New York's 'AA-' GO rating is based on the state's substantial wealth and resources and broad economy, and also recognizes concerns regarding the outsized role that the financial services industry plays in the state's economy and revenue system. State net tax-supported debt levels have been relatively stable as a percentage of personal income and are expected to remain above average but still in the moderate range; pensions are well funded.

Strong financial planning and reporting practices, including quarterly financial plan updates, allow the state to stay abreast of changing conditions. Based on downwardly revised revenue estimates in the midyear financial plan update released on Oct. 30, 2009, the state must now address a $3.2 billion budget gap for the current fiscal year, which ends on March 31, and a projected $6.8 billion shortfall for the coming fiscal year. In addition, as revenues have underperformed estimates this year, the state has taken proactive measures to ensure cash adequacy, moving scheduled payments to later in the year while still meeting statutory payment deadlines. More aggressive cash management measures will be necessary in the absence of timely action to address the current-year gap, with December and March projected to be tight months for cash. The Stable Outlook reflects the expectation that the state will be able to address the budget shortfall in a manner consistent with the current rating level. The performance of volatile personal income tax revenues as well as the extent of actual financial services industry losses, and the ultimate shape that the industry takes, remain major uncertainties.

About 20% of state tax revenue has come from the financial services sector and, as would be expected, the current downturn has been particularly troublesome for New York. The state took positive steps to identify and address projected budget gaps over the course of fiscal 2009 as revenue forecasts were reduced steeply and out-year gap estimates rose sharply. The enacted budget for fiscal 2010 closed gaps estimated at $2.2 billion for fiscal 2009 and $17.9 billion for fiscal 2010, with these estimates including program expansions in current law that would have resulted in spending growth of a high 12.8%.