EXCLUSIVE

Facing cuts: NSW Treasurer Andrew Constance delivers his first budget on Tuesday.

Facing cuts: NSW Treasurer Andrew Constance delivers his first budget on Tuesday. Photo: Greg Ellis

Fresh from blowing a $2 billion hole in NSW finances with cuts to school and hospital funding, federal Treasurer Joe Hockey has now helped consolidate a likely deficit next financial year in Tuesday's state budget.

The Commonwealth has brought forward to this financial year a $703 million payment to NSW for the upgrade of the Pacific Highway originally slated for 2014/15.

The mid-year review published in December forecast a $1 billion deficit in 2014/15, with a return to surplus in 2016/17.

Helped consolidate a likely deficit: Treasurer Joe Hockey

Helped consolidate a likely deficit: Treasurer Joe Hockey Photo: Andrew Meares

The decision to bring forward the Pacific Highway payment means that when NSW Treasurer Andrew Constance delivers his first budget on Tuesday, it is likely to include a 2014/15 result worse than had been hoped.

Mr Constance and Premier Mike Baird have been engaged in a war of words with Mr Hockey and the federal government over the announcement in its May budget that health and education funding to the states would be cut by $80 billion over the next 10 years.

The impact on NSW is estimated to be $2 billion over the next four years.

Mr Baird described the cuts as "a kick in the guts to the people of NSW" and raised concerns they could place the state's triple-A credit rating at risk.

Mr Constance has said the cuts will be factored into Tuesday's statement but that the NSW government would not pursue "knee-jerk" fixes such as increasing payroll tax, as suggested by Federal Treasury secretary Martin Parkinson.

He has also said the cuts largely neutralised the benefit of record stamp duty receipts in NSW in the first quarter of this year.

It is understood that Tuesday's budget papers will not include two results as they did last year due to a change in accounting standards.

The change to how public servant superannuation is calculated meant while last year's forecast result for 2013/14 was a $329 million deficit on a "traditional basis", the new accounting standard meant it was $1.9 billion.

Both figures were published with an explanation in the budget papers, but this year the new accounting standard is expected to be fully embraced.

The budget will also include $24 million in funding for "short-term works" and planning for major road upgrades worth an estimated $348 million around the planned Northern Beaches Hospital at Frenchs Forest.

The hospital, which is to be privately run, is due to open in 2018.

The funding comprises $14 million from Roads and Maritime Services and a $10 million commitment from the NSW government's infrastructure fund, Restart NSW.

It will go towards consideration of road widening, intersection upgrades, pedestrian bridges and bus priority lanes designed to cope with the anticipated growth in traffic.

Roads minister Duncan Gay said options to reduce the impact of flooding on Wakehurst Parkway are also being considered.

"We want to get the infrastructure right upfront while we are constructing the hospital," he said.

The government says $348 million has been "reserved" in Restart NSW to fund the upgrades.

Health minister Jillian Skinner said the Northern Beaches Hospital would deliver "the highest quality care".