The 2023 budget year may be the last in a while that Gov. Kathy Hochul and state lawmakers don’t have to worry about holding back on state spending. A new financial forecast released by the governor’s budget office shows future deficits doubling next year.
Just over four months ago, when Hochul unveiled her state budget proposal, the current budget was balanced, and the projected deficit for next year was around $5 billion.
“We’ve set the table for what should be one of the most prosperous times in our state’s history,” Hochul said on February 1.
Now, the governor’s budget office says the deficit has nearly doubled to $9 billion, rising to over $13 billion the following year.
The budget office released its revised numbers earlier this month.
Patrick Orecki, with the watchdog group Citizens Budget Commission, says that’s the biggest deficit the state has faced since the Great Recession of 2008 and 2009. He says in the months between Hochul’s address and the budget passage in early May, fiscal storm clouds were gathering.
“We knew it as the budget was being negotiated, when the budget was enacted, that there were out year gaps on the horizon. So it's a big concern,” Orecki said. “That’s why we urged some spending restraint at the time.”
Lawmakers did not heed that warning.
The deficit is partly a result of increased spending during the COVID-19 pandemic, fueled by a large infusion of federal relief funds sent to New York. The budget office says tax receipts are also coming in at a rate lower than anticipated.
The governor has begun talking about the upcoming shortfall, and how it influences her decisions about spending money now. For instance, she spoke against a bill being considered by the state Assembly that would provide health care coverage for undocumented immigrants, saying the state can’t afford it.
“The warnings about our finances are troubling,” Hochul said. “We saw a reduction of $6 billion dollars from the month of March in our normal tax receipts.”
During her tenure, Hochul has built up the state’s reserve fund. It now totals $19 billion. Orecki credits the governor with significantly increasing that fund. But he says it’s supposed to be used in a true economic downturn or an unforeseen emergency.
“Just using reserves to plug gaps that you built when times were good, is not how you should use reserves,” Orecki said. “No matter what.”
The Citizens Budget Commission is offering some advice to the governor and lawmakers. Orecki says Hochul should be “vigilant” about controlling spending, and should reject any new bills by the legislature that add to the state’s spending burden. He says next year, it’s likely that the governor will be presenting a more fiscally austere budget.
