screen-shot-2020-03-02-at-9-29-12-am-150x150-1203117

“Hope for the best and prepare for the worst” is a favorite saying of Governor Cuomo, who has rolled it out again to describe how the state will deal with the Coronavirus.

But when it comes to the revenue forecast underlying the next state budget, Cuomo effectively is hoping for better and preparing for more of the same.


This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.


The more laid-back approach is reflected in Sunday’s Consensus Forecast Report, in which Budget Director Robert Mujica and legislative fiscal committee staffs agree that revenues for fiscal 2020 and 2021 will be a combined $700 million higher than forecast last month in Cuomo’s FY 2021 Executive Budget.

If the Coronavirus disruption had not developed over the past few months, that might be seen as a conservative number. At least a quarter of the $700 million in projected new revenues is already in hand, based on January tax receipts that came in $170 million above the cash-flow projection in the governor’s budget. As usual, the Legislature began the consensus-building process with higher revenue estimates than the governor’s Division of the Budget: $1.1 billion from Senate Majority Finance, and $1.7 billion from Assembly Majority Ways and Means.

But all of those forecasts predated the full brunt of last week’s bad news about the spread of the Coronavirus outbreak and the meltdown in the stock market, which experienced its most rapid correction (a drop of at least 10 percent in major indexes) since the 2008 financial crisis. The big question now is whether the correction, with or without a worst-case viral pandemic, will turn into a deeper and more prolonged bear market and recession.

The Consensus Forecast Report acknowledged there are “multiple and elevated risks to the economic outlook,” including “an exceedingly significant downside risk” stemming from the spread of the Coronavirus. On the other hand, the same paragraph in the report states “a quick resolution of the Coronavirus outbreak” could lead to a stronger rebound.

In any year, under any circumstances, adding $700 million to the revenue estimate is like tossing chum into an Albany pool full of hungry legislators and interest groups—not a great idea right now, given the added downside risks.

But if the governor truly means to abide by his 2 percent self-imposed spending cap, the $700 million can’t be spent on anything. Given the exceptionally shaky economic outlook, the most prudent course would be for Cuomo to follow up the consensus report by announcing the added $700 million—if it actually materializes—will be put in reserves. That’s what he did this time last year; if he hadn’t, he’d be facing an even bigger problem than the multi-billion dollar Medicaid deficit.

As state Comptroller Thomas DiNapoli keeps warning, the state needs to build up its comparatively low rainy-day funds. “As the financial capital of the world, New York is particularly sensitive to economic downturns, which can put a significant strain on our budget,” the comptroller said back in December. And now the threat of a downturn is larger than it’s been in several years.

About the Author

E.J. McMahon

Edmund J. McMahon is the Empire Center’s founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Nursing Home Vacancy Rate Soars, Hinting at a Higher Coronavirus Toll

The vacancy rate in New York's nursing homes has more than doubled since the start of the coronavirus pandemic, suggesting that the death toll among residents may be thousands higher than officially reported. Read More

Cuomo Extends Slushy “Freeze” of State Worker Pay

A temporary freeze on scheduled pay hikes for state government employees (apparently) will continue through September while Governor Cuomo continues to count on aid from Washington to cope with the pandemic-induced economic and fiscal crisis. But the gove Read More

Federal Judges Have (Again) Upheld Public Worker Pay Freezes to Deal with Fiscal Crises

A federal appellate court has upheld a state-imposed freeze on pay increases for Nassau County employees—reaffirming the Legislature’s power to to every level of government in New Read More

New York’s Personal Income Pulse Weakened in First Quarter of 2020

Personal income growth in New York nearly flatlined in the first quarter of this year, reflecting the start of the economic shutdown triggered by the coronavirus crisis, according to by the federal Bureau of Economic Analysis (BEA). Revised BEA data a Read More

Private Jobs Recovery was Glacial in NY as Reopening Began in May

Unlike its , New York's economic recovery began at a painfully slow rate during the normally buoyant month of May. the viral lockdown ordered by Governor Cuomo resulted in an economic catastrophe of historic proportions for the Empire State, culminati Read More

Unsure of COVID Impact, NY Insurers Roll Dice on Rate Hikes

The health insurance industry's rate applications for 2021, , reveal deep uncertainty about the long-term impact of the coronavirus pandemic on medical costs. Some companies anticip Read More

As Local Sales Taxes Crash, Cuomo Rolls Out Police Plan Mandate

The pandemic-driven decline in sales tax revenues accelerated in May, when the local share statewide was down 32 percent from last year's levels, the state comptroller's office today. And as if their fiscal predicament wasn't bleak enough, municipalit Read More

State Goes on a “RAN” Run as NY Sinks into Deeper Fiscal Hole

While Governor Cuomo crawls further out on a fiscal limb, delaying threatened budget cuts in hopes of landing more federal aid, New York State is wrapping up its biggest short-term spring borrowing in 30 years. As listed on , the borrowing will take th Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.