Thanks to a strong third quarter, New York’s state tax receipts through December were $1.3 billion above projections for the fiscal year that ends March 31, according to the latest monthly cash report from state Comptroller Thomas DiNapoli.

Assuming no erosion in revenues is expected during the last three months, having an extra $1.3 billion on hand will reduce a $4 billion current-year operating deficit driven by Medicaid over-spending, which is the main element in a prospective FY 2021 budget gap of $6 billion. Governor Cuomo will reveal more details of his proposal for dealing with that problem in his FY 2021 Executive Budget, which will be presented Tuesday.

Cuomo could use surplus revenue to paper over the true extent of excess “capped” spending increases in the budget as a whole, or in the Medicaid program in particular. This would be accomplished by pre-paying FY 2021 expenses just before the end of the current year, artificially reducing apparent growth from one year to the next.

But this would not fix the larger structural problem of Medicaid over-spending, which will be baked into the spending baseline until steps are taken to permanently reduce it.

DiNapoli’s December cash report said the added third-quarter revenue came mainly in the form of personal income tax (PIT) receipts, which were $1 billion ahead of projections in Cuomo’s Mid-Year Financial Plan Update, released (three weeks past the statutory deadline) Nov. 22. Most of the extra money flowed into the state’s coffers in November, usually the lowest month for PIT collections, when total PIT receipts of $2.5 billion exceeded the Mid-Year forecast by $813 million, or nearly 50 percent.

In addition to PIT, the comptroller reported state business taxes as of December were $343 million ahead of projections, while consumption taxes were about $50 million below the projection for the quarter. DiNapoli’s report also said miscellaneous receipts through December were $218 million above projections, bringing the total State Operating Funds revenue surplus through the first nine months of the fiscal year to $1.5 billion.

With only three months to go before the April 1 start of a new fiscal year, it’s still too early to assume the revenue picture will end up as (relatively) bright as it looks. The final quarter of the fiscal year is always a bellwether period for receipts from the PIT, New York’s largest tax source. Cuomo’s Mid-Year report projected PIT collections for the last three months of fiscal 2020 at $16.1 billion, more than half of which is expected in January. In addition, the unanticipated excess in business tax receipts for the third quarter could be timing-related, leading to a dropoff in what’s left of the year.

The governor’s adjusted revenue expectations—and how he might use surplus revenues to paper over a portion of the budget gap—will become clear on Tuesday when he presents his Executive Budget.

For now, at least, this much is already clearer than ever: New York does not have a revenue problem.

About the Author

E.J. McMahon

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

Read more by E.J. McMahon

You may also like

While New York’s Medicaid Budget Soared, Public Health Funding Languished

Four years after a devastating pandemic, the state has made no major investment to repair or improve its public health defenses. While funding for Medicaid over the past four years Read More

Unions are pressing bogus arguments for blowing up NY’s public pension debts

New York's public employee unions are arguing, without evidence, that state lawmakers need to retroactively sweeten the pensions of workers who have been on the job for more than a decade. In fact, state and federal data show why state lawmakers shouldn't. Read More

A Medicaid Grant Recipient Sponsors a Pro-Hochul Publicity Campaign

While much of the health-care industry is attacking Governor Hochul's Medicaid budget, at least one organization is rallying to her side: Somos Community Care, a politically active medical group in the Bronx that recently r Read More

New Jersey’s Pandemic Report Shines Harsh Light on a New York Scandal

A recently published independent review of New Jersey's pandemic response holds lessons for New York on at least two levels. First, it marked the only serious attempt by any state t Read More

Senate, Assembly Budget Plans Include $4B Pension Giveaway

A little-noticed provision in lawmakers’ budget proposals would also be the most costly: their proposal to change state retirement rules would slam New York taxpayers with more than $4 billion in new debt, and immediately drive up pension costs, by retroactively sweetening the pension benefits of public employees. Read More

Past Due: It’s Time to Float New York’s Statutory Interest Rates

Adopting a more neutral statutory interest rate—like the rate under federal law—would address a distorting factor in the cost-benefit analysis of pursuing a meritorious appeal in the Empire State. Read More

Four years later, New York’s COVID hangover lingers

Just in time for the pandemic's fourth anniversary, the state's latest monthly jobs data offer fresh evidence of the lingering economic damage wrought by New York's heavy-handed response to the COVID-19 outbreak. Read More

NYS Seeks Spin Doctor To Fight Climate Law Critics

New York state energy officials are taking the exceptional step of hiring a public relations outfit, using $500,000 per year of public money, to "maintain a positive narrative" and “respond to negative viewpoints” about the state’s 2019 climate law. Read More