Wall Street woes pressure NYC budget: NYS official

Reuters News
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Posted: Dec 15, 2011 12:43 PM

By Chip Barnett

NEW YORK (Reuters) - New York state is facing bigger budget deficits as the weak performance on Wall Street drags on the city's economy, state Comptroller Thomas DiNapoli said on Thursday.

The securities industry lost nearly $3 billion in the third quarter of 2011, reducing year-to-date profits to $9.6 billion, DiNapoli said in a statement.

DiNapoli said the sector's profits, the primary driver of the city's economy, are likely to fall far short of the city's forecast of $20 billion for 2011.

"With its prospects dimming, the industry has begun to cut costs and reduce employment and employee compensation, actions which will ripple through the New York City economy," DiNapoli said. "Cash bonuses paid to securities industry employees in the city are likely to be substantially smaller than last year."

Lower Wall Street profits will make balancing New York City's budget more difficult, DiNapoli said.

He said New York City is projecting budget gaps of $2 billion in fiscal year 2013, rising to $4.9 billion in fiscal year 2015. The estimates, however, do not reflect any further cuts in federal and state aid.

In addition, the city is counting on getting $1 billion in fiscal year 2013 from the sale of taxi medallions. The state has not yet authorized the sales as negotiations with the city continue.

(Editing by Jeffrey Benkoe)