ALBANY – New York may face its first major budget gaps since 2011 as tax revenues are estimated to be less than initially anticipated, state budget records this week showed.
The looming budget gaps could be up to $2 billion in the next two years, which might influence state aid for schools and spending on programs proposed by Gov. Andrew Cuomo.
“This is going to be acid test of his commitment to fiscal restraint,” said E.J. McMahon, president of the Empire Center, a fiscally conservative think tank.
Cuomo came into office in 2011 facing a $10 billion budget gap, which led to cuts in school aid and a pledge to keep state spending to less than 2 percent a year.
The Democratic governor has limited state spending to less than 2 percent each year, but he’s done so by curbing state-agency spending while allowing school aid — the largest piece of the budget — to grow by 5 percent to 6 percent annually in recent years.
The state’s mid-year fiscal report released Monday pledged to keep the 2 percent spending cap — even in the face of a projected $689 million budget gap for the fiscal year that starts April 1.
The report estimated that the budget gaps could grow to $2.1 billion for the 2018-19 budget year and then fall back to $1.7 billion in the 2019-2020 year.
Cuomo will propose his 2017-18 budget in January. Lawmakers have until March 31 to approve a spending plan.
The budget gaps are largely due to a larger-than-expected drop in personal income-tax revenue — $1.2 billion less than the state estimated in March.
Yet the out-year gaps assume the state will end a so-called millionaire’s tax on high-income earners: The top rate is set to drop to 6.85 percent from the current rate of 8.82 percent at the end of 2017.
Cuomo and lawmakers kept higher rates on the wealthy in 2011, but it’s unclear whether they will let the rates expire as planned.
If they keep the higher rates, it would essentially wipe out the looming deficits, because the higher tax brings in about $3 billion a year.
There are other factors impacting the state budget.
Most union contracts have expired, and the state estimated that if the unions all get similar deals, the cost would hit as high as $820 million a year because of pay raises.
The fiscal report also noted the uncertainty over federal policy next year under the new Trump administration.
President-elect Donald Trump, for example, has proposed an overhaul of the Affordable Care Act, the health-insurance program that has more than 3 million enrollees in New York.
State officials estimated last week that a repeal of Obamacare could cost the state about $1 billion a year in federal aid.
“Certain financial projections concerning federal aid, and the assumptions on which they are based, are subject to significant revision in future financial plan updates as more information becomes available about the new administration’s proposals for health care, infrastructure, and other activities,” the report said.
You may also like
Pandemic, recession don’t bring down school budgets
Stephen T. Watson
This year's school elections were delayed and then shifted entirely to voting by mail thanks to the Covid-19 pandemic, which also shut down schools here and across the country.
District officials worried this new method of Read More
The good, the bad and the ugly in Cuomo’s budget
“We are at the early stages of what shapes up as the biggest state and city fiscal crisis since the Great Depression,” said E.J. McMahon of the Empire Center. “Borrowing and short-term cuts aside, the budget doesn’t chart any clear path out of it.” Read More
Medicaid cuts make the state budget, with some tweaks
Bill Hammond, director of health policy at the conservative-leaning think tank the Empire Center, suggested this is because the proposed cuts are meant to slow the otherwise rapid growth in Medicaid spending, which means an increase is still possible. Read More
‘Pork’ Bill Hangs Over Other Issues in Albany
E.J. McMahon, research director for the Empire Center for Public Policy, a fiscally conservative think tank, questioned the need for these projects. His organization found recent SAM allocations paid for projects he deemed frivolous such as a skate park and a local highway garage. “It’s this huge mutual back-scratching,” he said. Read More
Capitol Pressroom: Gov. Hugh L. Carey Policy Forum
In recent memory, New York’s budget negotiations typically end with the good, the bad, and the big ugly. Is it time to change the way the state budget is negotiated? We recapped this morning’s event on the topic with EJ McMahon, Founder and Research Director of the Empire Center, and former Assemblyman Richard Brodsky. Read More
EDITORIAL: Pork fund a waste of taxpayer money
The Empire Center for Public Policy earlier this week came out with its regular update on how much New York state government spends on local projects that have little to do with state needs like infrastructure and social programs and more to do with helping local state legislators get re-elected. Read More
Report says move start of state fiscal year, add budget office
Moving the start of the state fiscal year to July 1 and establishing a Legislative Budget Office are among the recommendations of the Empire Center to improve accountability in the budget process. Read More
The little-known budget weapon that Cuomo could deploy this session
A new analysis by the Empire State Center for Public Policy examines how the SAM program funded “pork barrel” capital projects across the state in the past year. Lawmakers have voted every year to authorize raising several hundred million dollars in borrowing for the program. Since the program was established in 2013, more than $2 billion in total public debt has been created. Read More