Is New York's state budget in good or bad shape? How to view it, ultimately, may come down to who you listen to.
For Republicans, the budget is beset with pressure from inflation and other global problems that will squeeze taxpayers. Progressives are taking a more optimistic approach, pointing to better-than-expected revenue from taxes amid a shaky worldwide economy.
State lawmakers and Gov. Kathy Hochul are set to begin negotiations in earnest in the coming months over a new budget expected to pass by the end of March. How those negotiations translate into a final agreeement depends heavily on whether the state's tax revenue will continue to come in as robustly as it has over the last year, or if inflation will continue to weigh down on the broader ecnomy.
At stake for New Yorkers are big-ticket items like a planned increase in education aid by nearly $3 billion and how health care programs are funded.
Republicans in the state Assembly who pointed to a mid-year budget update found reason for concern, pointing to the rising cost of consumer goods as a sign taxes should not be raised any further.
The state's unemployment rate, meanwhile, remains consistently higher than the rest of the country on average.
“Global and federal factors continue to put pressure on everything from high inflation to supply chain issues to future labor market recovery; however, there are indications that some relief could be addressed at the state level. While recession potential remains a risk, the state’s financial position is not precarious, and we can help mitigate some of the strain residents are feeling,” said Assembly Minority Leader Will Barclay “Based on our analysis, Gov. Hochul and legislative leaders should practice fiscal restraint, focus on necessities and effectively manage risk when crafting the 2023-24 State Budget. We’re faced with a 40-year high inflation, and more than ever we must work together during this ‘back to basics’ year to ensure all New Yorkers – particularly those already struggling – are warm, fed and safe.”
The Fiscal Policy Insititute, a left-leaning think tank, pointed to some brighter news. The economy of New York remains resilient after being hit hard by the pandemic and in many cases forecasts have underestimated growth. At the same time, local sales tax revenue continues to be strong.
"Financial plan revenue estimates have consistently underestimated the strength of New York’s recovery from the Covid recession," the group found in analysis. "Prior to the pandemic, enacted financial plan revenue projections were generally more accurate: in fiscal years 2019 and 2020, the difference between actual revenue and enacted plan projections never exceeded 8 percent. In the two most recent financial plans, however, projections have dramatically underestimated revenue. By the end of fiscal year 2022, actual PIT receipts exceeded state projections by 16 percent — similar to PIT’s overperformance of estimates this year. PIT revenues have consistently been buoyed by strong wage growth and better-than-expected employment growth."
Hochul's new budget is expected in early 2023 and will be expected to pass by March 31.