2014-2015 NYS EXECUTIVE BUDGET OVERVIEW

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Economic Overview

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2014-2015 NYS EXECUTIVE BUDGET OVERVIEW

  1. 1. I. Economic Overview
  2. 2. 4.0 2.7 3.8 4.5 4.5 4.8 4.1 0.9 1.8 2.8 3.8 3.4 2.7 1.8 -0.3 -2.8 2.5 1.8 2.8 1.9 2.7 2.9 2.9 2.8 2.9 -4 -3 -2 -1 0 1 2 3 4 5 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Percentchange GDP CPI Outlook for Real U.S. GDP Growth and Inflation Note: Displayed values pertain to GDP growth. Source: Moody’s Analytics; DOB staff estimates. Forecast
  3. 3. 2013 2014 2015 Real Gross Domestic Product (GDP) (2009 chained percent change) DOB 1.9 2.7 2.9 Blue Chip Consensus NA 2.8 3.0 Global Insight 1.9 2.7 3.2 Macroeconomic Advisers 1.9 3.0 3.3 Consumer Price Index (CPI) (percent change) DOB 1.5 1.6 2.0 Blue Chip Consensus NA 1.6 2.0 Global Insight 1.5 1.4 1.8 Macroeconomic Advisers 1.5 1.5 1.6 Unemployment Rate (percent) DOB 7.4 6.8 6.3 Blue Chip Consensus NA 6.8 6.3 Global Insight 7.4 6.5 5.9 Macroeconomic Advisers 7.4 6.8 6.4 U.S. ECONOMIC FORECAST COMPARISON Source: New York State Division of the Budget, January 2014; Blue Chip Economic Indicators , January 2014; Global Insight, US Forecast Summary , January 2014; and Macroeconomic Advisers, Economic Outlook, January 2014. U.S. Economic Forecast Comparison
  4. 4. 70 80 90 100 110 120 130 140 1970 1976 1982 1988 1994 2000 2006 2012 Millions 2 3 4 5 6 7 8 9 10 11 12 1970 1976 1982 1988 1994 2000 2006 2012 $T,SAAR 35 45 55 65 75 85 95 105 1970 1976 1982 1988 1994 2000 2006 2012 Index 350 450 550 650 750 850 950 1,050 1,150 1970 1976 1982 1988 1994 2000 2006 2012$B,SAAR Real Personal Income Minus Transfers Total Employment Industrial Production Real Manufacturing and Trade Sales Note: Shaded areas represent U.S. recessions. Source: Moody’s Analytics. Income and production have finally surpassed their pre-recession peaks. Manufacturing and trade sales are on their way, leaving employment.
  5. 5. 40 50 60 70 80 90 100 110 120 40 50 60 70 80 90 100 110 120 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 US NewYork NYS Recessions US Recessions NY US (right scale) New York State Index of Coincident Economic Indicators Note: NYS recession dates are DOB staff estimates; NYS forecast (in red) is derived from the New York State Leading Index. Source: Moody’s Analytics; DOB staff estimates. F
  6. 6. 70 80 90 100 110 120 0 5 10 15 20 25 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 NetCreationIndex(%) RatesofJobCreationandDestruction(%) Net creation index (right scale) Job creation index Job destruction index Source: NYS Department of Labor; DOB staff estimates. NYS Private Sector Employment Dynamics
  7. 7. -2 -1 0 1 2 3 4 5 6 7 8 9 2010 2011 2012 2013 2014 2015 Year-agoPercentChange Executive Budget Underlying Growth Forecast • Federal marginal tax rates were raised for the highest income earners in 2013, resulting in accelerated bonus payouts into late 2012, injecting additional volatility into State wages. • For state fiscal year 2012-13, the contribution to wage growth of both the information sector and the professional, scientific and technical services sector increased significantly. NYS Quarterly Wage Forecast Comparison
  8. 8. 0 10 20 30 40 50 60 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Outlook for NYS Finance and Insurance Sector Bonuses Source: NYS Department of Labor; DOB staff estimates. $Billions Forecast • Looking at wage and bonus growth on a fiscal year basis helps to smooth the volatility. • Finance and insurance bonus growth of about 8 percent is estimated for 2013-14, with projected annual average growth of about 7 percent going forward.
  9. 9. Capital Gains Realizations ($billions) 0 20 40 60 80 100 120 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 Executive Budget "Underlying Growth" $87.4 $78.4 Source: NYS Department of Taxation and Finance; DOB staff estimates. Forecast$118.3 • Taxpayers also realized capital gains early to avoid higher tax rates at the end of 2010, but even more so in 2012 when the low rates actually expired. • The underlying growth smoothes the volatility, revealing a strong estimated performance of $87.4 billion in 2013.
  10. 10. The Indicators of New York State’s Tax Base -15 -10 -5 0 5 10 15 20 2002 2004 2006 2008 2010 2012 2014 Percentchange Personal Income NYSAGI PIT Liability Forecast Note: Personal income tax (PIT) liability is computed based on 2002 NY State tax law; 2012 liability and NYSAGI data are preliminary. Source: NYS Department of Taxation and Finance; Moody's Economy.com; DOB staff estimates.
  11. 11. II. Financial Plan
  12. 12. For Decades Actual Spending Outpaced Income and Inflation $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Actual Spending Spending at Income Billions
  13. 13. Gap Closing/Surplus Plan FY 2015 FY 2016 FY 2017 FY 2018 MID-YEAR BUDGET SURPLUS/(GAP) ESTIMATE (1,742) (2,889) (2,948) (3,887) Spending Changes 1,942 4,247 5,348 6,723 Agency Operations 358 708 990 1,342 Local Assistance 1,624 1,976 2,267 2,104 Debt Management 116 110 118 158 Initiatives/Investments (156) (232) (394) (499) Adherence to 2% State Operating Funds Spending Benchmark1 n/a 1,685 2,367 3,618 Resource Changes 286 31 (153) (129) Resource Changes (24) 31 (153) (129) Surplus Available from FY 2014 310 0 0 0 BUDGET SURPLUS/(GAP) BEFORE TAX CUTS 486 1,389 2,247 2,707
  14. 14. Financial Plan Impact of Tax Actions FY 2015 FY 2016 FY 2017 FY 2018 Budget Surplus (Before Tax Actions) 486 1,389 2,247 2,707 Tax Actions (486) (1,234) (2,082) (2,534) Budget Surplus/(Gaps) After Tax Actions - 155 165 173
  15. 15. Tax Reform Package (For the Financial Plan Period) Corporate Tax Cut and Reforms $900,000,000 Upstate Manufacturers Tax Cut $98,000,000 Manufacturers Property Tax Credit $408,000,000 18a Elimination/Phase Out $600,000,000 Total: $2 billion Property Tax Freeze $1,850,000,000 Circuit Breaker $1,700,000,000 Renters’ Tax Credit $1,000,000,000 Estate Tax Relief $1,200,000,000 Total: $5.7 billion
  16. 16. III. Debt Overview
  17. 17. State Debt Outstanding (Millions of Dollars) 56,372 55,692 55,572 55,000 55,200 55,400 55,600 55,800 56,000 56,200 56,400 56,600 SY 2012 SY 2013 SY 2014 State Debt is Projected to Decline for a Second Consecutive Year, the First Time in Over 50 Years
  18. 18. Debt Burden is Steadily Declining At Lowest Level Since the 1960s 0% 2% 4% 6% 8% 10% 12% 14% 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 State debt as percent of NYS personal income Projected
  19. 19. IV. Revenue Outlook
  20. 20. Actual and Base Tax Receipt Growth (percentage) Actual Base Adjusted Base Change Change Change Historical Average (1990-91 to 2012-13) 4.0 3.4 0.6 Forecast Average (2013-14 to 2017-18) 3.8 4.7 2.5 Forecast Average (2014-15 to 2017-18) 3.5 4.6 2.2 Recessions (1.5) (5.1) (7.6) Expansions 5.9 6.3 3.6
  21. 21. Actual and Estimated Tax Receipt Growth (percentage) Actual Estimated FY 2011 FY2012 FY2013 FY 2014 FY2015 FY 2016 FY2017 Personal Income Tax 4.2 7.1 3.8 6.5 3.0 5.8 5.6 User Taxes 10.5 2.6 0.3 3.4 2.5 3.0 2.9 Business Taxes -2.4 8.2 7.4 -3.3 -4.1 3.6 0.6 Other Taxes* 31.8 -3 -2.8 9.4 1.7 -0.9 -2.3 Total 5.6 5.6 3.1 4.7 2.0 4.6 4.1
  22. 22. All Funds Revenue Growth All Funds FY 2014 tax receipts growth of 4.7 percent and FY 2015 growth of 2 percent are heavily influenced by timing factors. Growth in FY 2014 is inflated by: • Superstorm Sandy recovery spending • The movement of realized capital gains and other non-wage income into Tax Year 2012 from future years in anticipation of higher federal tax rates in 2013 • Higher revenue as the result of the tax credit deferral program
  23. 23. All Funds Revenue Growth All Funds FY 2014 tax receipts growth of 4.7 percent and FY 2015 growth of 2 percent are heavily influenced by timing factors. Slower FY 2015 growth is the result of: • The first year of the tax credit deferral payback • The non-recurring nature of Superstorm Sandy recovery spending by consumers • Tax cuts proposed with this Budget

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