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New York faces a budget deficit

Posted by Karen DeWitt on

New York could be facing its first major shortfall in several years, partly due to falling tax collections and federal health care and other policy changes. That could leave the state with billions of fewer dollars in state aid. 

Lately, Governor Cuomo’s been sharing some bad news with New Yorkers. Twice in recent days, he’s said there could be a multi-billion dollar shortfall in the budget next year.

The first time was at a briefing on how the state would be affected by potential federal Medicaid cuts. 

“The state is already facing a $4 b deficit going into next year,” said Cuomo.

The second time was a few days later, at a speech to the state’s Business Leaders in Lake George.

“That is a big hole to fill,” said Cuomo “We need 4 billion just to get to zero. And that’s without a penny more being spent.”

The governor says 2018 is an election year and “everyone is going to want to go back a hero”. He says he expects requests from lawmakers for additional money for schools and economic development projects.

Cuomo says there are even more concerns looming, including potential losses of billions of dollars in Medicaid, under plans to repeal and replace the Affordable Care Act, and tax overhaul plans.

“Anyone of them would be devastating, and we don’t even know what they are,” said Cuomo who said the potential federal cuts could range from $2.6b to $17b. “Any of these numbers are unmanageable”.

“My take away from it is that he’s very concerned about actions on the federal level that may seriously limit the state’s ability to pass a budget,” said Heather Briccetti, President of the state’s Business Council, which sponsored the speech.   

The $4 billion dollar structural deficit next year is not new. It’s even written into the state’s financial plan. But up until now, the governor’s budget office has said since Cuomo plans to keep state spending growth capped at 2% next year, the structural deficit would be whittled down to around $800 million dollars.  That plan is even footnoted in the most recent financial plan released by the Division of Budget in August. But it still means that state lawmakers would have to make some tough decisions just to adhere to the 2% growth limit.

The state’s Comptroller, Tom DiNapoli, agrees that there’s a structural deficit and that it could be a problem.

“We have no reason to doubt that number,” said DiNapoli. “And I think it’s actually helpful that the governor identifies the fact that we do have out year (future) gaps that we have to keep in mind.”

DiNapoli says another worrisome factor is that tax collections have been coming in below projected rates.

“It reflects the fact that while the economy has been much better, it’s not the robust economic activity that we’d like to see,” said DiNapoli.

But the Comptroller says potentially huge cuts from the federal government present the biggest threat to the state budget.

The Governor, in his speech to business leaders,  also made the case for a Washington- style continuing resolution to keep state spending going beyond the April 1st deadline without a settled budget, if there’s uncertainty about whether federal aid may be significantly cut.

“Since we don’t know what this federal government is doing, primarily because I don’t think this federal government knows what it’s doing,” said Cuomo. “How do you lock yourself into a budget with numbers until you know what you’re going to get from Washington?”

Briccetti with the Business Council, once worked as a counsel to the Senate and Assembly in the 2000’s when the budget was always chronically late. She says continuing resolutions have their downside.

“Continuing resolutions are quite painful because you’re never done,” Briccetti said.

The governor does not have to present his new plan until January. He’s hinted that if there are federal cuts to New York this fall, he might have to call a special session before then.

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