ALBANY, N.Y. (NEXSTAR) \u2014 New York passed a $277 billion state budget that relied on short-term solutions like prepaying debt, according to New York State Comptroller Thomas DiNapoli. And the financial watchdogs at the Citizens Budget Commission warned that more state spending and unfunded mandates mean multi-billion-dollar deficits on the way.<\/p>\n
\t In the video above, Ana Champeny from CBC addressed economic stress in New York City and State<\/a>, tallying almost $400 billion in total government spending. The CBC\u2019s briefing on July 16 explained that the state is outspending inflation at a rate of three to one. They calculated that keeping pace with inflation for the past 10 years would have meant $41 billion less in the budget.<\/p>\n New York\u2019s 2027 fiscal year began on April 1, 2026, and runs through March 31, 2027.<\/p>\n \t The comptroller\u2019s report\u2014published a day before the CBC presentation and available to read at the bottom of this story\u2014pointed out that state spending will grow by 7%, or $18.1 billion, this year. Taking a longer view, CBC tallied that the state\u2019s day-to-day operating spending\u2014which does not account for federal funding or capital projects\u2014has grown at an average rate of 7.2% per year since 2020.<\/p>\n The state\u2019s projected inflation rate for 2027 is 3.9%.<\/p>\n \t In its official spending plan that implemented the state budget<\/a>, the New York State Division of the Budget officially forecasted a cumulative budget gap of over $31 billion by the year 2030<\/a>. Both analyses took aim at those deficit numbers. That\u2019s $6.4 billion in 2028, $10.5 billion in 2029, and $14.7 billion in 2030.<\/p>\n The CBC\u2019s independent analysis argued that short-term accounting strategies like debt prepayments\u2014uses cash on hand to pay anticipated future bills\u2014mask the real long-term deficit of $18 billion in 2030 alone. That hole might be $23 billion deep if the state lets temporary higher tax rates on personal income and businesses expire as scheduled<\/a>.<\/p>\n \t The state\u2019s 7.25% top corporate tax rate was recently extended through tax year 2029, but if it or other temporary tax tweaks lapse, the state would lose $4.9 billion in projected tax revenues.<\/p>\n In June, DOB forecasted that payouts from the state\u2019s main account, the general fund, will grow by 17.7% from April 2026 to March 2030. That outpaces the projected 4.9% tax revenue growth over the same four fiscal years.<\/p>\n \t In the video below, Jeff DiGironimo from CBC talked about structural gaps and spending:<\/p>\n \t The comptroller also projected that state debts (owed by taxpayers) will skyrocket by 64% over the next five years, growing from $60.3 billion today to $98.8 billion. \u201cBackdoor borrowing\u201d of debt through unelected public authorities drives most of the increase, DiNapoli calculated. Meaning, instead of having voters approve the government taking on debt, the state has independent agencies like the Metropolitan Transit Authority or the Dormitory Authority take out loans on its behalf.<\/p>\n DiNapoli warned that the state is approaching its legal debt limit, and that by 2031, New York will only be allowed to borrow $177 million. Indeed, \u201cThe state\u2019s finances remain highly exposed to federal actions, as well as potential economic downturns,\u201d he said in the press release announcing his analysis.<\/p>\n \t The budget also leaves emergency reserves flat at $15 billion, which both the CBC and the comptroller warned would leave us vulnerable to shifts in the economy or the job market if there\u2019s a recession. They warned that it\u2019s less than half of what New York would need to offset some $35 billion to $50 billion that would be lost during a typical three-year recession.<\/p>\n Those reserves were just $2.5 billion in fiscal year 2021, according to DOB. But keeping savings static now, as spending grows, \u201ccould put essential State investments at risk in the future,\u201d DiNapoli said. That means our debt cushion shrinks and the social safety net for millions of New Yorkers frays.<\/p>\n \t That\u2019s because new, recurring, permanent spending isn\u2019t being matched with permanent tax revenues. To legally balance the books this year, the state had to spend $1.3 billion from the general fund, and DOB projected that our cash balance will drop from $56.178 billion to $54.558 billion by March 31, 2027.<\/p>\n According to DiNapoli, the state should stop relying on unpredictable federal funding and circle the wagons. He said, \u201cStrong rainy day funds provide a critical safeguard against economic downturns and other disruptions, helping ensure that essential investments that help New Yorkers can be sustained when they are needed most.\u201d<\/p>\n \t Much of every tax dollar funds Medicaid<\/a> and Foundation Aid<\/a>\u2014the money paid to schools to educate kids statewide. Together, they represent about 60% of the state\u2019s day-to-day spending increases<\/a>. The state currently spends $31,918 per public school student and $4,775 per Medicaid recipient, according to federal data cited by DOB from the Census and the Centers for Medicare and Medicaid Services.<\/p>\n Total Medicaid spending hit $112 billion (or $114.4 billion, if you include federal spending), according to the comptroller. Year-over-year increases here were driven by better pay for healthcare workers, medical inflation like higher drug prices, and more enrollment among the state\u2019s aging population<\/a>, per DOB and the comptroller\u2019s office.<\/p>\n \t The state-funded portion of Medicaid grew by 12% since the last fiscal year\u2019s budget, and the CBC projects another 19% of cumulative growth over the next three fiscal years. DOB has predicted that the state\u2019s Medicaid program will represent 29%\u2014or $53.3 billion\u2014of the state\u2019s day-to-day operating budget by 2030. The comptroller said these pressures could send Medicaid $3.2 billion over its legal limit in fiscal year 2030, meaning the state government would have to either cut services or raise new revenues.<\/p>\n Both analyses blamed higher Medicaid costs on changes to federal rules for non-American citizens who live in-state full-time<\/a>. New York had to end a health program for low-income residents, moving 700,000 people to a less comprehensive plan in order to access $10 billion from the feds. That move maintained coverage for over a million people, including 636,000 lawfully present non-citizens, but that federal money runs out after December 2028, according to the CBC and DOB.<\/p>\n \t New York will transfer those 636,000 New Yorkers onto state-funded Medicaid during fiscal year 2029 at a cost of almost $7 billion to taxpayers through 2028.<\/p>\n And 450,000 working-class New Yorkers making between 200% and 250% of the federal poverty line nonetheless lost their health insurance on July 1<\/a>. Now, they have to buy other marketplace plans, rely on employer-sponsored coverage, or go uninsured. According to the comptroller, this drives up costs for taxpayers and hospitals.<\/p>\n \t Meanwhile, state funding for public schools costs $39.1 billion, DiNapoli reported, a $2 billion increase over last year. New York also outspends the national per-pupil average of $17,619 by more than 80%, according to Census data cited by DOB.<\/p>\n Plus, per-student aid continues to grow by 6% this year, according to the CBC. That\u2019s despite public school enrollment numbers having dropped statewide, according to DOB. Enrollment peaked at 2.8 million students in the 2000\/2001 school year and stands at 2.4 million today.<\/p>\n \t But New York\u2019s budget still extended Foundation Aid\u2019s \u201chold harmless\u201d policy, which maintains the prior year\u2019s funding amount as the current year\u2019s minimum, even for districts that lost students. Along with the budget\u2019s new minimum 2% increase per school, that translates to $711 million in \u201cmisspent\u201d funding\u2014$548 million to hold harmless and $163 for the new minimum. According to the CBC, money for \u201cphantom students\u201d who don\u2019t exist would be better spent on other classroom needs.<\/p>\n That\u2019s not the only inefficient spending decision costing taxpayers, according to the CBC. The budget\u2019s Protecting Our Wallets Energy Rebate<\/a> will send $1 billion in tax refund checks\u2014ranging from $100 to $200 each\u2014to over 8 million taxpayers. The CBC called this a \u201cwasted small sprinkling\u201d of cash that won\u2019t affect affordability<\/a> long-term, and said those funds should instead be added to the Rainy Day Fund.<\/p>\n \t The state budget also sweetened the Tier 6 public retirement plan for government workers hired after 2012 by lowering the retirement age for teachers and reducing employee contributions. This increased pension costs by $550 million annually, the CBC said. Those costs are defrayed across different levels of government, leaving municipalities outside of New York City with a new bill of $318 million every year in total, they said. Will municipalities cut public services or raise property taxes<\/a> to fill that void?<\/p>\n Although the budget gives $1.8 billion to local governments for fiscal year 2027\u2014a 107.7% increase, according to the comptroller\u2019s calculations\u2014much of that support is temporary and doesn\u2019t address ongoing fiscal challenges in municipalities like Albany, Buffalo, Rochester, Syracuse, and Yonkers.<\/p>\n \t The budget also included unnecessary subsidies<\/a>, according to the CBC. It extended a $150 million COVID-era Broadway theater tax credit program that they said is no longer needed. The budget also added $1 billion in new environmental spending, though CBC said previously allocated environmental funds from past years remain unspent.<\/p>\n Federal policy changes also added stricter work requirements to the Supplemental Nutrition Assistance Program<\/a>, and are increasing the state\u2019s share of administrative costs from 50% to 75%, adding a new $205 million annual price tag. Because New York has a high SNAP error rate<\/a>, taxpayers could face an annual federal fiscal penalty of up to $1.2 billion starting in 2028, according to both the CBC and the comptroller.<\/p>\n
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