Albany, NY, Oct 12, 2011 — State Comptroller Thomas DiNapoli says Wall Street is having another bad year--and he's saying that could have a negative impact on New York State's budget. In Albany, Karen DeWitt has the details.
Comptroller Tom DiNapoli says the financial industry's slump is largely due to uncertainty over Europe's debt crisis and a sluggish US economy, as well as a volatile stock market.
The Comptroller, in his annual report on the securities industry, says the "weaker outlook" will result in Wall Street profits that are one third lower than last year's earnings. He says major investment houses are once again cutting jobs, eliminating 4100 positions just since April of this year. The Comptroller also believes that the lucrative Wall Street bonuses will be down significantly, as well.
All of that translates into trouble for the New York City and New York State budgets, which are heavily dependent on revenues from Wall Street, including income taxes and fees on financial transactions.
14% of total state tax revenues come from Wall Street related activity, though that's down from a full 20% in past years. DiNapoli says it's likely that the state's projected budget deficit will rise.
Governor Cuomo said recently that he also thinks the budget deficit for the new fiscal year could be higher than the $2 billion dollars originally projected.
Comptroller DiNapoli says it's too soon to tell whether the financial industry's slide will trigger another state budget crisis. Cuomo says, compared to the $10 billion dollar deficit in the current fiscal year, which was closed in April, the new gap will be somewhat easier to manage.
"Worry is a relative term," Cuomo said. "But it doesn't make me happy."
The Comptroller's report comes as youthful protesters continue their Occupy Wall Street demonstrations. DiNapoli says even with the downturn, the financial services industry is still on track to make nearly $18 billion dollars in profits. And he says the average salary has grown to over $361,330, 5.5 times higher than the average private sector pay of $66,120 a year. The comptroller describes Wall Street as a "double edged sword "for New York.
"These are folks who spend money, pay taxes," said DiNapoli. "That helps, in the long run, everyone."
But he says there's "plenty" to be angry about over past behaviors on Wall Street. And the comptroller says the higher average salaries may actually be a good thing, because it shows that investment firms are replacing the high risk- high reward culture that led to former record end of year bonus payments, with more steady, long term productivity.