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

SCOTUS Punts To Biden On Potential Challenge to NY’s Taxing of Work-at-Home Nonresidents

The U.S. Supreme Court today kept alive federal litigation that could cost New York a big chunk of the billions of dollars in taxes it collects from nonresidents working for New York-based employers. Read More

NY Post-Pandemic Employment Tide Stopped Rising At Year’s End

New York's post-pandemic employment recovery came to a halt and moved into reverse in December, according to the state's for the final month of COVID-wracked 2020. Private payroll employment in December was 966,000 jobs below the level of the previous Read More

Governor Cuomo’s budget proposal leaves the Medicaid throttle open

Perhaps the most remarkable thing about Governor Cuomo's Medicaid budget is how little it changes the program's spending pattern. In spite of a once-in-century pandemic that rocked the state's health-care system and decimated state revenues, the govern Read More

Emmy-Winning Gov Shows Hollywood More Love

Amid the economic and fiscal fallout of the pandemic, in a proposed FY 2022 budget that would postpone $400 million in scheduled middle-class tax cuts while imposing $1.5 billion in tax-surcharges on millionaire earners, Governor Cuomo is also seeking to Read More

Seeking Bigger Federal Handout, Cuomo Proposes Record Budget

Somewhere within that vast fog bank of a FY 2022 Executive Budget that Governor Cuomo is a structural budget gap, opened during the pandemic recession and temporarily obscured by piles of federal cash that will eventually be gone with the wind. Once a Read More

Amid Cuomo’s Fulminations, New York’s Budget Gap Keeps Shrinking

State tax receipts in the month of December came in $1.4 billion above the latest projection by Governor Cuomo's Division of the Budget (DOB), according to a cash report released late today by state Comptroller Thomas DiNapoli's office. on the numbers Read More

The State’s Vaccine Appointment System Was Not Ready for Prime Time

The two top priorities Governor Cuomo identified in his State of the State speech Monday morning were "Defeat COVID" and "Vaccinate New York." Read More

A Study in Contrasts: Cuomo’s 2011 and 2021 State of the State Messages

State of the State messages by New York governors customarily lay out general goals and priorities, rather than specifics. Even in general terms, however, there is a striking contrast between Governor Cuomo's latest State of the State and his first annual message to the Legislature, which he delivered five days after taking office 10 years ago. 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.