixedCosts: Estimates for theStatespension costsandother fringe

benefitshavebeen reviseddownwardbasedonupdated information. Inaddition,FY2015 and 2016 costs have been reduced as a result of FY 2014 prepayments and areviewofFY2014operatingresults.



LOCAL ASSISTANCE Local assistance spending includes financial aid to local governments and nonprofitorganizations, as well as entitlement payments to individuals. Reductions from the priorprojectionsforlocalassistancespendingareexpectedtogenerate$1.8billioninGeneralFundsavings.8 Savings are expected from targeted actions, continuation of prioryear costcontainmentactions,andreestimatesbasedonactualspendingdata.Specifically:

Human Services Cost of Living Adjustment (COLA): The Enacted Budget providesfundingtosupporta2percentsalaryincreasebeginninginJanuary2015fordirectcareworkersanda2percentincreaseinApril2015fordirectcareandclinicalworkers.ThisisinlieuofanacrosstheboardannualCOLAforthesetwoyears.

Mental Hygiene: Program spending is reduced to reflect revised forecasts for

communitybasedbeddevelopmentandexpansion;efforts to return individuals frommore costly outofstate placements; and continued efforts to expand communityservicestoreduceinstitutionalcosts.

Healthcare: Lower spending reflects a downward trend in reimbursement of claims

submitted by local governments under the General Public Health Works (GPHW)program andutilizingother insurance forprenatal care services; and lower expectedChildHealthPlus(CHP)costsasaresultoftheoneyearmoratoriumonrateincreases.

DOH Medicaid: The Enacted Budget includes annual Stateshare Medicaid savings

beginninginFY2015achievedundertheMedicaidGlobalCap.Projectedsavingsresultfrom the continuation of successful Medicaid Redesign Team (MRT) initiatives,improved cashmanagement, andutilizationof Federal resources associatedwith theAffordableCareAct(ACA). Inaddition,projectedannualspendingundertheMedicaidGlobalCaphasbeenadjustedtoreflectupdatedestimatesofthemedicalcomponentoftheConsumerPriceIndex(CPI).

Education:TheBudgetincludesspecialeducationprogramreformstargetedtoimprove

fiscal practices and service delivery. Estimated spending has also been reviseddownwardbasedonrevisedschooldistrictdata.

SchoolTaxRelief: Spendinghasbeenreducedtoreflectareduction intheestimatednumberofSTARexemptionrecipients.AspartoftheState'sreviewofrecipientdatatoensureunlawfulexemptionsareexcludedfromStatepayments,existingSTARrecipientswerealsorequiredtoreregisterfortheirbenefit.

8LocalassistanceincludespaymentsforSchoolAid,SchoolTaxRelief(STAR),Medicaid,publicassistance,childwelfare,localgovernmentassistanceandarangeofotherpurposes.



Social Services/Housing: Lower spending is expected in several programs, includingChild Welfare Services, Adult Protective and Domestic Violence Services, PublicAssistance, and Supplemental Security Income, based on updated claiming data andrevisedgrowth(caseload)assumptions.

AllOther: Spendingreductionsareexpectedtobeachievedacrossmultiple functions

andprogramareas including: eliminationofcertainmiscellaneous financialassistanceto local governments; utilization of capital financing for eligible homeland securitycapitalneeds;revisionstodisasterassistanceaid;andeliminationofcertain legislativegrants.

CAPITAL PROJECTS/DEBT MANAGEMENT

Savings are expected through continued use of competitive bond sales, refundings,consolidationofdebt issuances, the timingofbond sales, the levelofPAYGO capitalspending, and other debt management actions. In addition, first instance capitaltransfersmade inprioryearsareexpectedtobereimbursed fromplannedbondsalesand existing bond proceeds. The savings from debt management in FY 2015 andFY2016also reflectactualandplannedprepaymentsofdebtservice,basedonDOBsestimateofavailableresources.TheEnactedBudgetFinancialPlandoesnotreflecttheuseof the$500million inGeneral Fund resourcesdesignated fordebtmanagement.DOBexpectstomakeadecisiononusingthoseresources,basedonmarketconditions,FinancialPlanneeds,andotherfactors.

In addition, the Enacted Budget includes $30 million from the Metro Mass

TransportationOperatingAid(MMTOA)account,with$20millioninresourcesavailableforthesamepurposeonanannualbasisbeginninginFY2016.

INITIATIVES

The Enacted Budget includes significant spending additions for School Aid, highereducation, and human services. During negotiations, the Executive and Legislatureagreed to approximately $550 million in distinct new spending additions to theExecutiveBudgetproposalforFY2015.



TheFinancialPlanalsoreflectsthecostsofnewcapitalinitiativesauthorizedintheBudget.Theseinclude:

SmartSchoolsBondAct: Ifapprovedbyvoters, the$2billionSmartSchools

bond act will fund enhanced education technology in schools, with eligibleprojects including infrastructure improvements tobringhighspeedbroadbandto schools and communities in their school district and the purchase ofclassroom technology for use by students. Additionally, Smart Schools willenable longterm investments in full day prekindergarten through theconstruction of new prekindergarten classroom space, replace classroomtrailers with permanent classroom space and make investments in hightechschoolsafetyprograms.Thedebtservicecostsofthebondactareestimatedat$126millionbeginninginFY2017and$156inFY2018.

Health Care Facility Restructuring: This $1.2 billion initiative is intended to

improve the financialviabilityandefficiencyof theStateshealthcaredeliverysystem.Fundingisexpectedtobetargetedtolongtermcare,hospitals,primarycare, and behavioral/substance abuse services. Priority projects will includethose that: align hospital and nursing home bed capacity to regional needs,enablefacilityintegration,mergeandconsolidatefacilities,expandprimarycare,and facilitate transformation to care management models. The debt servicecosts of this initiative are estimated at $5 million in FY 2015, $24 million inFY2016,$43millioninFY2017,and$63millioninFY2018.

RESOURCES

Tax Receipts: The FY 2015 estimate for annual receipts has been revised to reflectupdated economic forecast data, and includes downward adjustments to personalincometaxandcigarettetaxcollections,partlyoffsetbyupwardchangestobusinesstaxandestatetaxcollections.

Other Resource Changes: The estimate formiscellaneous receipts has been revised

basedonareviewofFY2014collections,theprojectedreceiptofvariousbankingandinsurancerelatedsettlementsandrecoveries,andothertransactions. Inaddition,thetimingofcertaintransfersandothertransactionsattheendofFY2014hadtheeffectofmakingadditionalresourcesavailableforFY2015.



TAX ACTIONS

TheEnactedBudgetcontainsasetoftaxreformactionsthatareestimatedtoresult inanetreductiontotaxesandassessmentsof$725millioninFY2015and$1.3billioninFY2016onanAllFundsbasis.Themostsignificanttaxactionsinclude:

RealPropertyTaxCredit: TheEnactedBudget freezesproperty taxes for two years,

subjecttotwoconditions.Inyearone,theStatewillprovidetaxcreditstohomeownersoutside of New York City with qualifying incomes of $500,000 or less who live in ajurisdictionthatstayswithinthepropertytaxcap.Thetaxcreditswillbeextendedforasecondyearinjurisdictionswhichcomplywiththetaxcapandhaveputforwardaplantosave1percentoftheirtax levyperyear,overthreeyears. Thefreezewillresult inover$1.5billion indirectpropertytaxrelief forasmanyas2.8milliontaxpayersoverthethreeyearsthatthefreezeispaidout.

NewYorkCity"CircuitBreaker"TaxCredit: TheEnactedBudgetcreatesarefundable

tax creditagainst thePIT toprovide targeted tax relief toNewYorkCity rentersandhomeownersbasedonanindividualhomeownersorrenter'sabilitytopay.Thisreliefprogramisprogressivelystructuredtoprovideagreaterproportionofbenefitstothosewiththehighestpropertytaxandrentburdensasashareoftheirincome.Theprogramis valued at $85million annually andwill benefit over 1.4million taxpayers for twoyears.

CorporateTaxReform:TheBudgetcombinesthecorporatefranchiseandbanktaxesto

providesignificanttaxsimplificationandrelief. Thetaxrateonnet income isreducedfrom 7.1 percent to 6.5 percent, the lowest rate since 1968, and the alternativeminimumtaxisrepealed.

CorporateCapitalBaseCalculation:Theassettaxisphasedoutoversixyears,

beginningin2016.

Net Income Tax on Corporate Manufacturers: The Budget lowers the tax rate onincomeforcorporatemanufacturersfromthecurrent5.9percenttozero in2014andthereafter,toencouragethegrowthofmanufacturing.

20 Percent Real Property Tax Credit for Manufacturers: The Budget provides a

statewidecreditequalto20percentofpropertytaxespaidbymanufacturerswhoownorleaseproperty.

Accelerate Phase Out of 18a Temporary Assessment: The budget accelerates thephaseoutofthe18atemporaryassessmentoverthenextthreeyears.



EstateTax:Theexclusionthresholdoftheestatetaxfrom$1milliontoconformtotheFederalexemptionamount(currently$5.34million)byJanuary2019,and indexes ittoinflation thereafter. The top rate remainsat16percent. Thisactionwillbecoupledwithatemporaryprovisionthatwillrequirethevalueofgiftstobeaddedbacktotheestate.

Resident Trust Loophole: New York beneficiaries of exempt resident trusts will be

requiredtopaytaxonaccumulatedincomedistributedtosuchtrusts.Furthermore,theincomeofaparticulartypeofexemptresidenttrust(knownasanincompletegift,nongrantortrusts)willbetaxedtothegrantorofthetrust.

NEGOTIATED CHANGES TO EXECUTIVE BUDGET During negotiations, the Executive and Legislature agreed to $610million in gross spendingrestorations and additions to the Executive Budget proposal. Restorations,which are costsfrom the rejection of certain savings proposals contained in the Executive Budget, totaledapproximately $60million. Additions,which represent distinct new spending added to theExecutive Budget proposal by the Legislature, totaled roughly $550 million. The mostsignificant additionswere for SchoolAid andother educationprograms. The Executive andLegislature also reached agreement on the reprogramming of certain spending initiativesproposedintheExecutiveBudget.NegotiationsontaxlawchangesresultedinanumberofchangesfromtheExecutiveproposal,includingrevisionstothepropertytaxfreeze,thecreditforNewYorkCityrentersandpropertyownersandadoptionoftheeliminationofthetaxonnetincomeforcorporatemanufacturersstatewide(versusupstateonly).Inaddition,theEnactedBudgetexcludedproposedchangestothe Investment Tax Credit and repeal of the Financial Services Investment tax credit. Aprovision to phase out the capital base calculation under the corporate franchise tax wasadded.OvertheFinancialPlan.ThetaxlawchangesapprovedintheEnactedBudgetwerelesscostlythanproposedintheExecutiveBudget.Resourceshavebeen identifiedtofinancetherestorationsandadditions,andtoprovideforabalancedbudget inFY2015. These include reestimates todisbursementestimatesbasedonoperating results forFY2014, resourcesmadeavailableby theprepaymentofexpenses,andothermanagementactions.Inaddition,DOBexpectstoprepayinFY2015approximately$350million in expenses due in FY 2016. For planning purposes, the Financial Plan assumes theprepaymentofdebtservice,butDOBwilldeterminethespecificprepaymentsthatwillbemadelater inthefiscalyear. The levelofprepaymentsmaychange,dependingontheState'sfiscalposition.



ThetablebelowsummarizesallthechangestotheExecutiveBudget,asamended.

FY2015 FY2016 FY2017 FY2018

RESTORATIONS/ADDITIONS (610) (918) (973) (1,064)SchoolAid (203) (659) (677) (696)OtherEducationAid (92) (49) (65) (115)HumanServices/Labor (90) (60) (60) (60)HigherEducation (70) (87) (87) (87)MentalHygiene (12) (3) (3) (3)Housing/Agriculture/Environment (26) (10) (10) (10)PublicProtection/CriminalJustice/Judiciary (17) (6) (10) (12)EconomicDevelopment (17) (3) (3) (3)GeneralGovernment/LocalGovernmentAssistance (17) (9) (10) (10)SalaryIncreaseforDirectCareandClinicalStaff (13) (122) (122) (122)Transportation (4) (3) (3) (3)Health(incl.DOHMedicaid) (32) (15) (15) (15)AllOther (17) 108 92 72

NETTAXREVISIONSTOEXECUTIVEPLAN (220) 326 831 1,399EligibleManufacturersat0%ModifyStatewide (151) (151) (154) (154)ReformITCReject (95) (95) (95) (95)CloseResidentTrustLoopholeModify (7) (22) (15) (15)CircuitBreakerCreditModify 0 115 440 1,000CorporateReformModify 0 0 (55) (95)IncreaseHouseholdRentersTaxCreditReject 0 200 400 400ManufacturerPropertyTaxCreditModify 0 36 36 36EstateTaxReliefModify 8 50 141 322PropertyTaxFreezeCreditModify 25 193 133 0

AVAILABLERESOURCES(NETOFNEWCOSTS) 830 346 73 (325)

NETSAVINGS/(COSTS) 0 (246) (69) 10

CHANGESTOTHEEXECUTIVEBUDGETFINANCIALPLANGENERALFUND

(millionsofdollars)

Budget Risks and Uncertainties to the

Financial Plan


BudgetRisksandUncertaintiestoTheFinancialPlan

GENERAL The States Financial Plan is subject to many complex economic, social, financial,environmental,andpoliticalrisksanduncertainties,manyofwhichareoutsidetheabilityoftheState to control. DOB believes that the projections of receipts and disbursements in theExecutiveBudgetarebasedon reasonableassumptions,but there canbenoassurance thatactualresultswillnotdiffermateriallyandadversely fromtheseprojections. Incertain fiscalyears, actual receipts collections have fallen substantially below the levels forecast in theFinancialPlan. Inaddition, theprojections in futureyearsarebasedon theassumption thatannualgrowthinStateOperatingFundsislimitedto2percent,andthatallsavingsthatresultfromthe2percentlimitaremadeavailabletotheGeneralFund.TheFinancialPlanisbasedonnumerousassumptions,includingtheconditionoftheStateandnationaleconomiesand theconcomitant receiptofeconomicallysensitive tax receipts in theamounts projected. Other uncertainties and risks concerning the economic and receiptsforecastsincludetheimpactof:nationalandinternationalevents;ongoingfinancialinstabilityin theEuroZone;changes inconsumerconfidence,oilsuppliesandoilprices;major terroristevents,hostilities,orwar;climatechangeandextremeweatherevents;Federalstatutoryandregulatory changes concerning financial sector activities; changes concerning financial sectorbonuspayouts,aswellasanyfuturelegislationgoverningthestructureofcompensation;shiftsinmonetarypolicyaffecting interestratesandthe financialmarkets; financialandrealestatemarketdevelopmentswhichmayadverselyaffectbonusincomeandcapitalgainsrealizations;andtheeffectofhouseholddebtreductiononconsumerspendingandStatetaxcollections.Amongotherfactors,theFinancialPlanissubjecttouncertaintiesandcontingenciesrelatingto:wage increases for State employees; changes in the size of the States workforce; therealizationoftheprojectedrateofreturnforpensionfundassetsandcurrentassumptionswithrespecttowagesforStateemployeesaffectingtheState'srequiredpensionfundcontributions;the willingness and ability of the Federal government to provide the aid expected in theEnacted Budget; the ability of the State to implement cost reduction initiatives, includingreductions in State agency operations, and the success with which the State controlsexpenditures; and the ability of the State and its public authorities to market securitiessuccessfully inthepubliccreditmarkets. Someofthesespecific issuesaredescribed inmoredetailherein. Theprojectionsandassumptionscontained intheFinancialPlanaresubjecttorevisions which may involve substantial change. No assurance can be given that theseestimatesandprojections,which includeactionstheStateexpectstobetakenbutwhicharenotwithintheState'scontrol,willberealized.

BUDGETRISKSANDUNCERTAINTIESTOTHEFINANCIALPLAN


DOBestimates that theEnactedBudget forFY2015provides forbalancedoperations in theGeneralFund.Therecanbenoassurance,however,thattheStatesfinancialpositionwillnotchange materially and adversely from current projections. If this were to occur, the Statewouldberequiredtotakeadditionalgapclosingactions.Suchactionsmayinclude,butarenotlimitedto,additionalreductions inStateagencyoperations;delaysorreductions inpaymentsto local governments or other recipients of State aid; delays in or suspension of capitalmaintenance and construction; extraordinary financing of operating expenses; or othermeasures. In some cases, the ability of the State to implement such actions requires theapprovaloftheLegislatureandcannotbeimplementedsolelybytheactionoftheGovernor.TheFinancialPlanprojectionsgenerallyassume thatSchoolAidandMedicaiddisbursementswillbelimitedtothegrowthinStatepersonalincomeandthetenyearaveragegrowthintheMedicaidcomponentof theConsumerPrice Index (CPI), respectively. However, theFY2015EnactedBudgetauthorizedspendingforSchoolAidto increaseby5.3percent,which isabovethe3.1percentgrowth inpersonal income thatwouldotherwisebeused tocalculateSchoolAidincreases.State lawgrantstheGovernorcertainpowerstoachievetheMedicaidsavingsassumed intheEnactedBudgetFinancialPlan.However,therecanbenoassurancethatthesepowerswillbesufficientto limittherateofannualgrowth intheDepartmentofHealths(DOH)StateFundsMedicaidspending to the levelsestimated in theEnactedBudgetFinancialPlan. Inaddition,savings are dependent upon timely Federal approvals, revenue performance in the StatesHealthCareReformAct(HCRA)fund(whichfinancesapproximatelyonethirdoftheDOHStatesharecostsofMedicaid),andtheparticipationofhealthcareindustrystakeholders.The forecast contains specific transaction risks and other uncertainties including, but notlimitedto,thereceiptofcertainpaymentsfrompublicauthorities;thereceiptofmiscellaneousrevenuesatthelevelsexpectedintheFinancialPlan,includingpaymentspursuanttotheTribalState Compact that had failed tomaterialize in prior years, butwhichwere received in theFY 2014 as part of an agreement between the State and certain tribal nations; and theachievement of costsavingmeasures including, but not limited to, the transfer of availablefund balances to the General Fund at the levels currently projected. Such risks anduncertainties,iftheyweretomaterialize,couldhaveanadverseimpactontheFinancialPlaninthecurrentyearorfutureyears.FEDERAL ISSUES The State receives a substantial amount of Federal aid for health care, education,transportation, and other governmental purposes, as well as Federal funding to addressresponsetoandrecoveryfromsevereweatherevents.AnyreductioninFederalfundinglevelscouldhaveamateriallyadverse impacton theFinancialPlan. Inaddition, theFinancialPlanmaybeadverselyaffectedbyotheractionstakenbytheFederalgovernment,includingaudits,



disallowances,and changes to Federalparticipation ratesorotherMedicaid rules. Issuesofparticularconcernaredescribedbelow.MEDICAID REDESIGN TEAM MEDICAID WAIVER TheFederalCentersforMedicareandMedicaidServices(CMS)andtheStatehavereachedanagreement inprincipleauthorizingupto$8billion inFederalfunding,overmultipleyears,foruseintransformingNewYorkshealthcaresystem.ThefinaltermsofthisagreementarestillbeingnegotiatedanduponfinalCMSapprovalwillbereflectedasanamendmenttotheStatesPartnershipPlan1115Medicaidwaiver.FEDERAL REIMBURSEMENT FOR STATE MENTAL HYGIENE SERVICES Pursuant to discussions with the Federal government, the State has lowered MedicaiddevelopmentaldisabilitycenterpaymentrateseffectiveApril1,2013. Full implementationofthis change has reduced Federal funding to the State by approximately$1.1billionannually,beginninginFY2014.The2014EnactedBudgetincludedamultiyearplanto address the loss in Federal aid, including $90million inOPWDD savings associatedwithreduced administrative costs, enhanced audit recoveries and improvedprogram efficiencies.Theplan issubject to implementationrisksand isdependent, inpart,on theapprovalof theFederal government. In addition, as described below, the CMS may seek to retroactivelyrecoverFederalfundspaidtotheStateregardingthismatter.AUDIT DISALLOWANCE Inadditiontotheratereductiondescribedabove,onFebruary8,2013,theU.S.DepartmentofHealth&HumanServicesOfficeoftheInspectorGeneral,atthedirectionoftheCMS,beganaFiscal Management Review to determine the allowability of Medicaid costs for servicesprovided inprioryears to theMedicaidpopulation inNewYorkStateOperated IntermediateCare Facilities for theDevelopmentallyDisabled (ICF/DD). The initial reviewperiod includesclaims for servicesprovided fromApril1,2010 throughMarch31,2011. Asa resultof thisreview,CMSmayseektorecoverFederal funds foranypayments that itdetermines tohavebeen inexcessofFederalrequirements. TheStatehasattemptedtoaddressCMSsconcernsregardingitsprospectivepaymentstoICF/DDswithaStateplanchangeeffectiveApril1,2013,andcontinuestohavediscussionswithCMStoresolvetheconcernsrelatedtotheApril1,2010throughMarch31,2011period. Asnotedabove,thechangesbegun inFY2014resulted inareduction inFederalaidofanestimated$1.1billionannually. TheStateexpectstoreceiveafinalFiscalManagementReviewshortly.



AcomparableamountofFederalaidisatriskforanypriorperiodthatmaybepursuedbyCMS,withgreateramountsinyearswithhigherFederalFMAPparticipation.Mattersofthistypearesometimesresolvedwithaprospectivesolution(asalreadycommencedbytheState),andtheState isnotawareofanysimilarattemptsbytheFederalgovernmenttoretroactivelyrecoverFederalaidof thismagnitude thatwaspaidpursuant to anapproved Stateplan. The StatecontinuestoseekCMSapprovaltoproceedwiththedevelopmentofasustainablesystemofservicefundinganddeliveryforindividualswithdevelopmentaldisabilities.However,therecanbenoassurancethatFederalactioninthismatterwillnotresultinmateriallyadversechangestotheFinancialPlan.BUDGET CONTROL ACT TheFederalBudgetControlAct (BCA)of2011 imposedannual capsonFederaldiscretionaryspendingoveratenyearperiodandmandatedanadditional$1.2trillion indeficitreduction,which, ifnotenacted,wouldbeachievedthroughthesequestrationoffunds inFederalFiscalYear (FFY) 2013 and lowered discretionary spending caps in the following years. As therequireddeficitreductionwasnotachievedbytheMarch1,2013deadline,anacrosstheboard5percent reduction inFFY2013 funding forFederalnondefensediscretionaryprogramswasimplemented. In December 2013, the spending caps for FFY 2014 and 2015 were revisedupward by the Bipartisan Budget Act (BBA) of 2013. While the BBA provided minordiscretionarycapreliefover twoyears,BCAcaps in theremainingyearswerenotaddressed.Specificfundinglevelsareexpectedtobedeterminedthroughtheannualcongressionalbudgetprocessiftheloweredspendingcapsremaininplace.DOBestimatesthatNewYorkStateandlocal governments could lose approximately $5 billion in Federal funding over nine years,including reductions in Federal funding that passes through the State budget for schooldistricts,aswellasenvironmental,criminaljusticeandsocialservicesprograms.DEBT CEILING InOctober2013,an impasse inCongresscauseda temporaryFederalgovernment shutdownand raised concern for a time that the Federaldebt ceilingwouldnotbe raised in a timelymanner.AFederalgovernmentdefaultonpayments,particularlyifitpersistedforaprolongedperiod,couldhaveamateriallyadverseeffecton thenationalandstateeconomies, financialmarkets,and intergovernmentalaidpayments. ThespecificeffectsontheFinancialPlanofaFederal government payment default in the future are unknown and impossible to predict.However,data frompasteconomicdownturnssuggestthattheStatesrevenue losscouldbesubstantialiftheeconomygoesintoarecessionduetoaFederaldefault.A payment default by the United States may adversely affect the municipal bond market.Municipalissuers,aswellastheState,couldfacehigherborrowingcostsandimpairedmarketaccess. This would jeopardize planned capital investments in roads and bridges, higher



education facilities, hazardous waste remediation, environmental projects, and economicdevelopmentprojects.Additionally,themarketforandmarketvalueofoutstandingmunicipalobligations,includingmunicipalobligationsoftheState,couldbeadverselyaffected.HEALTH INSURANCE COMPANY CONVERSIONS State law permits a health insurance company to convert its organizational status from anotforprofit toa forprofitcorporation (ahealthcareconversion),subject toanumberofterms,conditions,andapprovals. UnderState law,theState isentitledtoproceedsfromthemonetizationofahealthservicecorporation,fromanotforprofittoaforprofitcorporation,and such proceeds must be used by the State for expenses related to healthcare. PriorFinancialPlanshavecountedonproceedsfromconversions($175millioninFY2014,and$300millionannuallyinFY2015,FY2016,andFY2017),whichhavenotbeenrealized.Forplanningpurposes,theFinancialPlannolongercountsonconversionproceeds.STATUS OF CURRENT LABOR NEGOTIATIONS (CURRENT CONTRACT PERIOD) TheStatehassettledcollectivebargainingagreementswith90percentoftheStateworkforceforthecontractperiodcommencing inFY2012. FiveyearagreementswerereachedwiththeCivilServiceEmployeesAssociation (CSEA), theUnitedUniversityProfessions (UUP), theNewYorkStateCorrectionalOfficersandPoliceBenevolentAssociation(NYSCOPBA),andCouncil82.FouryearagreementswerereachedwiththePublicEmployeesFederation(PEF)andtheNewYorkStatePoliceBenevolentAssociation(NYSPBA).The settled agreements include wage and benefit concessions in exchange for contingentemployeejobprotectionthroughtherespectivecontractperiods. Nevertheless,reductions inforcemaybeauthorized iftheStatesfiscalcircumstanceschangemateriallyorunexpectedly,orifsuchreductionsareassociatedwiththeclosureorrestructuringoffacilitiesauthorizedbylegislationorbyaSpendingandGovernmentEfficiencyCommission(SAGE)determination.Theagreementshaveprovided: twoyearDeficitReductionPlan(DRP)savingsof$300million;nogeneralsalaryincreasesforthethreeyearperiodFY2012throughFY2014;a2percentgeneralsalaryincreaseinFY2015;anda2percentgeneralsalaryincreaseinFY2016fortheemployeeswith fiveyear agreements. Additionally, the agreementsprovided fullannualhealthbenefitsavingsof$230millionresultingfrom increasestoemployee/retireepremiumshares,copays,outofnetworkdeductiblesandcoinsurance.Twolumpsumpayments$775inFY2014and$225inFY2015wereorwillsoonbepaidtoemployeesrepresentedbyCSEA,NYSPBA,NYSCOPBAandCouncil82.PEFdidnotnegotiatethese lump sum payments, but covered employees will receive repayment for all DRPreductionsoveranextendedtimeattheendofthecontractterm.Theemployeesrepresentedby unions which negotiated the lump sum payments will be repaid a portion of their DRP



reductions over an extended term at the end of their respective contract terms. UUPemployeesmayreceivelumpsumpaymentsofsimilarvalueintheformofChancellorsPowerofStateUniversityofNewYork(SUNY)AwardsandPresidentialDiscretionaryAwards.The unions representing State Police Troopers, Investigators and Commissioned/NonCommissionedOfficers,aswellasemployees representedbyDistrictCouncil37 (Housing) intheDivisionofHousingandCommunityRenewal(DHCR),continuetohaveunsettledcontractsforthecurrentcontractperiod.TheFinancialPlandoesnotincludeaGeneralFundreserveforthis purpose. The union representingGraduate Students has an unsettled contract for theperiodstartinginFY2010;thereisareserveforthispurpose.LABOR SETTLEMENTS FOR PRIOR CONTRACT PERIODS TheFinancialPlancontinuesto includeaGeneralFundreservetocoverthecostsofapatternsettlementforunsettledcontractspriortoFY2011.Thereisnoassurancethisreservewillfullyfundtheseunsettledcontracts.Inaddition,theStatesabilitytofundallfutureagreementsinFY2015andbeyonddependsontheachievementofbalancedbudgetsinthoseyears.CURRENT CASH-FLOW PROJECTIONS TheStateauthorizestheGeneralFundtoborrowresourcestemporarilyfromavailablefundsintheShortTerm InvestmentPool(STIP)foruptofourmonths,ortotheendofthefiscalyear,whicheverperiod isshorter. Theamountof resources thatcanbeborrowedby theGeneralFund is limited to the available balances in STIP, as determined by the State Comptroller.Available balances include money in the States governmental funds and a relatively smallamountofothermoneysbelongingtotheState. Severalaccounts inDebtServiceFundsandCapitalProjectsFundsthatarepartofAllGovernmentalFundsareexcludedfromthebalancesdeemedavailableinSTIP.Theseexcludedfundsconsistofbondproceedsandmoneyobligatedfordebtservicepayments.DOBexpectsthattheStatewillhavesufficientliquiditytomakepaymentsastheybecomeduethroughoutFY2015,butthattheGeneralFundmay,fromtimetotimeonadailybasis,needtoborrowresourcestemporarilyfromotherfundsinSTIP.TheStatecontinuestoreservemoneyonaquarterlybasisfordebtservicepaymentsthatarefinancedwithGeneralFundresources.Money topaydebt serviceonbonds securedbydedicated receipts, includingPITbondsandSales Tax bonds, continues to be set aside as required by law and bond covenants. ThefollowingtableprovidesanestimateofmonthendbalancesforFY2015.



General Other AllFund Funds Funds

April 5,600 2,226 7,826May 2,565 3,139 5,704June 2,515 3,150 5,665July 2,378 3,489 5,867August 1,753 3,908 5,661September 4,072 1,283 5,355October 2,563 1,727 4,290November 1,017 2,159 3,176December 3,029 1,012 4,041January 5,068 2,582 7,650February 5,708 3,022 8,730March 2,055 1,890 3,945

PROJECTEDALLFUNDSMONTHENDCASHBALANCES

(millionsofdollars)FY2015

PENSION AMORTIZATION UnderlegislationenactedinAugust2010,theStateandlocalgovernmentsmayamortize(deferpaying)aportionoftheirannualpensioncostsbeginninginFY2011.Amortizationtemporarilyreduces thepension costs thatmustbepaidbypublicemployers in a given fiscal year,butresultsinhighercostsoverallwhenrepaidwithinterest.The2010 legislationenacteda formula to setanamortization threshold foreach year. Theamortization threshold (the graded rate)may increaseor decrease in the direction of theactuarialcontributionrate(thenormalrate)byuptoonepercentagepointannually.Pensioncontributioncostsinexcessofthegradedratemaybeamortized.Amortizationispermittedinall years if thenormal rate isgreater than thegraded rate.However,when thegraded rateequalsorexceedsthenormalrate,amortizationisnotallowed.InFY2015, thegradedcontribution rates for theEmployeesRetirementFund (ERS)and thePoliceandFireRetirementSystem (PFRS)willbe13.5percentand21.5percent,respectively.TheFinancialPlanassumestheStatewillcontinuetoamortize itspensioncosts inFY2015attheserates.



Overthepastfouryears,thenormalratesandtheamortizationrateswereasfollows:

FiscalYear(FY)

ERSAverageNormalRate

ERSAmortization

RatePFRSAverageNormalRate

PFRSAmortizaton

Rate

FY2011 11.5 9.5 18.1 17.5FY2012 15.9 10.5 21.5 18.5FY2013 18.5 11.5 25.7 19.5FY2014 20.5 12.5 28.8 20.5

ForbothERSandPFRS,DOBprojectstheFY2016gradedrateswillbeequalto,ormorethan,thenormalcontributionrates.Assuch,continuedamortizationisnotexpected.Furthermore,DOBprojects thegraded rateswillexceed thenormal contribution rates inFY2017 throughFY2020.Intheseyears,amountsthatexceedthenormalcontributionswillbeusedtopaythecost of outstanding prior year amortizations, as required by statute. These projections arebased on projectedmarket returns and numerous actuarial assumptions. The next fiveyearexperiencestudyconductedbytheRetirementSystemsActuary isscheduledtotakeplace in2015andcouldchangetheseprojectionsmaterially.The State is required to begin repayment on each new amortization in the fiscal yearimmediately following the year in which the deferral was made. The full amount of theamortization,with interest,mustbe repaidwithin tenyears,but theamountcanbepaidoffsooner.TheannualinterestrateoneachnewamortizationisdeterminedbytheOfficeoftheStateComptroller(OSC),andisfixedfortheentiretermofthedeferral.InFY2014,theStatemadepensionpaymentstotheNewYorkState&LocalRetirementSystem(NYSLRS)of $1.62billion,ofwhich $814millionwas amortized. This included an additional$119.4million topayoff the2010Retirement Incentiveandotheroutstanding liabilities. Inaddition, theStatesOfficeofCourtAdministration (OCA)made itspensionpaymentof$269million,ofwhich$123millionwasamortized.Thisincludedanadditional$7milliontopayoffthe2005pensionamortization liability. Thetotaldeferredamount$937millionwillberepaidwithinterestoverthenexttenyears,beginninginFY2015.Foramountsamortized inFY2011,FY2012,FY2013,andFY2014,theStateComptrollersetinterest rates of 5 percent, 3.75 percent, 3 percent, and 3.67 percent, respectively. TheFinancial Plan assumes that both the State andOCAwill elect to amortize pension costs infuture years, consistent with the provisions of the authorizing legislation, and repay suchamountsataninterestcostassumedbyDOBtobe3.67percentperannumovertenyearsfromthedateofeachdeferredpayment,consistentwiththe interestratechargedontheFY2014amortizedamounts.



Thetablebelowsummarizespensioncontributionsandprojections forGeneralStateCharges(GSCs)andOCAover theperiodFY2011 toFY2028. TheNormalCostscolumnshows theamount of the States pension contribution prior to amortization. The New AmortizedAmounts / Payment on PriorDeferrals column shows new amounts deferred or paymentsmadeonpriordeferralsineachfiscalyear.TheNewAmortizationCostscolumnprovidetheaggregate cost of amortization in a given fiscal year (principal and interest on all priordeferrals).TheTotalcolumnprovidestheStatespensioncontribution,netofamortization.

FiscalYear NormalCosts2

NewAmortizedAmounts/PaymentonPriorDeferrals

NewAmortization

Costs Total

Results:2011 1,552.8 (249.6) 0.0 1,303.22012 2,041.7 (562.9) 32.3 1,511.12013 2,085.3 (778.5) 100.9 1,407.72014 2,633.7 (937.0) 192.1 1,888.8Projections:2015 2,373.5 (742.6) 305.8 1,936.72016 1,706.2 0.0 395.8 2,102.02017 1,477.9 117.3 395.8 1,991.02018 1,355.8 171.9 364.1 1,891.82019 1,315.7 178.7 363.5 1,857.92020 1,312.7 96.6 295.0 1,704.32021 1,389.1 3.6 207.2 1,599.92022 1,455.0 0.0 203.7 1,658.72023 1,523.7 0.0 203.7 1,727.42024 1,596.0 0.0 180.8 1,776.82025 1,671.1 0.0 90.1 1,761.22026 1,749.2 0.0 0.0 1,749.22027 1,830.6 0.0 0.0 1,830.62028 1,915.3 0.0 0.0 1,915.3

Source:NYSDOB.1PensioncontributionvaluesdonotincludepensioncostsrelatedtotheOptionalRetirementProgramandTeachers'RetirementSystemforSUNYandSED,whereastheprojectedpensiondisbursementsinthisFinancialPlantablesincludesuchpensiondisbursements.2NormalcostsincludepaymentsfromamortizationspriortoFY2011,whichwillendinFY2017.

EMPLOYEERETIREMENTSYSTEMANDPOLICEANDFIRERETIREMENTSYSTEM1

(millionsofdollars)



Consistentwith these amortization assumptions,Part TTofChapter57of the Lawsof 2010requires that: (a)theStatemakeadditionalcontributions inupcoming fiscalyears,above theactuarially required contribution, as reflected in the following table, and (b) once alloutstandingamortizationsarepaidoff,additionalcontributionsbesetasideasreservesforrateincreases,tobeinvestedbytheStateComptrollerandusedtooffsetfuturerateincreases.Asnotedabove,DOBsmostrecentpensioncontributionrateforecastassumesthatthenormalcontributionratewillequalthegradedrate inFY2016. Therefore,theStatewouldnothavetheoptiontoamortizeanyofitspensioncostsin2016,orintheimmediatelysucceedingfiscalyears. Inaddition,this forecastassumestheStatewillmakeamortizationpaymentsonpriordeferralspursuanttotheformulainstatute.ThesepaymentsareprojectedtooccurinFY2017through FY 2021. Projections in the following table are based on certain assumptionsconcerning investment earnings and benefits that DOB believes are reasonable. However,actualresultsmayvaryfromtheprojectionsprovidedinthefollowingtable,andsuchvariancescouldbesubstantial.

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018AMORTIZATIONTHRESHOLDSERS(%) 9.5 10.5 11.5 12.5 13.5 14.2 13.2 12.2PFRS(%) 17.5 18.5 19.5 20.5 21.5 20.8 19.8 18.8PENSION(NETCOST) 1,470 1,697 1,601 2,086 2,136 2,301 2,190 2,091

GrossPensionCosts 1,633 2,141 2,192 2,744 2,499 1,885 1,677 1,555AmortizationSavings (250) (563) (779) (937) (743) 0 117 172RepaymentofAmortization(incl.FY2005andFY2006) 87 119 188 279 380 416 396 364

STATEPENSIONCOSTSANDAMORTIZATIONSAVINGS(millionsofdollars)



OTHER POST-EMPLOYMENT BENEFITS (OPEB) Stateemployeesbecomeeligible forpostemploymentbenefits (i.e.,health insurance) iftheyreach retirement while working for the State, are enrolled in the New York State HealthInsuranceProgram (NYSHIP),orareenrolled in theStatesoptoutprogramat the time theyhave reached retirement,andhaveat least tenyearsofeligible service forNYSHIPbenefits.The costofprovidingpostretirementhealth insurance is sharedbetween the State and theretired employee. Contributions are established by law and may be amended by theLegislature.TheStatepaysitsshareofcostsonaPayAsYouGo(PAYGO)basisasrequiredbylaw.Inaccordancewith theGovernmentalAccountingStandardsBoard (GASB)Statement45, theStatemustperform an actuarial valuationevery two years forpurposesof calculatingOPEBliabilities. Asdisclosed inNote13of theStatesBasicFinancialStatements forFY2013, theAnnualRequiredContribution(ARC)representstheprojectedannualleveloffundingthat,ifsetaside on an ongoing basis, is anticipated to cover projected normal costs each year and toamortizeanyunfunded liabilitiesoftheplanoveraperiodnottoexceed30years. Amountsrequiredbutnotactuallysetasidetopayforthesebenefitsareaccumulated,withinterest,aspartofthenetOPEBobligation,afteradjustingforamountspreviouslyrequired.As reported in the States Basic Financial Statements for FY 2013, the projected unfundedactuarialaccruedliabilityforFY2013is$66.5billion($54.3billionfortheStateand$12.2billionforSUNY),adeclineof$5.5billionfromFY2012($5.4billionfortheStateand$0.1billionforSUNY).TheunfundedactuarialaccruedliabilityforFY2013usedanactuarialvaluationofOPEBliabilitiesasofApril1,2012 fortheStateandasofApril1,2010 forSUNY. ThesevaluationsweredeterminedusingtheFrozenEntryAgeactuarialcostmethod,andareamortizedoveranopenperiodof30yearsusingthelevelpercentageofprojectedpayrollamortizationmethod.TheactuariallydeterminedannualOPEBcost forFY2013 totaled$3.4billion ($2.6billion fortheStateand$0.8billionforSUNY),adeclineof$520millionfromFY2012($490millionfortheStateand$30millionforSUNY).TheactuariallydeterminedcostiscalculatedusingtheFrozenEntryAgeactuarialcostmethod,allocatingcostsonalevelbasisoverearnings.Theactuariallydeterminedcostwas$2.0billion ($1.4billion for theStateand$0.6billion forSUNY)greaterthanthecashpaymentsforretireecostsmadebytheStateinFY2013.Thisdifferencebetweenthe StatesPAYGO costs, and the actuariallydetermined required annual contributionunderGASB Statement 45, reduced the States net asset condition at the end of FY 2013 by$2.0billion.



GASBdoesnotrequiretheadditionalcoststobefundedontheStatesbudgetary(cash)basis,andnofunding isassumedforthispurpose intheExecutiveBudgetFinancialPlan. TheStatecontinues to finance these costs, alongwith all other employee health care expenses, on aPAYGObasis.There is no provision in the Executive Budget Financial Plan to fund the actuarial requiredcontribution for OPEB. If the State began making the actuarial required contribution, theadditional cost above thePAYGO amountswouldbe lowered. The StatesHealth InsuranceCouncil,whichconsistsoftheGovernorsOfficeofEmployeeRelations(GOER),CivilServiceandDOB, will continue to review this matter and seek input from the State Comptroller, thelegislative fiscal committeesandotheroutsideparties. However, it isnotexpected that theStatewillalteritsplannedfundingpracticesinlightofexistingfiscalconditions.FINANCIAL SETTLEMENTS TheStateperiodically receives financial settlements thataredeposited to theGeneralFund.Based on recent experience, the Financial Plan includes additional expected receipts fromsettlement proceeds of approximately $275 million in FY 2015, $250 million inFY2016,and$100millioneachforFY2017andFY2018.TherecanbenoassurancethatStatesettlement proceeds in upcoming fiscal yearswill be received at the levels assumed in theFinancialPlan.J.P. MORGAN SETTLEMENT PursuanttoalitigationsettlementreachedonNovember19,2013,J.P.MorganSecuritiesLLCisrequired to remit$1billion to theStateofNewYork.Theassociated2012 lawsuitwas filedagainst J.P.Morgan followingallegationsof the firmsmisrepresentationofmortgagerelatedsecurities. The settlement stipulated $387 million in direct restitutions to affected Stateresidents and $613 million to the credit of the State Treasury, of which a minimum of 85percentmustbe allocated forhousing and relatedpurposes, and thebalancepermitted forgeneralStateuse.Consistentwith the legalstipulationsand legislationadopted in theFY2015EnactedBudget,$613millionwasdeposited inaStateescrowaccountonDecember17,2013ofwhich$23.5million was subsequently transferred to the general fund and $589.5 million to the newlycreated Mortgage Settlement Proceeds Trust Fund. The Enacted Budget authorizes thefollowing distributions of the funds: (1) $440 million in accordance with an approvedMemorandumofUnderstanding(MOU)betweentheExecutiveandLegislatureinconsulta

Documents

Fy 2015 Enacted Budget