The coronavirus pandemic has caused extraordinary economic challenges in New York with punishing, still-evolving impacts on public health, jobs, the economy and state finances. As a result, the enacted state budget leaves greater uncertainty for school districts, health care providers and local governments this year than ever before, according to a report released today by New York State Comptroller Thomas P. DiNapoli.

“The ultimate price of the coronavirus remains undetermined. What is clear is that Washington must do more to help stabilize state and local government finances to avoid drastic cuts that would hurt hospitals, schools and vital services,” DiNapoli said. “The Executive and Legislature passed a budget under very difficult circumstances to address our immediate needs, but we must be mindful of the bigger picture. Tax revenues will be substantially lower in the near term because of the pandemic, and likely well beyond. The state should minimize long-term costs from any new debt and commit to building up our rainy day reserves. The road ahead is a challenging one and will require a long-term strategy.”

DiNapoli’s report notes the state has delayed the filing deadline for 2019 tax returns for individuals and corporations from April 15 to July 15. The Comptroller’s office estimates the amount of overall tax receipts delayed from April to July could be as much as $9 billion to $10 billion, depending largely on how many taxpayers choose to delay their filings. While the state received almost $3.8 billion in Coronavirus Relief Fund resources earlier this month, the total amount of federal assistance available to help address cash-flow and budget-balancing needs remains to be determined. The ability of the state to fully achieve its Medicaid savings target also remains unclear.

In response to these fiscal challenges, the Enacted Budget provides the Executive with extraordinary flexibility to manage spending, including authority to make broad reductions in most local assistance spending as needed to maintain budget balance. Separate provisions authorize the Executive to reduce Medicaid spending, in particular, if disbursements are expected to exceed projections or other developments occur.

Some of these spending provisions provide a role for the Legislature, while others do not. Given the extraordinary flexibility for spending reductions, the state Division of the Budget should go beyond statutory reporting requirements to provide more frequent and more detailed public updates on fiscal developments, including monthly updates on the economic and revenue outlook. DiNapoli said given the range of challenges facing entities that depend on state funding, stakeholder input on any budget actions should occur.

The final budget also included an additional $21.4 billion in total new and increased state-supported debt authorizations, including $11 billion for cash flow or deficit financing purposes. While short-term borrowing to offset delayed revenues may be appropriate, DiNapoli urges caution in any longer-term borrowing for operating costs.

Report
State Fiscal Year 2020-21 Enacted Budget: Budgeting in a Time of Crisis

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