A year ago this week, with the start of New York State’s 2021 fiscal year just over a month away, it became clear that the spread of the coronavirus was about to clobber the global economy, disrupt public finances and upend Governor Cuomo’s original budget calculations.
The collapse of stock prices during the final week of February 2020 was an unmistakable warning that the coronavirus was causing a severe economic disruption. “Coronavirus Fears Reverberate Across World Economy” was a front-page headline in The New York Times on Feb. 29, echoing similar reports across the news spectrum. As the Times reported that day:
“Investors are panicked that the virus is spreading so quickly, with each day threatening to bring more countries to a standstill, that it could severely harm the global economy.”
Given Wall Street’s importance to New York’s tax base, the fall in stock prices was an immediate threat to the state’s biggest revenue source, the personal income tax, which is heavily reliant on capital gains and investment income of the highest-earning taxpayers.
Yet as they headed towards the traditional start of budget negotiations, Governor Cuomo and the Legislature did little to brace for the fiscal impact of COVID-19. Instead, they plowed ahead with spending they knew they couldn’t possibly afford.
Even as he commended the budget’s passage as “an extraordinary feat of legislative accomplishment,” Cuomo estimated that projected spending for the new year totaled $10 billion more than the state expected (at that time) to collect in revenues. Rather than calling on the Legislature to reduce spending, he had negotiated with them behind the scenes to produce a budget that spent not much less than he had proposed, leaving the net total slightly above the previous year’s level. The budget made two concessions to the new reality: it gave the governor extraordinary added authority to reduce spending across the board or to withhold spending in some categories, and it allowed him to borrow up to $11 billion to plug budget holes.
Beyond that, locking himself into the position he’s maintained ever since, Cuomo insisted the federal government would have to fill New York’s budget hole. What’s now lingering is a fiscal hangover the governor and lawmakers expect a forthcoming federal stimulus bill to cure. Assuming the money comes, the relief will only be temporary, leaving the budget high and dry—and unbalanced by billions—in a year or so.
How did we get to this point? The key dates are highlighted on the chart below, followed by links to budget-focused blog posts, special reports and commentaries issued by me and my Empire Center colleagues last year as the crisis was beginning to unfold.