A new report from the Citizens Budget Commission critiques New York’s budget health and urges the state to get its finances in order amid a $26.8 billion cumulative budget gap through 2029.
The report tells state officials to get under the hood to recalibrate how New York approaches its finances, and make tough decisions when it comes to funding programs — many of which sit at historically high levels.
It comes as the state Division of Budget’s recent mid-year update featured shrinking budget gaps and a sunnier than expected fiscal outlook, but still warned of the impending impacts of federal cuts and potential pitfalls from broader economic turbulence.
“In the near term, pretty strong — revenues are strong but in the long run, New York’s budget is precarious at best,” said CBC Executive Director Andrew Rein.
The report emphasizes the need to manage ballooning program spending, fine tune programs to ensure they are working as efficiently as possible while delivering for New Yorkers and setting the Empire State up to successfully compete with other states.
Rein said making such decisions isn’t necessarily easy or politically expedient.
“If we have the will to make those decisions today, we will be able to help New Yorkers, especially those in need tomorrow,” Rein said.
He said one particularly tough area to moderate in terms of political will is education spending.
Two years after Gov. Kathy Hochul faced significant backlash and ultimately retreated from pulling the rug out on “Save Harmless” — the state’s policy of ensuring that school districts don’t receive less Foundation Aid funding than the year before — Rein is urging the governor and the state Legislature to revisit the policy in cases of shrinking enrollment, knowing backlash will reignite.
“The choice to do this is hard but it is smart because it will serve the people of New York in the long run. We are facing significant federal cuts that increase over time,” he said.
In last year’s budget, the state took steps to retool the Foundation Aid formula after years of stagnancy, but “Save Harmless” ultimately didn’t take the hit Hochul had initially advocated for.
Rein told Spectrum News 1 that in order to determine which programs should see their funding moderated, the state needs to create a performance management system to offer a real time look at which ones are performing as intended and which are lagging behind.
“A system which has the data on every program and a process that reviews that data to ensure we improve what’s not working,” he described.
It comes as Hochul is facing pressure from her left flank to do more with the state’s resources, and generate additional revenue.
On, Wednesday Hochul doubled down on Fox 5 NY that she doesn’t want to raise income taxes but was non-committal when it comes to other forms of revenue raisers or tax hikes.
Meanwhile, a recent study from the Fiscal Policy Institute says the exact opposite of the CBC document. Executive Director Nathan Gusdorf told Spectrum News 1 the state is being too careful in calculating its budget gaps, bracing for turbulence in the out years rather than leaning into the surpluses which have characterized recent cycles in future forecasting.
“It spreads some misunderstanding of the state’s fiscal situation, and people start to believe there really is a huge deficit and programs need to be cut in order to balance the budget,” he said.
He also said the state should be prioritizing a tax hike on the wealthy over tax cuts.
The state Division of Budget emphasizes that in crafting fiscal outlooks, risks to the financial plan are an important factor and budget officials acknowledge that those risks could extend beyond what is planned for, or as is the case in recent years, the picture could end up being brighter.
They also point out that robust reserves are a crucial aspect of getting out ahead of those unknowns, but once again, Gusdorf argued its too much caution.
“To have extra billions of dollars accumulating each year that don’t really go to serve a social purpose is actually underserving the taxpayers,” he said.
As the Division of Budget works to brace for potential trouble on the horizon from federal cuts, they have asked agencies to identify obsolete regulations and submit them this fall to kickstart a process of potentially getting them off of the books.
Rein argued that’s the right approach to cut into some of New York’s competitive disadvantage relative to states with less red tape.
“We need to identify all of those regulations and find out what really protects people and what harms people from getting things done. The governor is right to start that, but even more robust than asking state agencies they should crowdsource the best ideas from individuals, localities,” he said.