For the first time since taking office 10 years ago, Governor Cuomo has met the statutory deadline for producing a Mid-Year Financial Plan Update. As in most previous years, however, the report actually “updates” very little, raising as many questions as it answers.

The main mid-year takeaways promoted by the accompanying press release from Cuomo’s Division of the Budget (DOB) were “a $14.9 billion General Fund revenue decline and a 15.3 percent All Funds tax receipts decline from the Budget forecast released in February, creating a total loss of nearly $63 billion through FY 2024 as a direct consequence of the COVID-19 pandemic.”

These numbers—while accurate—are nothing new. They also are misleading: the current budget hole is, at most, $8 billion, and since the state budgets only one year at a time, multi-year differences in future revenues as projected back in February are not meaningful.

In fact, buried in the 432-page report issued Friday afternoon by Cuomo’s Division of the Budget (DOB) is a slightly improved economic forecast for the current fiscal year, compared to projections in DOB’s First Quarterly Update back in August.

In the most significant change since the August plan update, personal income in New York State during this fiscal year is now projected to increase by 2.3 percent—a 3.6 percentage point swing from the previous forecast of a 1.3 percent decline. This was chalked up in part to better-than-expected stock market performance since the first quarter, which led to an increase in predicted bonus payments to New York-based financial sector employees. Every percentage point change in New Yorkers’ personal income equates to about $14 billion, so the revised forecast adds about $50 billion to the tax base.

The Mid-Year Update also slightly improves the statewide wage forecast for this fiscal year, to a decrease of 5.4 percent from the original forecast of -6.3 percent, although the projected change in nonfarm employment was downgraded, from -8.8 percent to -10.1 percent, which is consistent with the state’s still-sluggish employment recovery from the pandemic-driven business shutdowns and restrictions. The report said it will still be “several years” before private-sector employment in New York recovers to pre-COVID levels.

Despite the improved income and wage forecasts—and even though tax receipts through September exceeded DOB’s Q1 forecast by about $1 billion, further supporting the improved personal income forecast—the Mid-Year Update makes no change to the tax revenue projection for FY 2021, or for the three following fiscal years covered by the plan.

The financial plan still includes what amounts to a recurring annual $8 billion placeholder labeled “Budget Balance Reduction” in the category of local assistance spending, but no longer includes a similar lump-sum assumption of $1 billion a year in reductions on the state operations category, which was included in the last two financial plans for this year.

Instead, a combination of relatively small changes to the disbursement projections results in a projected FY 2022 budget gap of $16.7 billion, compared to the previously projected gap of $17.4 billion. Neither number assumes recurring adoption of $8 billion in recurring budget reductions. Cuomo has yet to pull the trigger on those cuts.

The DOB press release issued with the update highlights $4.3 billion in reduced spending, compared to the first half of FY 2020, “done by freezing hiring, new contracts and pay raises, and temporarily holding back 20% of most [local aid] payments.”

These reductions have been mostly temporary, however. With less than half the fiscal year left, the governor continues to (literally) bank on his hopes for a Biden victory in the presidential election, coupled with a Democratic takeover of the U.S. Senate. Assuming that happens, Cuomo (not without reason) expects to produce a big infusion of federal aid to cover the still-enormous hole in his current budget, plus a large portion of the gap for FY 2022.

What if President Trump is re-elected, or a President Biden has his state and local aid proposals thwarted by a still Republican-dominated Senate? In that case, said Budget Director Robert Mujica, “The only alternatives to federal funding are spending reductions – a devastating impact on schools, hospitals, police and fire departments, along with other critical services – long-term debt and revenue raisers that may impact our competitiveness and weaken New York State’s ability to lead the national economic recovery as producer of 8% of national GDP.”

As explained here last month, the actual size of the current-year budget hole is less than $8 billion if some offsetting federal Coronavirus Relief Fund aid and other spending reductions are included. Cuomo also has discretion to roll over $4.5 billion in short term cash-flow borrowing for one more year, and the FY 2021 closing fund balance, including statutory reserves, is projected at $7.2 billion.

But the key bottom-line number remains daunting: the projected FY 2022 budget gap of $16.7 billion, with a state operating funds revenue base projected to total $12 billion less than in FY 2020, including tax revenues that still are not projected to recover to pre-pandemic levels until FY 2024.

Now that Cuomo has actually issued a Mid-Year Update on time for the first time, his next budget-related reporting deadline is Nov. 5, when the so-called “Quick Start” provision of the state Finance Law requires “appropriate personnel” for the governor, comptroller and legislative leaders  to “separately prepare and make available reports on estimated state receipts and state disbursements for the current and ensuing fiscal years.” In recent years, only the comptroller has met this deadline.

PS— Empire Center’s Bill Hammond has posted a Twitter thread pointing out some interesting changes to state Medicaid expenditure and revenue projections.

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

Albany’s week that was: drifting into a slow-motion fiscal collapse, February-March 2020

A year ago this week, with the start of the New York State's 2021 fiscal year just over a month away, it became unmistakably clear that the spread of the Wuhan, China, coronavirus was about to clobber the global economy, disrupt public finances and upend Governor Cuomo's original budget calculations. Read More

New York’s Shrinking Budget for Public Health Deserves More Attention

As Medicaid costs spiraled over the past decade, other parts of the state Health Department were losing money and staff—leaving New York with diminished public health resources when the pandemic struck last year. Read More

Despite pandemic, state FY21 tax collections continue to exceed Cuomo projections

New York State's tax receipts in January totaled $11.4 billion—outperforming Governor Cuomo's projections for the month by $1.7 billion, or 17 percent, according to the monthly cash report issued late today by state Comptroller Thomas DiNapoli. Read More

What to Expect When the Health Department Complies with the Empire Center’s FOIL Request

Although the state Health has recently revealed significant additional information about the pandemic death toll in New York's nursing homes, it has not fully complied with last week's court order in a Freedom of Information lawsuit brought by the Empire Center. Read More

House Democrats are working on the stimulus bailout of Cuomo’s dreams

The "state and local recovery" piece of the $1.9 trillion stimulus bill now being drafted by House Democrats in Washington would not by itself give Governor Cuomo the $15 billion in added federal aid he's been loudly demanding—but would come very, very close. Read More

Whoopee! NY pension fund investment returns climb to new heights

New York State's main pension fund investment pool earned 10 percent in its third quarter and has gained nearly 30 percent since the end of its 2020 fiscal year, according to state Comptroller Thomas DiNapoli, the fund's sole trustee. As of December 31 Read More

New York Reveals Another 1,516 COVID-19 Deaths in Long-Term Care Facilities

The death toll in New York's long-term care facilities jumped by another 1,516 this weekend as the Cuomo administration adjusted its reporting on adult-care facilities to include residents who died after being transferred to hospitals. Read More

The Cuomo Administration Releases More Data on Coronavirus Deaths in New York Nursing Homes

The state Health Department has revealed additional detail about coronavirus deaths in New York nursing homes, showing for the first time how many residents of each home died of COVID-19 outside of the facility, typically in a hospital. 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.

Empire Center Logo "Readers will recall that the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo’s government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it sued the government, and one week after a state court ruled that the Cuomo administration had violated the law and ordered it to come clean—Team Cuomo finally started coughing up some of the records."   -Wall Street Journal, February 19, 2021

SIGN UP TO STAY UP TO DATE ON THIS AND THOSE OTHER ISSUES THAT IMPACT NEW YORKERS.