ALBANY, N.Y. — In a Thursday memo, the New York state budget director told agency commissioners that budget requests for the next fiscal year should not exceed what they received for the current year, with the exception of one-time investments.
"I just told all my agencies yesterday, hold the line on spending," Gov. Kathy Hochul said Friday.
Addressing the Business Council of New York State, Hochul said she's increased reserves from $3.9 billion to $19 billion since she became governor and has no intention to dip into them or raise taxes to cover a projected budget gap next year.
"When that rainy day comes, I don't want to have to be in a position to either raise taxes or cut services dramatically," she said.
Empire Center for Public Policy, a fiscally conservative think tank, says the administration is making a responsible decision. Research Director Ken Girardin said a spending rate that has nearly doubled over the last three years compared to the prior decade and overly optimistic tax revenue projections appear to have put the state in a hole.
"That created a pretty big gap between where spending is expected to go next year and what money the state is going to have to pay for that,” Girardin said. “There's about a $10 billion difference between revenues and expenses.”
The budget office revised its projections in June to reflect the gap. However, the left-leaning Fiscal Policy Institute points out there have been relatively strong tax receipts since.
"We think that those projections of future budget gaps are really driven by one month of bad tax receipts and that the fiscal picture has been steadily improving since those projections were turned out," Executive Director Nathan Gusdorf said.
Empire Center said if agencies keep spending flat it should cover $1 billion, or about 10% of the gap. Girardin said the Legislature will need to make prudent but potentially politically unpopular decisions in an election year.
"Most of the state budget goes toward two places: Medicaid and school aid. That's where the governor is going to really need to get in the paint and bring spending down to more rational levels," he said.
Both organizations agree it is currently a time of economic growth, but a recession could be in the near future. While Empire Center says that's the reason not to use reserves, FPI argues it's important for spending growth to keep pace with overall economic growth during times of uncertainty and advocates for a wait and see approach.
"We think that both the use of reserves and tax increases should be on the table in order to be able to maintain really ordinary growth in the provision of government services, and again, just because that growth is necessary really to keep a steady provision of services alongside regular economic trends," Gusdorf said.
FPI said any tax increases should be focused on the state's top earners.