The Citizens Budget Commission, a non-partisan fiscal watchdog group, released their outlook for the New York state budget on Thursday that warns that even with a brighter outlook for the state’s economy, a focus should be placed on spending restraints. The group also released a list of recommendations which includes keeping spending growth below 2% and not increasing taxes.

The report points out that the executive budget proposal for fiscal year 2025 is balanced but structural budget imbalances will exceed $16.4 billion by fiscal year 2028. The report also finds that Medicaid and school aid spending “would continue at unsustainable rates” despite savings that are proposed in this fiscal year’s budget. The report warns that even with projected economic growth, spending restraints “remain necessary” to close out-year budget gaps.

Gov. Kathy Hochul has touted her administration’s commitment to grow the state’s reserves which have grown from $2 billion in 2020 to $20 billion today. However, the CBC projects that $28 billion would be needed to “withstand two years’ recessionary receipt losses” and to “finance two years’ growth of 1% in state operating funds.”

One of the recommendations that the CBC has for building the reserves is to send any savings from fiscal year 2024 to statutorily protected funds, including the Rainy Day Reserve.

Medicaid and education are two of the highest sources of state spending, with Medicaid spending accounting for around one-third of spending for the state. With a greying population in the Empire State, the CBC recommends that savings should come without sacrificing quality services for those with the highest needs. One area of focus is the accelerated growth in long-term care and home-care services.

On education funding, the CBC supports the phasing out of the “Save Harmless” provision from 2007 which prevents decreases year over year in Foundation Aid if the school district loses population or there are changes to the district’s wealth.

Despite calls from progressive lawmakers, the CBC recommends that the state should not raise taxes. The CBC argues that increasing taxes would risk competitiveness for businesses and residents in the state.

The deadline to pass the state budget, April 1, is quickly approaching. Legislators have held marathon budget hearings on the proposed budget from Hochul. The next step would be the release of the legislative budget proposals which are expected in the next week.