State income-tax refunds will be delayed by several weeks as the state struggles to manage its cash flow amid growing budget deficits, officials said Tuesday. The move will save the state about $500 million by delaying income-tax refunds until April 1. The state stopped paying the refunds on Monday.
It means that taxpayers who filed for refunds in late February and early March will have to wait a few extra weeks to get paid, officials said. Usually it takes three to four weeks to process a state tax return; people who filed within that period will have to wait about six weeks.
Income-tax refunds filed after April 1 are not expected to be affected. The tax filing deadline is April 15.
“This is certainly a difficult action and this impacts New Yorkers waiting for their refunds, but the fact that we even have to consider options like this speaks to how grave our fiscal circumstances are,” said budget spokesman Matt Anderson.
Last month, state officials quietly began talking about having to delay income-tax payments because the state faced a $1.4 billion shortfall before the fiscal year ends March 31.
The idea drew sharp rebukes from state lawmakers, who are now pushing legislation that would require all state income-tax refunds to be made within 30 days.
“This is a promise we cannot break,” Assemblyman Richard Brodsky, D-Greenburgh, Westchester County, who is sponsoring the legislation, said in a statement this week.
“The state should not bail itself out on the backs of people who are owed tax refunds.”
What the state is doing is capping how much it pays out in tax rebates before the fiscal year ends. The cap had been set at $1.75 billion; now it’s at $1.25 billion.
About $7 billion in state refunds are paid out each year. About 1.35 million taxpayers have received rebate checks already this year, state officials said.
The income-tax payments are complicated because of the state’s budget calendar. Because the fiscal year runs from April 1 through March 31, income-tax rebates are paid over two fiscal years.
Paterson said Tuesday that the current budget gap has grown to about $2.1 billion. The state faces a $9.2 billion deficit in the 2010-11 fiscal year, which starts April 1.
“The day of reckoning has come,” Paterson said, referring to the state’s burgeoning budget gaps.
The state Department of Taxation and Finance said it gets out about 85 percent of the tax refunds within 30 days, and it can be about 7 to 10 days faster if a taxpayer files electronically.
The decision helps the state manage its cash flow as the fiscal year ends. Paterson said the state expects to delay payments to local governments and other services this month to help end the fiscal year with a balanced budget.
The state has about $14 billion in payments due this month, but budget officials said no final decision has been made on which payments will be delayed. The state delayed payments last December because it was running out of money.