Given recent revenue trends, it should come as no surprise that the state’s first-quarter financial plan update is forecasting a  $2.1 billion deficit for the current fiscal year.   But some of the financial details released by the Division of the Budget (DOB) today are getting even more worrisome.

For example, DOB expects to be scraping the bottom of its cash drawer before the end of the year.  From page 12 of the plan:

DOB projects that the General Fund will end the months of November and December 2009 with negative cash balances of $1.2 billion to $1.4 billion, absent the implementation of potential cash management actions, and will return to a positive month-end balance in January 2010. The Enacted Budget authorizes the General Fund to borrow resources temporarily from other funds for a period not to exceed four months. The current forecast projects that the General Fund will continue to have periodic negative cash balances during the year. The amount of resources that can be borrowed by the General Fund is limited to the available balances in the State’s Short-Term Investment Pool. DOB will continue to closely monitor and manage the General Fund cash flow during the fiscal year.

The state last dipped into reserves to cover cash shortfalls in 2002, but on a much smaller scale.   The projected cash flow problems for 2009-10 appear to be the largest, in relative terms, since the severe fiscal crisis of the early 1990s.

However, on a more positive note, DOB is also saying that the state will end the year with a cash balance of $1.378 billion, including the $1 billion Tax Stabilization Reserve Fund, unchanged from the Enacted Budget Plan.  Governor Paterson is promising to deliver a Program to Eliminate the Gap (PEG) in early fall, including “substantial reductions in local assistance and State Operations spending, as well as other measures to achieve a balanced budget in the current year.”

Hmm.  It’s difficult to see how truly “substantial” reduction in local assistance and state operation spending could occur without a mid-year reduction in school aid or more employee headcount reductions than the governor has planned to date.

Meanwhile, as revenues continue to drop, state operating funds spending has actually grown by $106 million since the budget was enacted, as shown by the table on page 4 of the financial plan update.

Stay tuned.