Wednesday, March 17, 2010

New York Halts Refund Checks To Bridge Massive Deficits

New York State is holding on to your tax refunds for just a little while longer because the state simply needs whatever money it can get from interest on that money. Anyone expecting a refund from now through April 1 will have to wait.
Gov. David Paterson has temporarily halted income tax refund checks, with the last batch going out March 12 and no more scheduled to be sent until April 1.

"We paid all the way up until we hit $1.25 billion (in refunds)" Budget Director Robert Megna said Tuesday, explaining approximately $500 million is being delayed in order to get the state through the cash flow crunch that comes every March and is particularly bad this year.

About 1.35 million New Yorkers already have their income tax refunds in hand. Those who file from about now on should get their checks in about a month, Megna said.

But those who filed in late February and early March will likely have to wait about six weeks rather than the usual four weeks.

Paterson earlier warned the checks might be delayed due to the state budget crisis, which includes a drop in tax revenue and a budget deficit projected at more than $9 billion through the next fiscal year, which starts on April 1.

A number of large payments to localities for expenses such as schools and Medicaid are due in March, spurring the need for a delay.

"We know that's an inconvenience to people," said Megna. "We didn't want to do it, but because we were put in this cash flow position we had to do it."

Typically, more than 5 million of the 9 million New Yorkers who file get refunds, averaging about $1,000 each, Megna said.
New York's fiscal problems are even worse than New Jersey's, and the state is led by a lame-duck governor whose political problems are hamstringing the state's ability to craft a sound fiscal budget. The state is simply passing on the buck for yet another year and will do nothing to address the budget's structural deficits.

The primary reason that the state lacks the money this year is that the state simply hasn't been taking in revenues as had been projected to match the state's spending. Yet the state leaders can't seem to understand that out of control spending must be brought under control.

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