Runaway spending on Gov. Kathy Hochul and state Democrats’ record, election year, $220 billion budget has left New York facing deficits for the next five years, watchdogs warned Tuesday, saying continued loose spending by Albany’s leaders could make things worse for a generation.
“It seems clear at least that the Governor and the Legislature should have showed more fiscal restraint,” reads an analysis by Peter Warren, director of research at Empire Center for Public Policy.
Plummeting tax revenues mean a $310 million state budget deficit next year, which would grow to roughly $3.5 billion for the following two years before ballooning to $6.2 billion in the fiscal year beginning April 1, 2026, according to a state budget update released Monday night.
The state budget grew by $47 billion between 2020 and 2022, with expensive items like record-high public school funding, a controversial tax credit for film and TV productions, pension increases for state workers, and an expansion of health care for some undocumented people.
Budget watchdogs say state policymakers ought to restrain spending moving forward while reconsidering funding commitments made under previously rose fiscal projections that saw budget surpluses for years, in part thanks to federal COVID-19 funding.
“This considerable change—from five years of balanced budgets to widening and ultimately multi-billion-dollar budget gaps—reinforces the need to build reserves, vigilantly restrain spending growth, and identify and implement long-run cost savings,” Andrew Rein, president of Citizens Budget Commission, said in a statement.
Fiscal restraint moving forward would help the state overcome an expected $1.9 billion drop in tax receipts in the fiscal year beginning April 1, 2023 compared to previous estimates.
Job growth in the Empire State is now expected to grow by 4.3% in 2022, compared to the 4.9% that had been estimated in the state budget passed last April.
But then it is projected to slow to just .8% next year, according to the new budget update.
The state has thus far recovered only 80.1% of the jobs lost earlier in the pandemic, with a full recovery increasingly unlikely before 2026.
Fiscal conditions could worsen in New York if Hochul signs into law outstanding legislation that could cost the state billions more in upcoming years – including a tax subsidy for “green chip” makers Hochul backed weeks ago when the state was seemingly still flush with cash.
“It authorizes tax credits for semiconductor manufacturers of half a billion annually, up to $10 billion over twenty years. Hochul is expected to sign it into law. If she does, it will be with full knowledge that it will deepen the deficits DOB now forecasts,” Warren said.