Out-year state budget gaps represent the projected imbalances between New York State’s anticipated tax receipts and its planned spending in the years following the current fiscal cycle. This page covers CBC’s work on structural budget imbalances, spending growth trends, recessionary reserves, multi-year financial planning, and strategies for achieving long-term fiscal stability.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
A better use for the $1 billion in energy rebate checks would be to add these funds to recessionary reserves that are less than half of what the budget office says may be needed.
The State should relieve the City from the Class-Size Reduction Mandate.
The City should be much more ambitious in its effort to reduce inefficient spending.
Hold the line on spending; any additional spending should be offset with savings elsewhere.
Hold the line on taxes, as New York State and its local governments already collect the most taxes per person in the country.
Reject costly, unnecessary Tier 6 pension enhancements that may drive property tax increases or service cuts.
Bolster and protect reserves, as the $14 billion in principle reserves is less than half of what the State Division of the Budget reports is the low-end impact of a recession.
Help New York City—smartly by relieving the class size mandate, which would save the City $1.2 billion.
Key Data
In June 2026, the CBC reported that the State's structural budget gap reached nearly $18 billion, with the projected fiscal year 2030 budget gap weighing in at $14.7 billion.
Following the enactment of the Fiscal Year 2027 budget, the CBC warned that adding about $1.5 billion in recurring spending directly increases out-year budget gaps and heightens the risk of future service cuts.
In January 2026, the CBC noted that projected out-year gaps were reduced by an average of $5.5 billion annually due to stronger tax revenues and by $1.3 billion through the extension of the business tax surcharge.
In November 2024, the CBC highlighted that an improved economic outlook boosted State tax receipts by an average of $2 billion each year, which directly helped to reduce out-year budget gaps.
In May 2024, the CBC explained that the State's structural budget imbalance was masked by $2.9 billion from expiring tax increases, $2.5 billion in prior debt service prepayments, and $3.5 billion from rolled resources.
The budgets are in. Now find out what matters. With the Fiscal Year 2027 New York State and New York City budgets finalized, CBC invites you to a timely briefing with our research staff on what the budgets mean for New York's fiscal outlook. We'll highlight the most significant policy…
New York faces a structural budget gap of nearly $18 billion as total state spending reached $277 billion, driven by a 9.1% increase in expenditures. To ensure long-term fiscal stability, the state must prioritize strengthening reserves and controlling spending growth rather than relying on short-term political measures.
Recommendations related to Out-Year State Budget Gaps
Albany must bring discipline and resolve to the state’s finances by strengthening reserves.
The state must control spending growth to ensure that today’s commitments do not become tomorrow’s crises.
A sustainable strategy for state aid should combine support with clear expectations for efficiency and reform.
The state should prioritize long-term stability over short-term political appeal to avoid future fiscal crises.
Key Data
$18 billion
— The structural budget gap facing the state.
$277 billion
— The total size of the state budget.
9.1%
— The rate at which state spending increased this year.
$1 billion
— The cost of broadly distributed rebate checks.
$700 million
— The amount wasted on increasing school aid despite declining enrollment.
$547 million
— The cost of enhancing pension benefits.
New York's Fiscal Year 2027 Enacted Budget Financial Plan includes $1.5 billion in new recurring spending, which exacerbates out-year budget gaps to $14.7 billion by fiscal year 2030. With the structural gap now reaching nearly $18.0 billion, the state faces significant fiscal risk that could necessitate future service cuts.
Recommendations related to Out-Year State Budget Gaps
The Governor should release basic fiscal plan tables alongside the enacted budget to help lawmakers make smart, future-looking decisions.
Key Data
$14.7 billion
— The projected out-year budget gap for fiscal year 2030.
$18.0 billion
— The current structural budget gap.
$1.5 billion
— The amount of new recurring spending added to the budget that increases out-year gaps.
$277.0 billion
— The total budget for the fiscal year.
$174.1 billion
— The amount of Adjusted State Operating Funds spending.
$40.6 billion
— The amount by which State spending has grown higher than inflation over the past decade.
The New York State fiscal year 2027 budget leaves a structural gap exceeding $17 billion while increasing spending by over $30 billion above inflation. Despite strong revenues, the budget fails to bolster reserves and relies on questionable spending choices, such as increasing school aid to districts with shrinking enrollment and expanding pension benefits.
Recommendations related to Out-Year State Budget Gaps
The Governor should continue to resist calls to increase personal income and corporate taxes next year.
The State should build feasible targets into a market-driven cap-and-invest program to cost-effectively reduce emissions.
The State must publish basic financial plan tables with the budget agreement to ensure transparency regarding spending growth and future gaps.
Key Data
$17 billion
— The structural budget gap left by the enacted fiscal year 2027 budget.
$30 billion
— The amount by which decade-long spending growth exceeds inflation.
$700 million
— Annual cost of increasing school aid to districts with shrinking enrollment.
$547 million
— The cost of increasing Tier 6 pension benefits.
$2.4 billion
— Total support provided to New York City in the budget.
$268 billion
— The total amount of state spending in the budget.
The state's recent budget agreement adds $5 billion in spending, which threatens to widen future budget gaps and increase fiscal instability. Instead of distributing $1 billion in energy rebates, the state should prioritize bolstering recessionary reserves and reducing inefficient spending to ensure long-term fiscal health.
Recommendations related to Out-Year State Budget Gaps
A better use for the $1 billion in energy rebate checks would be to add these funds to recessionary reserves that are less than half of what the budget office says may be needed.
The State should relieve the City from the Class-Size Reduction Mandate.
The City should be much more ambitious in its effort to reduce inefficient spending.
Key Data
$5 billion
— Amount added above the Executive proposal for fiscal year 2027, which likely grows future budget gaps.
$1 billion
— Amount allocated for energy rebate checks that could be better used for recessionary reserves.
$268 billion
— Total amount the State plans to spend in the upcoming budget.
New York's state budget is late for the fifth consecutive year, risking a self-inflicted fiscal crisis due to ballooning spending growth and projected gaps reaching $12.8 billion by fiscal year 2030. To ensure long-term fiscal stability, the state must curb spending, maintain current tax levels, and avoid costly pension enhancements while bolstering financial reserves.
Recommendations related to Out-Year State Budget Gaps
Hold the line on spending; any additional spending should be offset with savings elsewhere.
Hold the line on taxes, as New York State and its local governments already collect the most taxes per person in the country.
Reject costly, unnecessary Tier 6 pension enhancements that may drive property tax increases or service cuts.
Bolster and protect reserves, as the $14 billion in principle reserves is less than half of what the State Division of the Budget reports is the low-end impact of a recession.
Help New York City—smartly by relieving the class size mandate, which would save the City $1.2 billion.
Key Data
$12.8 billion
— Projected Executive Budget gaps in fiscal year 2030.
$30 billion
— Amount spending has increased more than inflation in the last decade.
$14 billion
— Current amount in principle reserves, which is less than half of the low-end impact of a recession.
$1.2 billion
— Potential savings for New York City if the class size mandate is relieved.
$5 billion
— Amount the Legislature proposes to add to spending next year.
$3 billion
— Amount the Legislature proposes to add to spending annually after next year.
New York State's Fiscal Year 2027 budget faces a $12.8 billion gap in fiscal year 2030, masking a $20 billion structural imbalance that requires immediate spending restraint to avoid future fiscal crises. To achieve stability, the state must curb spending growth, reject unnecessary tax increases, and better target aid to ensure long-term fiscal health.
Recommendations related to Out-Year State Budget Gaps
Reduce SOF spending growth to 2.6 percent per year to close the structural budget gap by fiscal year 2030.
Eliminate hold harmless and minimum increase provisions in school aid formulas to better align funding with student need and district fiscal capacity.
Reject all benefit sweeteners including enhancements to Tier 6, which would cost the State, City, school districts, and local governments billions of dollars.
Identify reforms to rein in Medicaid spending growth, with a focus on home care and long-term care.
Redirect $2.25 billion originally budgeted for lawfully present immigrants to reserves in fiscal year 2027 and the $3 billion annually thereafter to gap closing.
Reject proposed personal income, corporate income, unincorporated business, pass-through entity, and real property transfer tax increases to protect New York's competitive position.
Key Data
$12.8 billion
— Reported out-year budget gap in fiscal year 2030.
$20 billion
— Structural budget gap after adjusting for temporary tax increases and pre-payments.
$30 billion
— Amount by which fiscal year 2026 State Operating Funds spending exceeds what it would have been if it had grown at the rate of inflation over the last decade.
$2.25 billion
— Amount of spending in fiscal year 2027 that is no longer needed due to federal approval of the Essential Plan to Basic Health Plan transition.
$14.6 billion
— Amount of "Principal Reserves" held through fiscal year 2030 with no new deposits.
New York faces a $20 billion structural budget gap and looming federal cuts, necessitating a strategy of reduced spending rather than increased expenditures. Instead of issuing rebate checks or raising taxes, the state should prioritize fiscal stability to hedge against economic uncertainty.
Recommendations related to Out-Year State Budget Gaps
The State should spend less, not more, than the executive budget proposed to address the $20 billion structural budget gap.
Any one-time aid to the City should serve as a bridge with the condition that the City is accountable for bringing spending in line with its current revenue base.
The State should be saving resources from proposed rebate checks as a hedge against the looming risks of economic uncertainty and federal cuts.
Both houses should publish basic multi-year budget tables to show New Yorkers the implications of what they have proposed.
Key Data
$20 billion
— The size of the structural budget gap facing the State.
$2 billion
— The amount New York residents and businesses could save annually through auto insurance reform.
78%
— The amount by which New York State and its localities collect more taxes per capita than the national average.
$500
— The proposed rebate check amount for households earning below $150,000.
New York State officials are urged to publish detailed, multi-year financial plan tables alongside one-house budget proposals and the enacted budget to ensure transparency regarding long-term fiscal impacts. Providing these tables for the budget year and three out-years would allow legislators and the public to better understand the state's immediate and long-term fiscal health.
Recommendations related to Out-Year State Budget Gaps
Publish at least one financial plan table each for All Funds, State Operating Funds, and the General Fund to provide transparency regarding the state's long-term fiscal impact.
Ensure each of these three tables provides reasonably disaggregated and totaled lists of receipts, disbursements, transfers, annual bottom-line results, and allocations of fund balances for the budget year and three out-years.
Codify in State law the requirement to publish these multi-year financial plan tables.
Key Data
30
— The Division of the Budget’s Enacted Budget Financial Plan is currently released up to <b>30</b> days after enactment, delaying public clarity.
400
— The requested basic financial plan tables are not a full <b>400</b>-page financial plan report, but rather essential documents for timely understanding of the budget.
$263 billion is the size of the FY27 State budget proposed by Governor Hochul. With strong tax receipts, the State has enough to close next year's gap and put a dent in future gaps, plus fund universal childcare. But risks abound, including a structural budget gap and federal changes to…
The Fiscal Year 2027 Executive Budget faces a structural gap exceeding $15.0 billion, with future gaps projected at $6.0 billion in 2028, $9.0 billion in 2029, and $12.5 billion in 2030. To address these challenges, the state should prioritize core programs, restrain spending growth in areas like CDPAP and long-term care, and scale back wasteful economic development and school aid to wealthy districts.
Recommendations related to Out-Year State Budget Gaps
The State should target programs to those in need and fund them by scaling back less impactful spending, including wasteful economic development programs and school aid to shrinking and wealthy districts.
The Governor and Legislature should hold the line on taxes to keep New York competitive for families and businesses.
The State should prioritize core programs and avoid adding unaffordable spending.
The State should add to the recessionary reserves rather than using them to offset recurring federal cuts.
The State should take additional steps to restrain growth in CDPAP and long-term care to manage Medicaid spending.
Key Data
$15.0 billion
— The structural gap driven by the Fiscal Year 2027 Executive Budget.
$8.6 billion
— The growth in State Operating Funds spending.
$6.0 billion
— The projected budget gap in fiscal year 2028.
$9.0 billion
— The projected budget gap in fiscal year 2029.
$12.5 billion
— The projected budget gap in fiscal year 2030.
$5.1 billion
— The amount New York State spent on economic development in fiscal year 2025.
New York State is urged to veto 17 bills that would increase public costs by expanding pension, disability, and death benefits outside of the formal budget process. These measures, which lack offsetting savings, threaten fiscal stability by adding millions in immediate and annual recurring expenses to state and local government budgets.
Recommendations related to Out-Year State Budget Gaps
The Governor should veto the 17 bills because they increase costs to New York State and local governments outside of the budget process without enhancing public services or providing offsetting savings.
Policymakers should avoid granting targeted benefit enhancements, as doing so increases costs and may encourage further expansions that also increase costs to the public.
Key Data
$30.0 million
— Estimated immediate costs for 12 of the bills that have complete fiscal notes.
$18.1 million
— Estimated annual recurring costs for 12 of the bills that have complete fiscal notes.
$5.9 million
— Annual cost of bill S6486/A6942, which reduces the service requirement for Tier 3 members of the Unformed Sanitation Force and Uniformed Correction Service.
$4.9 million
— First-year cost of bill S5083/A5898, which provides an in-service death benefit for retirement-eligible members of NYSLRS employed as State-paid judges or justices.
$4.2 million
— Annual cost of bill S6640/A6784, which extends the 'death gamble' benefit to Tier 4 and Tier 6 Special Plan transit members of NYCERS.
$3.9 million
— Annual cost of bill S4727/A5861, which reduces the service requirement for Tier 3 members of the New York City Fire Pension Fund.
Download the Presentation The New York State and New York City budgets are unaffordable and unprepared both for a recession and for federal budget cuts that will start hitting this fiscal year and grow in the future. Check out CBC’s New York State and New York City Fiscal…
New York's fiscal year 2026 budget includes significant spending increases that drive projected annual budget gaps to exceed $14 billion by 2029 and create a structural imbalance of over $22 billion. These fiscal decisions leave the state ill-prepared for potential economic downturns or federal funding cuts, particularly after the state depleted over $7 billion from its rainy day reserves.
Recommendations related to Out-Year State Budget Gaps
The State should have set aside additional money to mitigate the initial impact of federal cuts instead of significantly increasing spending.
The State should have repaid the unemployment insurance debt with other funds rather than depleting rainy day reserves.
Key Data
$14 billion
— Projected annual budget gaps by fiscal year 2029.
$22 billion
— The State's structural budget imbalance.
$7 billion
— Amount taken from the State’s rainy day reserves.
$254 billion
— Total amount of the people’s money the State passed a budget to spend.
$3 billion
— Amount by which the projected fiscal year 2029 budget gap is larger than what was projected in January’s Executive Budget proposal.
New York's fiscal plan reveals a financially unsustainable spending increase of over 12 percent, which contributes to future annual budget gaps of $14 billion. Once non-recurring resources are excluded, the long-run imbalance between receipts and disbursements exceeds $20 billion, necessitating difficult choices to re-balance the budget.
Recommendations related to Out-Year State Budget Gaps
State leaders should preserve core programs that have the greatest impact to re-balance the budget.
State leaders should shrink other programs despite their likely popularity to re-balance the budget.
State leaders should protect recession-mitigating reserves to ensure fiscal stability.
State leaders should hold the line on taxes to ensure New York’s competitiveness.
State leaders should make tough, smart choices to re-balance the State’s budget.
Key Data
12 percent
— The rate by which adjusted State Operating Funds spending increased, which is approximately four times the rate of inflation.
$14 billion
— The projected future annual budget gaps resulting from ballooning spending and lower projected receipts.
$20 billion
— The long-run imbalance between receipts and disbursements once reliance on non-recurring resources is removed.
$49 billion
— The amount the State spent before providing transparency to New Yorkers regarding how their money is being used.
New York's $254 billion state budget creates a structural imbalance between future receipts and disbursements of approximately $20 billion, threatening long-term fiscal stability. Lawmakers failed to set aside $2 billion to mitigate potential federal budget cuts and instead increased state operating funds spending by 12 percent.
Recommendations related to Out-Year State Budget Gaps
Lawmakers should have used other resources, such as the $2 billion for rebate checks, $2 billion of school aid for very wealthy districts that self-fund a sound basic education, or the $2 billion transaction risk reserve, to replenish the State's Unemployment Insurance Trust Fund instead of siphoning $7 billion from reserves.
The State should put aside $2 billion to soften the initial blow of federal cuts rather than increasing State Operating Funds spending by 12 percent.
Lawmakers should ensure that labor supports the MTA plan by agreeing with MTA leadership to operational changes that reduce costs, increase efficiency, and preserve services.
Key Data
$254 billion
— The total size of the State budget.
$20 billion
— The approximate structural imbalance between future receipts and disbursements.
12 percent
— The increase in State Operating Funds spending.
$7 billion
— The amount siphoned from the State’s reserves to replenish the Unemployment Insurance Trust Fund.
$2 billion
— The amount of school aid for very wealthy districts that self-fund a sound basic education.
$3 billion
— The amount the MTA will contribute to support the plan.
The state's $254 billion budget agreement increases spending beyond the initial proposal, exacerbating an already massive $18 billion structural budget gap. Lawmakers failed to prepare for looming federal budget cuts by neglecting to set aside reserves, instead opting to increase long-term spending.
Recommendations related to Out-Year State Budget Gaps
The State should produce basic budget tables as soon as possible so all New Yorkers, including legislators, can know where their money is going and this budget’s long-term effects.
The State should put money aside to cushion the initial blow of likely huge federal budget cuts rather than ignoring the threat.
The State should ensure Rainy Day reserves are saved for a recession and not used to plug recurring budget holes.
The State should spread the cost of MTA funding more broadly among riders, drivers, and taxpayers to improve economic competitiveness.
Key Data
$254 billion
— The total value of the general budget agreement.
$2 billion
— The amount the budget agreement spends above the Governor’s initial proposal.
$18 billion
— The size of the State's already massive structural budget gap.
New York State's proposed budget features the largest spending increase in recent history, ranging between 10.9 percent and 13.8 percent, which leaves the state with an $18.2 billion structural gap. To ensure fiscal sustainability, lawmakers are urged to restrain spending growth, set aside at least $2 billion to mitigate potential federal cuts, and reject tax increases that threaten state competitiveness.
Recommendations related to Out-Year State Budget Gaps
The budget should restrain exploding spending growth to ensure long-term fiscal sustainability.
Lawmakers should prepare for looming federal cuts by setting aside at least $2 billion to mitigate potential impacts.
The State should reject tax increases that risk the State’s competitiveness and instead focus on sustainable fiscal policies.
State leaders should publish basic, multi-year financial plan tables with the enacted budget bills to provide transparency on how money is being spent.
The budget should fairly fund MTA capital investment without relying on unsustainable fiscal practices.
Key Data
$18.2 billion
— The size of the structural gap left by the Governor’s and Legislature’s budget proposals.
10.9 percent and 13.8 percent
— The range of the largest spending increase in recent State history featured in the Governor’s and Legislature’s proposals.
$2 billion
— The minimum amount the budget should set aside to mitigate potential federal cuts.
$3 billion
— The amount of funding that should not be spread so thinly among taxpayers that it fails to help affordability.
New York faces an $18.2 billion structural budget gap, yet legislative proposals would add $4 billion in recurring spending, driving year-over-year growth to 13.7 percent. To maintain fiscal stability and prepare for potential federal funding cuts, the state must prioritize essential services and preserve rainy day reserves rather than increasing spending and taxes.
Recommendations related to Out-Year State Budget Gaps
New York should live within its means, deliver high quality services, and nimbly deal with any federal cuts while continuing to serve those most in need.
Lawmakers should hold the line on spending, identify the most critical services and needs, and keep money aside to fund a transition path to a new, lower level of federal aid, if cuts materialize.
Rainy Day reserves should be saved to weather recessions and time-limited emergencies, not depleted to temporarily plug recurring federal reductions.
Key Data
$18.2 billion
— The structural gap currently existing in the State budget.
$4 billion
— The amount of recurring spending the Assembly and Senate propose to add on top of the Governor's proposal.
13.7 percent
— The year-over-year adjusted State Operating Funds growth rate under the legislative proposals.
$11 billion
— The total increase in State Operating Funds spending in the Assembly plan.
$7 billion
— The portion of the Assembly plan allocated to pay off the State’s unemployment insurance trust liability.
New York State faces a structural imbalance of $18.2 billion, with an $11.0 billion budget gap projected for fiscal year 2029 due to unsustainable spending growth. To address this, annual State Operating Funds spending growth must be limited to 2.7 percent through 2029 to close gaps and allow temporary tax increases to expire.
Recommendations related to Out-Year State Budget Gaps
Lawmakers should find savings that restrain spending growth rather than adding more spending.
To close the State’s structural imbalance, SOF spending growth would need to be kept to 2.7 percent annually from fiscal year 2025 to fiscal year 2029.
Keeping annual spending growth to 2.7 percent starting next fiscal year would close projected budget gaps, allow temporary tax increases to sunset, eliminate the structural imbalance, and still be faster than projected inflation.
Key Data
$11.0 billion
— The State projects an $11.0 billion budget gap in fiscal year 2029.
$18.2 billion
— Spending growth supported temporarily by extraordinary receipts masks an $18.2 billion structural imbalance.
2.7 percent
— To close the State’s structural imbalance, SOF spending growth would need to be kept to 2.7 percent annually from fiscal year 2025 to fiscal year 2029.
10.9 percent
— Fiscal year 2026 SOF spending is projected to increase 10.9 percent.
$15.5 billion
— Fiscal year 2026 spending increases $15.5 billion in the Executive Budget.
$31.6 billion
— Between fiscal years 2025 and 2029, SOF spending grows 5.1 percent annually on average, increasing $31.6 billion over the period.
New York State faces a $15.6 billion structural imbalance that threatens long-term financial stability unless spending is restrained. Addressing this gap requires implementing major savings plans for Medicaid and education aid, alongside filling the $33 billion funding hole in the MTA’s capital plan.
Recommendations related to Out-Year State Budget Gaps
The State should take the opportunity to use its surplus funds to restructure State government to be lower cost and higher quality, pay cash for capital projects, and further bolster reserves.
Major savings plans are needed to reduce the growth in Medicaid costs and education aid so the State can sustain critical services.
State leaders have the responsibility to fill the $33 billion hole in the MTA’s capital plan to ensure the system doesn’t crumble.
Key Data
$15.6 billion
— The amount of the State's current structural imbalance.
$33 billion
— The funding hole in the MTA’s capital plan that remains unaddressed.
New York State faces a $15.6 billion structural imbalance, despite an improved economic outlook that has boosted annual tax receipts by an average of $2 billion. While state spending growth has slowed to 4.8 percent, it remains more than double pre-pandemic levels, necessitating stronger reserve protections and the use of surplus funds to address long-term budget gaps.
Recommendations related to Out-Year State Budget Gaps
The State should make additional deposits now, when receipts are strong, and should transfer the balance of the unprotected Economic Uncertainties Fund into the protected RDR, to ensure these funds are saved for a true emergency.
Additional receipts recognized during the closeout this fiscal year should be deposited into the Rainy Day Reserve.
The State should increase reserves to 22 percent of State Operating Funds based on prior recessions.
Higher receipts in the current year should be deposited to the RDR, and additional tax receipts in the out-years should be used to close gaps and reduce the structural imbalance.
Key Data
$2 billion
— Average annual boost to State tax receipts due to an improved economic outlook.
$15.6 billion
— The current structural imbalance of New York State.
4.8 percent
— The average annual rate of State Operating Funds spending growth.
$653 million
— The average amount by which the Legislature and Comptroller forecast higher tax receipts than the Executive in fiscal year 2026.
$1.0 billion
— The reduced budget gap for fiscal year 2026.
3 is the number of current and former Comptrollers who sat down to discuss the City and State's finances, economy, population loss and more. While jobs and tourism have recovered, New York continues to face challenges with hybrid work affecting downtowns and the office market, housing affordability, future budget gaps,…
CBC's Ana Champeny and Patrick Orecki delivered a briefing on the fiscal year 2025 budgets of New York State and New York City, including basic fiscal overviews and the risks facing the State and the City.
Delaying congestion pricing and relying on fiscal maneuvers outside the formal budget process threatens to widen state budget gaps and undermine long-term fiscal stability. Implementing congestion pricing is essential to fund critical transit infrastructure and avoid the negative economic impacts of underinvestment.
Recommendations related to Out-Year State Budget Gaps
The State should not enact an eleventh-hour fiscal scheme to make up for the poor decision to delay congestion pricing, which risks widening budget gaps and weakening fiscal stability.
The best decision is to stay the course and implement congestion pricing.
The MTA should include these projects and develop a realistic, holistic 2025-2029 capital program that focuses on essential state of good repair and modernization needs.
New York State's enacted budget for fiscal year 2025 creates a structural imbalance that is projected to exceed $16.1 billion by fiscal year 2028. This long-term deficit is obscured by the use of temporary, non-recurring resources, including expiring tax increases and debt service prepayments, rather than sustainable fiscal adjustments.
Key Data
$16.1 billion
— The total structural budget gap driven by the enacted budget.
$2.3 billion
— The low end of the projected structural budget gaps in fiscal year 2026.
$7.3 billion
— The high end of the projected structural budget gaps in fiscal year 2028.
$2.9 billion
— The amount of the structural imbalance masked by expiring tax increases.
$2.5 billion
— The amount of the structural imbalance masked by prior debt service prepayments.
$3.5 billion
— The amount of the structural imbalance masked by rolled resources.
New York's fiscal year 2025 budget fails to address long-term fiscal stability, leaving the state with a structural deficit likely exceeding $16 billion. By adding unaffordable spending and failing to implement necessary reforms, the budget exacerbates future financial gaps rather than shoring up the state's fiscal foundation.
Recommendations related to Out-Year State Budget Gaps
State leaders should deposit all reserves into the Rainy Day Reserve to protect them from potential squandering.
State leaders should use short-term funds to restructure the Medicaid system to be more sustainable.
State leaders should produce basic financial plan tables immediately to provide transparency.
State leaders should remove the hold harmless provision to align school aid to enrollment.
Key Data
$16 billion
— The estimated size of the future structural budget deficit.
$237 billion
— The total amount of spending approved in the fiscal year 2025 budget.
$4 billion
— The amount added to the state's pension liabilities by the Tier 6 retirement-plan sweeteners.
$377 million
— The cost of unnecessary expenses imposed on state and local government budgets next year due to Tier 6 sweeteners.
New York State's conceptual budget agreement creates a significant structural deficit likely exceeding $16 billion by adding unaffordable spending instead of utilizing revenue growth to stabilize finances. The proposed $237 billion spending plan lacks transparency, as it was announced without the necessary fiscal details for the public to understand its long-term implications.
Recommendations related to Out-Year State Budget Gaps
The State should publish basic financial plans as the Legislature votes on the bills to provide a clear view of the full budget picture.
The Legislature should restrain Medicaid spending to avoid increasing future budget gaps.
The State should remove the hold harmless provision on education aid to better align spending with actual needs.
The State should reject the Tier 6 retirement-plan enhancement because it is unnecessary, unpaid for in the long run, and an unfunded mandate on localities.
Key Data
$16 billion
— The estimated future structural budget gap resulting from the conceptual budget agreement.
$237 billion
— The total amount of public money reportedly planned for spending in the conceptual budget agreement.
New York State's budget process currently lacks transparency, as detailed financial plans are released weeks after the budget is enacted, leaving the public and legislators without crucial information on multi-year fiscal impacts. To address this, the state should publish basic, multi-year financial plan tables at the time of the budget agreement to ensure fiscal decisions are understood in the context of future years.
Recommendations related to Out-Year State Budget Gaps
Publish at least one financial plan table each for All Funds, State Operating Funds, and the General Fund with the enacted budget.
Publish reasonably disaggregated and totaled lists of receipts, disbursements, transfers, annual bottom-line results, and allocations of fund balances for the budget year and three out-years.
Codify in State law the requirement to publish these tables.
New York State's structural budget gap has expanded to between $16 billion and $20 billion due to a pattern of funding permanent spending increases with temporary revenue sources. Relying on speculative federal funds from a proposed Medicaid tax to support recurring programs risks further destabilizing the state's fiscal position.
Recommendations related to Out-Year State Budget Gaps
The State should not budget money it does not have, as there is a risk that the State does not receive the projected federal funds.
Federal funds should be used exclusively to finance one-time programs rather than recurring expenses.
The State should only pursue the proposed Medicaid tax path after it has identified and publicized the planned one-time programs it intends to fund.
The State needs to break its bad habit of ratcheting up spending on the back of temporary receipts to avoid further destabilizing its fiscal position.
Key Data
$16 billion to $20 billion
— The estimated size of New York State's structural budget gap.
$4 billion
— The amount of federal money the State aims to leverage through a new tax on Medicaid and other managed care plans.
New York State's proposed budgets rely heavily on non-recurring resources to mask a structural deficit that is projected to reach $20.3 billion by fiscal year 2029. To stabilize the state's fiscal foundation and avoid further economic damage, spending growth must be restrained to 2.0 percent annually, and closeout balances should be used to build reserves rather than support new spending.
Recommendations related to Out-Year State Budget Gaps
The State should be using closeout balances each year to build reserves, rather than to support further spending increases.
Spending growth should be slowed significantly—especially in high-cost areas such as Medicaid and school aid—in order to stabilize the State’s fiscal foundation and avoid further damage to New York’s already shaky economic competitiveness.
Restraining spending growth to 2.0 percent annually would close future gaps and eliminate the structural imbalance and allow temporary tax increases to expire.
Key Data
$20.3 billion
— The projected structural imbalance in the State budget by fiscal year 2029 based on the Legislature's one-house budgets.
$16.8 billion
— The amount of non-recurring resources the Executive Budget relies on to achieve budget balance in fiscal year 2025.
$6.3 billion
— The additional amount of non-recurring resources from new temporary taxes relied upon by the Legislature's one-house budget proposals.
$8 billion
— The amount of additional funding currently required to make principal reserves sufficient to cover receipts losses and spending growth of a typical recession.
$33.6 billion
— The amount by which the Executive Budget would push spending above the pre-pandemic trend in fiscal year 2028.
New York State's budget growth has been driven by rapid increases in school aid, necessitating spending restraint to close widening budget gaps. By phasing out the "hold harmless" provision and reforming the Foundation Aid formula, the state can better target resources to districts with the greatest need while moderating overall spending growth.
Recommendations related to Out-Year State Budget Gaps
The Legislature should reconsider the proposed modifications and enact a fiscal year 2025 budget that brings State school aid growth to a more sustainable level.
The State should enact the phaseout of the hold harmless provision to allow Foundation Aid to be more reflective of changing demographics across school districts.
The State should eliminate the School Tax Relief (STAR) program, a property-tax-relief program that results in increased funding for wealthier districts.
The State should shift some of its expense-based aid to Foundation Aid, which would target funding based on need and not a district’s ability to self-fund with local revenue.
The State should seek additional savings from other sources, such as expense-based aid categories that do not incorporate district need in their allocation.
Key Data
$413 million
— Savings in school year 2024-25 from proposed changes to the Foundation Aid formula.
$38.1 billion
— Total State school aid, including Foundation Aid, expense-based aids, and STAR, in the coming school year.
$15,761
— Per-student State aid amount for the coming school year.
$2.4 billion
— Amount of State aid allocated to 145 districts that can fully fund a sound basic education with local revenue and regular federal aid.
2.1 percent
— Proposed growth rate for Foundation Aid in school year 2024-25.
6.8 percent
— Average reduction in Foundation Aid for districts in the highest wealth decile compared to current law projections.
New York State faces significant out-year budget gaps ranging from $5.0 billion to $9.9 billion, with a structural imbalance reaching $16.4 billion by fiscal year 2028. To achieve long-term fiscal stability, the state must implement significant spending restraint, particularly in Medicaid and school aid, rather than relying on temporary tax increases or non-recurring resources.
Recommendations related to Out-Year State Budget Gaps
Restrain State Operating Funds spending growth to 2.0 percent annually to close the $9.9 billion projected budget gap and achieve structural balance.
Reject extraordinary Executive budget powers, as they create fiscal risk and reduce accountability in the budget process.
Publish basic financial plan tables with the one-house and enacted budgets to ensure transparency in spending plans.
Rein in Medicaid spending growth by targeting savings in high-growth areas such as home- and community-based care.
Eliminate hold harmless provisions in school aid to better target resources to districts where needs and enrollment are growing.
Enact a 421-a successor to make affordable rental housing development in New York City financially feasible.
Enact OPEB reforms, including the elimination of IRMAA reimbursement, to provide recurring savings and reduce unfunded liabilities.
Reject the NYC sales tax capture, as the State should not foist its costs onto local governments.
Enact proposed fare and toll enforcement policies to protect the critical revenue base for transportation authorities.
Deposit additional closeout balances to the Rainy Day Reserve if additional receipts are realized during the closeout of fiscal year 2024.
Key Data
$16.4 billion
— The State's structural budget imbalance in fiscal year 2028.
$9.9 billion
— The projected budget gap in fiscal year 2028.
2.0 percent
— The annual rate to which State Operating Funds spending should be restrained to close projected gaps.
$2.4 billion
— The amount of State aid sent to 145 districts that fully fund a sound basic education before receiving any State aid.
$67 billion
— The total current OPEB liability.
$103,000
— The annual income threshold for recipients whose Medicare Part B premium IRMAA costs the Executive proposes eliminating reimbursement for.
New York State faces a $9.9 billion budget gap in fiscal year 2028, which masks a larger $16.4 billion structural imbalance caused by rapid spending growth. To achieve fiscal stability, the state must restrain spending growth to 1.5 percent annually and avoid further tax or spending increases.
Recommendations related to Out-Year State Budget Gaps
The State should restrain spending growth to 1.5 percent annually over the life of the financial plan to close the structural imbalance.
The enacted budget should restrain spending to put the State on a path to budget balance.
Policymakers should avoid layering on further tax and spending increases to relieve building budget pressure and stave off a harsh fiscal reckoning.
The State should avoid additional tax increases, as they would weaken the State’s competitiveness.
Key Data
$9.9 billion
— Projected budget gap in fiscal year 2028.
$16.4 billion
— The actual structural imbalance when accounting for non-recurring resources.
1.5 percent
— The required annual spending growth rate needed to close the State's structural imbalance.
$26 billion
— Total growth in State Operating Funds spending from fiscal year 2021 to fiscal year 2024.
7.9 percent
— Average annual growth rate of State Operating Funds spending from fiscal year 2021 to fiscal year 2024.
$51 billion
— Projected growth in State Operating Funds spending over the 8 years between fiscal years 2021 and 2028.
New York faces significant fiscal challenges as both city and state governments grapple with structural budget gaps driven by years of unsustainable spending growth and reliance on temporary revenue sources. To avoid a looming fiscal reckoning, policymakers must prioritize spending restraint, improve government efficiency, and align recurring expenditures with available revenues rather than increasing taxes or depleting reserves.
Recommendations related to Out-Year State Budget Gaps
Both the City and State must align recurring expenditures for all programs with revenues.
Smart spending restraint should focus on prioritizing the programs that produce the most significant effects, based on a hard-nosed look at the data, and shrinking or eliminating those that are ineffective or deliver less benefit.
The State needs to reduce Medicaid spending growth while ensuring access to needed high-quality care and a strengthened safety net.
School aid needs to focus on better targeting aid to high-need districts, not increasing aid to wealthy districts that already self-fund a sound basic education, and not holding districts harmless when enrollment declines.
Leaders, managers, and front-line workers should work together to improve productivity, such as ensuring uniformed employees are deployed effectively and not filling jobs that could be done by civilian employees.
Key Data
$233 billion
— The State's total budget for fiscal year 2025.
$33 billion
— The increase in State Operating Funds spending between fiscal years 2020 and 2025.
$9.9 billion
— The State budget gap on paper in FY 2028.
$15 billion
— The structural gap in FY 2028 when accounting for non-recurring revenue.
$11.5 billion
— The increase in City-funded spending between FY 2020 and FY 2025.
$3.6 billion
— The additional fiscal year 2025 expenses to serve migrants.
New York State's fiscal year 2025 executive budget faces a structural gap of approximately $15 billion, with the fiscal year 2028 gap projected to reach $9.9 billion. While the proposal maintains over $19 billion in reserves, significant additional spending restraint and structural reforms are necessary to align future expenditures with the state's ongoing revenue base.
Recommendations related to Out-Year State Budget Gaps
The State must exercise significant additional restraint to close the State’s structural budget imbalance.
The State must get on a path to align future spending with its ongoing receipts base.
The State must ensure that temporary tax increases sunset on time to maintain New York’s competitiveness.
State lawmakers should make basic improvements to the budget process to increase transparency and accountability.
Lawmakers should publish basic financial plan tables with one-house and enacted budgets, avoid use of lump sum appropriations, avoid use of messages of necessity, and omit fiscal maneuvers that undercut accountability.
Key Data
$9.9 billion
— The projected fiscal year 2028 budget gap.
$5.5 billion
— The amount of the spending base supported by temporary tax increases and pre-payments from prior year surpluses.
$15 billion
— The approximate structural budget gap.
$19 billion
— The amount of record State reserves maintained in the budget.
New York faces a structural budget gap of $17 billion, necessitating spending restraint to ensure long-term fiscal stability. To maintain competitiveness, the state must avoid raising taxes, which are already among the highest in the nation.
Recommendations related to Out-Year State Budget Gaps
Spending restraint is needed to put New York on a path to fiscal stability.
New York should avoid raising taxes, as the state's combined top personal income and business tax rates are already the nation’s highest.
The state must address the structural budget gap in the upcoming budget proposal.
Key Data
$17 billion
— The structural budget gap facing New York State.
New York State faces significant multi-billion-dollar budget gaps in the coming fiscal years as federal aid expires and tax revenue growth slows. To ensure fiscal stability, the state must shift from recent spending increases toward greater fiscal restraint and bolster its financial reserves to better withstand potential economic downturns.
Recommendations related to Out-Year State Budget Gaps
The State must shift to restraining spending growth, rather than continuing the recent trend of adding new spending, to close projected budget gaps.
To adequately weather a recession, the State should increase its reserves to more than $27 billion.
The full balance of the State’s principal savings should be moved immediately into statutory lockboxes to ensure they are protected for emergencies.
If receipts exceed projections this year, additional funds should be deposited in the Rainy Day Reserve.
Key Data
$4.3 billion
— The projected budget gap for the upcoming fiscal year.
$9.5 billion
— The projected budget gap for fiscal year 2026.
$7.7 billion
— The projected budget gap for fiscal year 2027.
$16.8 billion
— The structural gap between recurring receipts and disbursements after accounting for non-recurring resources.
$19.6 billion
— The current level of the State's principal reserves.
$27 billion
— The amount the State should have in reserves to weather a recession and fund modest spending growth.
New York State faces significant long-term fiscal challenges, with projected budget gaps of $9.5 billion in fiscal year 2026 and $7.7 billion in fiscal year 2027. The state's structural imbalance exceeds $16.8 billion when accounting for reliance on reserves and temporary tax increases, necessitating immediate spending restraint to avoid future service cuts.
Recommendations related to Out-Year State Budget Gaps
The State needs to implement significant spending restraint to stabilize and strengthen its fiscal foundation.
The State should take decisive action to rein in spending in the upcoming budget to stave off significant future cuts.
Key Data
$4.3 billion
— Projected budget gap for the upcoming fiscal year.
$9.5 billion
— Projected budget gap in fiscal year 2026.
$7.7 billion
— Projected budget gap in fiscal year 2027.
$9.1 billion
— Amount of prepayments, reserves, and sunsetting tax increases relied upon in fiscal year 2027.
$16.8 billion
— The State's long-term structural imbalance.
New York faces a projected $9 billion budget gap next year that is expected to grow to $13 billion, ultimately resulting in a $22 billion structural hole. To address these fiscal challenges, the state should restrain spending growth in major programs like Medicaid and education while avoiding tax increases or the depletion of reserves.
Recommendations related to Out-Year State Budget Gaps
The state should restrain spending growth, necessarily starting with its largest programs.
State school aid should be better targeted to districts with higher-need students, instead of funneling billions of dollars to wealthy districts with strong local funding.
In Medicaid, the state should understand and reverse rapid cost growth in long-term care and other areas to reduce costs.
In “economic development,” the state should curtail — not expand — programs with dubious impacts.
The state should avoid another round of tax increases to maintain long-term stability and economic competitiveness.
The state should avoid drawing down reserves to ensure it remains prepared for the next crisis or recession.
Key Data
$9 billion
— Next year’s projected budget gap.
$13 billion
— The projected budget gap growth after next year.
$22 billion
— The state's structural hole once temporary funds are removed.
9.0%
— Annual rate of state spending growth over the past three years.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
New York State's future budget gaps have doubled, reaching $9.1 billion for the upcoming year and $13.4 billion by fiscal year 2027. While the state has increased reserves to over $19 billion, these funds are threatened by a structural budget gap exceeding $20 billion that will emerge as one-time revenues disappear.
Key Data
$9.1 billion
— The State's projected budget gap for the upcoming fiscal year.
$13.4 billion
— The State's projected budget gap for fiscal year 2027.
$20 billion
— The State's annual structural budget gap that will be revealed once one-time revenues disappear.
$5 billion
— The amount by which annual tax receipt estimates were revised downward, further widening budget gaps.
$19 billion
— The amount of reserves the State has increased to, though these are jeopardized by looming gaps.
The New York State Fiscal Year 2024 budget increases long-term structural deficits to over $15 billion by adding significant spending without corresponding cost-saving measures. This fiscal approach risks future service cuts and necessitates the extension of temporary tax surcharges to maintain state operations.
Recommendations related to Out-Year State Budget Gaps
State leaders should enact proven, flexible strategies, like those proposed by the Governor, to streamline environmental review, eliminate the floor area ratio cap, promote transit-oriented development, legalize accessory dwelling units and basement apartments, and extend and enact a successor to 421-a.
The Governor and Legislature should strongly support identifying and implementing productivity improvements during this round of collective bargaining between the MTA and its unions.
Additional deposits into the Rainy Day Fund should be prioritized to protect New Yorkers from economic downturns.
The federal government should provide both significant fiscal resources to cover costs and provide policy solutions to the asylum seeker crisis.
Key Data
$5 billion
— Projected budget gap in the Executive Budget.
$15 billion
— Long-term structural deficit.
$2.9 billion
— Potential efficiency improvements in the MTA.
$1 billion
— Funding to assist New York City in addressing the costs of asylum seekers.
New York State's fiscal year 2024 budget agreement was announced without providing essential financial details, such as the impact on the state's structural budget gap or the amount of new recurring spending. The state must release comprehensive financial plan tables to ensure transparency regarding how it intends to manage its $229 billion budget.
Recommendations related to Out-Year State Budget Gaps
The State should publish basic financial plan tables with the final agreement in the next few days to provide New Yorkers the information they need to understand how the State plans to spend and afford their $229 billion.
Key Data
$229 billion
— The total amount of the New York State budget that the state needs to explain how it plans to spend and afford.
New York State's failure to enact a timely budget creates uncertainty regarding a structural budget gap estimated between $15 billion and $20 billion. This delay complicates financial planning for local governments, including New York City, which faces potential mandates for nearly $1 billion in additional spending without clear state policy guidance.
Recommendations related to Out-Year State Budget Gaps
The State should enact a Fiscal Year 2024 Budget that makes New York more competitive, affordable, and fiscally stable, while restraining spending growth and paving the path to sunsetting temporary tax increases.
Lawmakers should give the public a reason to have faith in their government by providing basic multi-year financial plan tables that reveal the fiscal impacts of the budget when there is an agreement.
Key Data
$15 billion to $20 billion
— The range of the State’s massive structural budget gap, which is largely dependent on the choices made in the budget.
nearly $1 billion
— The amount of additional City spending that State policies could require, which New York City may have to account for without knowing the details due to budget delays.
New York State's budget delay risks exacerbating the state's existing structural budget gap through the addition of billions of dollars in unfunded programs. This unsustainable spending threatens to necessitate massive future service cuts and increase taxes, potentially driving further outmigration of residents and businesses.
Recommendations related to Out-Year State Budget Gaps
The State should restrain spending to stave off massive future cuts.
The State should maximize reserve deposits to protect New Yorkers from economic shocks.
The State should not raise taxes to avoid further outmigration.
The State should eschew wasteful subsidies in the final budget agreement.
The State should publish basic, multi-year financial plan tables to reveal the fiscal impacts of the budget.
New York State officials are urged to publish basic, multi-year financial plan tables at the time of the budget agreement to provide necessary transparency regarding the state's fiscal condition and out-year impacts. Codifying this requirement into state law for both one-house budget bills and the enacted budget would ensure legislators and the public have a timely understanding of the budget's size and balance.
Recommendations related to Out-Year State Budget Gaps
We urge you to publish basic, multi-year financial plan tables when you agree on the Fiscal Year 2024 Enacted Budget to provide transparency on out-year impacts.
These should include at least one financial plan table each for All Funds, State Operating Funds, and the General Fund; and include reasonably disaggregated and totaled lists of receipts, disbursements, transfers, annual bottom line results, and allocations of fund balances to provide transparency on out-year impacts.
We recommend that this requirement be codified in State law for both the one-house budget bills and enacted budget to provide transparency on out-year impacts.
The Legislature should include these tables with their one-house proposals to provide transparency on out-year impacts.
New York State's fiscal plan faces significant structural deficits, projected to reach $15 billion under the Governor's proposal and nearly $20 billion under the Legislature's plan by fiscal year 2027. These gaps are exacerbated by unsustainable spending growth and a reliance on temporary resources that will soon expire, necessitating immediate fiscal restraint and management reforms.
Recommendations related to Out-Year State Budget Gaps
The State should restrain SOF spending growth to 2 percent annually to bring spending trends in line with receipts and close forecast gaps.
The State should allow temporary tax increases to sunset as scheduled or earlier to improve competitiveness and reduce the cost of living and doing business.
The State should maintain or expand the Governor’s Rainy Day reserves plan by raising balance and deposit caps and automating future deposits.
The State should publish basic financial plan tables with the enacted budget to ensure transparency regarding fiscal impacts.
The State should reform the State’s budgeting and fiscal management to improve services, stability, and accountability.
Key Data
$15 billion
— The projected structural deficit by fiscal year 2027 under the Governor's plan.
$20 billion
— The projected structural deficit by fiscal year 2027 if the Legislature's plans are enacted.
$23.8 billion
— The growth in State Operating Funds from fiscal year 2020 to fiscal year 2023.
$7.2 billion
— The total budget gaps by fiscal year 2027 under the Governor's proposal.
$15.3 billion
— The total structural gap after removing temporary resources.
$4.7 billion
— The amount of net new recurring spending added by the Legislature above the Governor's proposal.
$227 billion is the size of the NYS FY 2024 Executive Budget. The State's finances are in a precarious state, with the economy uncertain and the budget going from riches to rags. There is an $8 billion surplus this year, but outyear gaps of over $7 billion and a $12…
The New York State legislative budget proposals for fiscal year 2024 add nearly $5 billion in new, largely recurring spending and approximately $2 billion in annual taxes, which threatens to widen the state's significant future budget gaps. These proposals fail to prioritize fiscal stability and transparency, as they lack essential financial plan tables and reduce reserve deposits, potentially leaving the state vulnerable to economic downturns.
Recommendations related to Out-Year State Budget Gaps
State leaders should craft a budget that ensures fiscal stability by restraining spending to stave off massive future cuts.
State leaders should craft a budget that ensures fiscal stability by saving for a rainy day.
State leaders should craft a budget that ensures fiscal stability by providing essential budget transparency regarding the size of the budget and how it impacts future gaps.
The final budget should adopt or improve upon the Governor's version of the Rainy Day Fund to strengthen the state's financial structure.
State leaders should craft a final budget that ensures New York remains attractive by paving the path to reasonably competitive taxes.
Key Data
$2 billion
— Additional annual taxes added by the proposals on personal income and business taxes.
$1 billion
— Business tax surcharge extension proposed by the Governor.
$5 billion
— New spending added by the proposals, most of which is likely to be recurring.
New York State faces significant fiscal challenges, with projected budget gaps reaching $7.2 billion in fiscal year 2027 and a structural imbalance of $14.4 billion by fiscal year 2028 due to unsustainable spending growth. To address these issues, the state must restrain spending, reject tax increases, and improve fiscal transparency and management to ensure long-term economic stability.
Recommendations related to Out-Year State Budget Gaps
Restrain annual SOF spending growth to 2 percent to structurally balance the budget by fiscal year 2028.
Reject the corporate tax surcharge extension and lay the path to sunset the temporary personal income tax surcharge on schedule or early.
Accelerate Rainy Day Fund deposits and further improve the Fund’s structure.
Publish basic financial plan tables with the Legislative one-house budgets and the Enacted Budget when voted on to ensure basic fiscal transparency.
Reject the proposal to shift Medicaid costs onto local governments, and empower a Health System Reform task force to put Medicaid on a fiscally sustainable path.
Target all school aid based on need, reduce aid to wealthy districts that fund a sound basic education with local resources, and eliminate hold harmless provisions that ensure state aid increases year-over-year.
Shrink rather than expand the film tax credit, reject State borrowing for Belmont Park, and reject extension of New York City economic development incentives absent rigorous evaluation of their effectiveness.
Boost statewide housing production by supporting the Governor’s housing plan, including the New York State Housing Compact and transit-oriented development.
Ensure at least one-half of any plan to stabilize the MTA’s operating budget comes from labor productivity, with the remaining from the State budget, and appropriately apportioned regional support.
Prioritize cost-effective investments in the energy transition and resiliency to maximize the impact of climate and energy interventions.
Key Data
$7.2 billion
— Projected budget gap in fiscal year 2027.
$14.4 billion
— Exposed structural budget imbalance in fiscal year 2028.
3.6 percent
— Slated growth of State Operating Funds spending next year.
4.3 percent
— Projected future annual spending growth from fiscal year 2024 to fiscal year 2027.
$8.6 billion
— Projected budget gap in fiscal year 2026.
$3.1 billion
— State aid going to 164 districts that self-fund a sound basic education.
New York's Executive Budget for fiscal year 2024 balances the immediate year but widens out-year budget gaps to $5.7 billion in 2025, $9.0 billion in 2026, and $7.5 billion in 2027. These deficits are driven by forecasted lower tax receipts and the addition of new recurring spending that exceeds the revenue generated by extending the temporary corporate tax increase.
Recommendations related to Out-Year State Budget Gaps
The Governor should proceed with raising the balance and deposit caps on the Rainy Day Fund and tying it to State Operating Funds to better protect savings for use during a downturn.
Key Data
$5.7 billion
— The projected out-year budget gap for fiscal year 2025.
$9.0 billion
— The projected out-year budget gap for fiscal year 2026.
$7.5 billion
— The projected out-year budget gap for fiscal year 2027.
$1 billion
— The amount of revenue expected from extending the temporary corporate tax increase for three years.
New York faces widening out-year budget gaps, with a structural deficit exceeding $12 billion annually and projected gaps reaching $9.0 billion in fiscal year 2026. To ensure long-term fiscal stability, the state must align spending with recurring revenue and restrain the rapid growth in operating funds, which has averaged 7.1 percent annually over the past three years.
Recommendations related to Out-Year State Budget Gaps
New York should focus on aligning spending with revenues to address the structural budget gap and avoid creating new fiscal cliffs.
The State should restrain spending growth to be in line with its recurring revenue to close budget gaps and stabilize finances.
At least half of any MTA stabilization plan should come from productivity improvements that reduce spending, which will require changes agreed to with labor.
Efforts to restrain Medicaid spending growth will be essential to the State’s future fiscal stability.
Key Data
$12 billion
— The structural budget gap New York faces annually.
$5.7 billion
— The projected budget gap in fiscal year 2025.
$9.0 billion
— The projected budget gap in fiscal year 2026.
$7.5 billion
— The projected budget gap in fiscal year 2027.
7.1 percent
— The average annual growth of State Operating Funds spending over the past three years.
12.8 percent
— The growth of State Operating Funds spending in the current year.
New York State faces significant fiscal risks, including a $12 billion structural budget gap and rapidly growing program costs that threaten future stability. To address these challenges, the state should limit spending growth, bolster rainy day reserves, and reform spending in areas like Medicaid and school aid to wealthy districts.
Recommendations related to Out-Year State Budget Gaps
Keep fiscal year 2024 spending growth to 2 percent and start closing the $12 billion structural gap.
Add at least $2 billion more than already planned to the Rainy Day reserves.
Do not create new fiscal cliffs with recently identified receipts.
Put Medicaid on a fiscally sustainable path.
Do not increase State school aid for districts already self-funding a sound basic education.
Key Data
$12 billion
— The size of the structural budget gap that the state needs to start closing.
$2 billion
— The amount of additional funds that should be added to the Rainy Day reserves.
$3.1 billion
— The amount of state aid provided to wealthy school districts that already self-fund a sound basic education.
1 million
— The number of Medicaid enrollees added over the past three years.
New York State faces a $12 billion structural budget problem, driven by unsustainable spending growth and the expiration of non-recurring federal pandemic aid. To address this, the state must restrain spending growth and prioritize cost-effective management of major programs like Medicaid and the MTA to avoid future fiscal cliffs.
Recommendations related to Out-Year State Budget Gaps
The State should restrain spending growth in the fiscal year 2024 budget to help balance the budget in the out-years.
The State should reduce State Operating Funds (SOF) spending growth to 2 percent annually to eliminate the current 2027 budget gap and accommodate the loss of nonrecurring resources.
The State should reject extraordinary budget powers and broadly defined lump sum appropriations, as they are unnecessary and create fiscal and ethical risks.
The State should save the $2 billion in unallocated receipts to bolster the Rainy Day Fund.
The State should implement structural reforms, including establishing an independent fiscal analyst’s office, transitioning to budgeting on a modified accrual basis, and implementing a performance management system.
The State should rely significantly more on efficiency savings to stabilize the Metropolitan Transportation Authority’s operating budget.
Key Data
$12 billion
— The total structural problem the State has in its sights.
$6 billion
— The amount of fiscal year 2027 budget balance that will not be available the following year.
$13 billion
— The amount of pandemic-related federal aid received for schools.
$10 billion
— The minimum amount of pandemic-related federal aid received for Medicaid.
$2.5 billion
— The annual structural operating budget deficit of the Metropolitan Transportation Authority.
$4.2 billion
— The amount of the environmental bond act approved by voters.
New York faces significant future budget gaps, with projections reaching $12.7 billion by fiscal year 2028, necessitating immediate fiscal restraint and strategic planning. To ensure long-term stability, the state must prioritize building reserves, limiting annual spending growth, and reforming major cost drivers like Medicaid and education aid.
Recommendations related to Out-Year State Budget Gaps
The state should stay the course on building reserves to provide a lifeline during the next recession.
New York should restrain spending growth to 2% annually through 2028, which would be sufficient to close the projected $12 billion gap.
The state should transform Medicaid and the broader health system by charging a diverse panel of stakeholders to identify cost-control and improvement strategies.
To stabilize the budget and increase equity, the state should better target education aid to high-need districts and reevaluate assistance to wealthy districts that already self-fund a sound basic education.
New York should base economic development and climate investments on data, evaluation, and tradeoffs to maximize job creation and environmental benefits.
The state should implement comprehensive performance management to deliver high-quality, efficient services and focus funds where the impact is greatest.
Leaders must mind New York’s tax competitiveness to avoid chipping away at the state's revenue and economic foundation.
Key Data
$12.7 billion
— The projected budget gap for fiscal year 2028, accounting for the expiration of one-time money and the personal income tax surcharge.
$12 billion
— The projected budget gap for 2028 that could be closed by limiting annual spending growth to 2%.
$3 billion
— The amount of annual education aid currently provided to wealthy districts that already self-fund a sound basic education.
$6 billion
— The amount by which spending is projected to exceed receipts by fiscal year 2027.
50%
— The portion of the state budget comprised of Medicaid and education spending.
32%
— The education aid increase that the state began to phase in during 2021.
New York State faces multi-billion-dollar budget gaps beginning in fiscal year 2025, necessitating a reduction in the recurring spending base. As the second largest area of state spending, school aid should be reformed by better targeting resources to high-need districts and implementing performance management systems to ensure accountability.
Recommendations related to Out-Year State Budget Gaps
The State should stop increasing aid to wealthy districts that fund an SBE through local revenue and regular federal aid.
The State should consider freezing aid to better-off districts which already receive State aid in excess of the amount needed for an SBE.
The State should reform both Foundation Aid and many of the expense-based aids to direct more of the funds to high-need districts.
The State should identify and spread best practices and implement a robust performance management system to track outcomes, quality, and efficiency of services across districts.
The State should require under-performing districts to implement action plans to improve their performance.
Key Data
$34.4 billion
— Total state school aid for the current school year.
$3.1 billion
— State aid directed to 176 districts that already fund a Sound Basic Education (SBE) with local and regular federal resources.
$13.6 billion
— Total state aid sent across all districts above the level needed to fund a Sound Basic Education (SBE).
$14.7 million
— Combined funding shortfall for the four districts remaining underfunded.
$10.5 billion
— Amount of state aid provided to districts in amounts exceeding what is needed to fund a Sound Basic Education (SBE).
New York State's fiscal outlook has weakened, with projected budget gaps expanding from $310 million in fiscal year 2024 to $6.2 billion by fiscal year 2027 due to downward revisions in tax receipt forecasts. To maintain stability, the State must prioritize building reserves to a total of $19.4 billion while curbing recurring spending in high-growth areas like Medicaid and school aid.
Recommendations related to Out-Year State Budget Gaps
The State must build reserves, vigilantly restrain spending growth, and identify and implement long-run cost savings to address widening budget gaps.
It is imperative that the State continue on the path of depositing $15.4 billion into reserves, at least until there is a recession.
The State should seek to reduce recurring spending, especially in high-growth areas such as Medicaid and school aid, while continuing to build reserves.
Key Data
$310 million
— The projected budget gap for fiscal year 2024.
$6.2 billion
— The projected budget gap for fiscal year 2027.
$15.4 billion
— The amount the State plans to deposit into reserves over four years.
$19.4 billion
— The total reserve balance the State aims to reach.
$801 million
— The amount of enhanced federal Medicaid funding provided for the next quarter.
$893 million
— The estimated State cost for New Yorkers remaining enrolled in Medicaid due to the continued public health emergency.
New York State's fiscal plan faces significant long-term challenges, with projected annual budget gaps of approximately $8 billion starting in fiscal year 2028 once temporary tax increases expire and one-time resources are depleted. To mitigate these risks and ensure future stability, the state must implement performance management and develop strategies to restrain the rapid growth of Medicaid and education spending.
Recommendations related to Out-Year State Budget Gaps
The State should improve accountability and transparency by implementing performance management to reduce risks and preserve service levels.
The State should actively develop plans to restrain Medicaid and education spending growth while delivering needed services and quality.
Maintaining balance and making reserve deposits will require fiscal prudence, including adhering to spending targets and maximizing Rainy Day Fund deposits.
The Legislature and Governor should release basic financial plan tables with both the one-house and enacted budget bills to improve governmental transparency.
Key Data
$8 billion
— Projected annual budget gaps likely to open beginning in fiscal year 2028.
$15.4 billion
— Total planned deposits to reserves over a four-year period.
$222 billion
— Total All Funds spending in the fiscal year 2023 enacted budget.
$130 billion
— State Operating Funds spending, adjusted for off-budget shifts and payment timing.
$10 billion
— Amount of debt service costs prepaid in fiscal years 2022 and 2023 to achieve budget balance.
The fiscal year 2023 budget agreement adds billions in recurring spending without sufficient measures to restrain growth, creating significant future fiscal risks. To protect against future emergencies and ensure long-term stability, the state must align spending growth with long-run receipts and allow recent tax increases to expire as planned.
Recommendations related to Out-Year State Budget Gaps
The reported set aside of reserves equal to 15 percent of State operating funds is important, substantial, and welcome; these funds all should be deposited in a locked Rainy Day Fund.
The State should be bringing spending growth in line with long-run receipts—to protect New Yorkers from future emergencies and to ensure last year’s tax increases expire on time or early.
The State should be bringing spending growth in line with long-run receipts—to protect New Yorkers from future emergencies and to ensure last year’s tax increases expire on time or early.
A comprehensive, public performance management system to improve quality, efficiency, and accountability in New York is long overdue.
Extension of film tax credit continues an expensive program that does not provide commensurate value for New Yorkers and should be phased out and ultimately eliminated.
Key Data
15 percent
— The amount of State operating funds set aside as reserves in the fiscal year 2023 budget.
$40 billion
— The average reduction in expected receipts over three years during recent recessions prior to 2020.
$10 billion
— The amount of the Governor's proposed spending increase, on top of which additional recurring spending was reportedly added.
Legislative budget proposals would create significant out-year budget gaps, estimated to reach $7.7 billion by fiscal year 2026, while preventing the state from building necessary reserves. These spending plans threaten the state's long-term fiscal stability and could necessitate future budget cuts or tax increases to address the resulting deficits.
Recommendations related to Out-Year State Budget Gaps
The Governor and the Legislature should adopt a budget that keeps to the Executive Budget’s top line on spending and focuses on allocating the $5 billion available for relief and recovery.
The Governor and Legislature should diligently manage and provide oversight of funded programs by developing plans, identifying goals, measuring activities and results, and ensuring accountability by managers and local governments.
The state should implement statewide performance measurement and management to ensure and assess how successful its spending is in delivering results efficiently for New Yorkers.
The state should publish basic financial plan tables that show the receipts and disbursements with the one-house and enacted budgets to improve budgeting transparency.
The state should set aside significant reserves to stabilize its outlook and protect New York’s competitiveness and tax base.
Key Data
$7.7 billion
— Estimated out-year budget gap in fiscal year 2026 under the Legislative proposals.
$15 billion
— Amount added to reserves by fiscal year 2025 under the Governor's proposal.
$4.8 billion
— Amount added to reserves under the Legislative proposals.
$4.2 billion
— Estimated budget gap in fiscal year 2024 under the Legislative proposals.
$15 to $17 billion
— Estimated annual tax receipts shortfall in a typical recession.
$10.1 billion
— Proposed increase in State Operating Funds spending in fiscal year 2023 under the Governor's budget.
$0 is the size of the New York State budget deficit in each year of New York State’s five-year Executive Budget financial plan, as proposed by Governor Kathy Hochul. The Governor’s budget proposal balances the budget in each of the next five years, an unprecedented level of fiscal stability for…
New York State's fiscal plan for 2023 relies on optimistic economic growth projections, creating risks for future budget stability if the economy falters. To ensure long-term fiscal health, the state should restrain spending growth, bolster rainy day reserves, and implement stricter oversight of major programs like Medicaid and economic development.
Recommendations related to Out-Year State Budget Gaps
The Legislature should hold the top line on spending to ensure the State's fiscal stability.
The State should save for a rainy day by maintaining the planned reserve deposits and enacting improvements to the Rainy Day Fund.
The State should reform the Medicaid global cap and improve transparency to control spending.
The Legislature should reject unnecessary budget powers and lump sum appropriations to maintain fiscal oversight.
The State should not allow the State to continue to take $250 million annually in local sales tax revenue.
The Governor and Legislature should include financial plans with the one-house budgets and enacted budget to improve transparency.
The Legislature should deliver New Yorkers value by enacting performance management.
The State should ensure the massive influx of school aid delivers commensurate results.
The State should boost housing production and enact a cost-effective 421-a replacement that supports affordable and rental housing development.
The State should reform economic development program management and transparency to ensure results.
Key Data
$10 billion
— The adjusted year-to-year increase in State Operating Funds spending.
$41 billion
— The cumulative amount of federal and State school aid flowing to schools over the next five years.
$250 million
— The amount of local sales tax revenue the State takes annually from local governments.
$4.2 billion
— The total amount allocated for relief and recovery in the fiscal year 2023 budget.
$2.7 billion
— The amount of annual aid received by wealthy school districts that already self-fund a sound basic education.
$10 billion
— The annual price tag of the State's economic development spending.
New York faces a looming fiscal cliff as temporary federal aid expires, creating a structural imbalance that requires identifying recurring savings to avoid drastic service cuts. To ensure long-term stability, the state must address these out-year budget gaps by building adequate rainy day reserves and implementing structural reforms across major spending areas like Medicaid and the MTA.
Recommendations related to Out-Year State Budget Gaps
The State should start to identify recurring savings that should grow to $3.5 billion annually by fiscal year 2025 to ensure that drastic service cuts are not required when the federal funds are exhausted.
The State should deposit any receipts above the current projections to the Rainy Day Fund and Retiree Health Benefits Trust to build a stronger fiscal future for the State.
The State should take steps to improve the Medicaid program’s fiscal stability and outlook by charging the Transformation Team to identify Medicaid efficiencies, program improvements, and savings.
The Governor should vigorously support the MTA to improve the efficiency of its operations, including working with the leaders of its unionized workforce, to stave off future service cuts, tax increases, or extraordinary fare increases.
The State should transition to budgeting and reporting in accordance with Generally Accepted Accounting Principles (GAAP) to increase the integrity and consistency of the State’s financial reporting and decisions.
Key Data
$3.5 billion
— Recurring program spending supported by federal aid in fiscal year 2025 but not thereafter.
$2 billion
— Structural imbalance in the MTA operating budget that will emerge when federal aid runs out.
$19.6 billion
— The two-year impact of a typical recession.
$8.9 billion
— Projected increase in State Operating Funds spending in fiscal year 2022.
$3.2 billion
— Projected increase in State Operating Funds spending in fiscal year 2023.
New York State faces a $3.5 billion fiscal cliff by fiscal year 2025 as one-time federal pandemic aid is exhausted and recurring spending continues to grow. To ensure long-term fiscal stability, the state must improve financial transparency, adopt standard accounting practices, and identify specific actions to reduce future budget gaps.
Recommendations related to Out-Year State Budget Gaps
The State should identify actions to reduce the existing out-year gaps, avoid the fiscal cliff, and bolster reserves needed to mitigate the inevitable next downturn.
The State should shift to budgeting and reporting using Generally Accepted Accounting Principles (GAAP) to ensure financial transparency.
The State should restrain new aid growth for wealthy districts as a preferable alternative to other methods of controlling spending.
The State should present clear, timely financial reports that display the true level and growth of State spending.
The State should forego fiscal maneuvers that obscure the true size of the budget and distort spending increases.
Key Data
$3.5 billion
— The projected fiscal cliff, or gap between available funding and planned spending, in fiscal year 2025.
$12.7 billion
— The amount of American Rescue Plan (ARP) federal fiscal relief received by the State in May 2021 to be disbursed over four years.
15.5 percent
— The projected increase in State Operating Funds (SOF) spending in fiscal year 2022 after adjusting for fiscal maneuvers.
5.7 percent
— The decline in State Operating Funds (SOF) spending in fiscal year 2021 after adjusting for fiscal maneuvers.
$108.2 billion to $130.7 billion
— The projected increase in spending over the four-year period from fiscal year 2022 to fiscal year 2025.
New York State faces a $3.5 billion fiscal cliff as one-time federal pandemic aid is depleted, necessitating a shift toward targeting school funding to districts with the greatest need rather than wealthy ones. To ensure fiscal stability and improved educational outcomes, the state must implement rigorous performance measurement and detailed tracking of all recurring and one-time aid.
Recommendations related to Out-Year State Budget Gaps
The State should address performance and fiscal stability by directing school aid to those districts most in need, and by restraining increases to wealthy districts.
To increase the likelihood that students benefit from this funding increase, the State should set goals, track performance, evaluate initiatives, and adjust programs and spending as necessary going forward.
The State should focus funding on districts with the greatest need, and reduce aid and aid increases to wealthy districts to address educational needs and stabilize finances.
The Legislature, Governor, and Comptroller should work together to make sure that all recurring and one-time aid is tracked and reported in detail.
Key Data
$3.5 billion
— The projected fiscal cliff facing the State once extraordinary federal aid is depleted.
$2.5 billion
— The amount of State aid received by 168 districts that already have sufficient local and recurring federal funding to finance a sound basic education.
$11.4 billion
— The amount of one-time federal pandemic aid that will be spent over four years.
$32,352
— The total per pupil spending for the school year, which is roughly double the national average.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
New York State should implement a government-wide performance management system to ensure accountability and transparency while shifting recurring programs from temporary federal funding to stable state revenues. To protect against future fiscal instability, the state must also build sufficient rainy-day reserves and cease fiscal maneuvers that obscure the true size and growth of the budget.
Recommendations related to Out-Year State Budget Gaps
The state should put more funds aside for a rainy day — the next recession or severe emergency — and reduce the future federal fiscal cliff.
The state should shift priority recurring programs from federal to recurring state revenues over time.
Five specific transparency measures would improve the state’s fiscal management: Move funds back on budget, stop manipulating the timing of spending, budget and report using Generally Accepted Accounting Principles, and publish the financial plan when the budget is adopted and other financial reports on time.
Hochul should get the job done by instituting a data-driven management and accountability process.
Key Data
$212 billion
— Total size of the state budget for the current year.
$3.3 billion
— Funding allocated for renter and homeowner relief programs.
$2.1 billion
— Funding allocated for the Excluded Workers Fund.
$800 million
— Funding allocated for small business recovery grants.
$13 billion
— Increase in school aid for the school year.
$1.7 billion
— State Medicaid payment that was delayed by three days to make spending appear lower.
The fiscal year 2022 budget agreement relies on temporary federal aid and tax increases to support a massive $212 billion spending plan, creating significant risks for long-term fiscal sustainability. By failing to implement systemic improvements and using non-recurring funds for recurring expenses, the state sets the stage for future budget gaps and potential tax hikes once federal relief is exhausted.
Recommendations related to Out-Year State Budget Gaps
The State should empanel a Health System Transformation team to reform the Global Cap, address long term Medicaid spending, and focus on health system-wide reforms to restrain cost, reduce disparities, and improve quality.
The State should avoid using temporary federal funds to support recurring spending, which sets the stage for future budget cuts or tax increases when the federal aid is exhausted.
It is critical that the enacted budget report identify how the federal funds are being used, so New Yorkers can determine if those uses are wise and how they affect New Yorkers now and the State in the long-run.
Key Data
$22 billion
— Amount of additional funds available over the next two years compared to the Governor's initial budget proposal.
$4.3 billion
— Annual amount of revenue expected from the agreed-upon personal income and corporate tax increases.
$212 billion
— Total planned All Funds spending for the fiscal year.
$5 billion
— Estimated increase in school aid, representing the largest increase in recent history.
0.75 percentage points
— Increase in corporate tax rates when combined with NYC and MTA taxes.
New York State has received significant federal aid that allows for the restoration of previously planned spending cuts without needing to raise income taxes. However, because these federal funds are temporary, the state must use the next two years to restructure its spending to address significant budget gaps projected for fiscal years 2024 and 2025.
Recommendations related to Out-Year State Budget Gaps
The State should use the next two years to restructure spending to be more sustainable to address the gaps that will exist and grow when the federal funds are depleted.
Key Data
$6,242 Million
— Projected budget gap for fiscal year 2025.
$3,634 Million
— Projected budget gap for fiscal year 2024.
$12.6 Billion
— Direct federal funding provided to the State under the American Rescue Plan.
$9.6 Billion
— Projected surplus over fiscal years 2021 through 2023.
$7 Billion
— Amount of annual tax increases proposed by the State Legislature.
The state should provide full transparency regarding fiscal year 2021 budget withholdings and repayments by agency, while also detailing the proposed 5 percent spending reductions for fiscal year 2022 and beyond. Additionally, the legislature should reject proposals for extraordinary executive budget powers that undermine legislative authority and lack sufficient public oversight.
Recommendations related to Out-Year State Budget Gaps
The Division of the Budget should publish timely and complete information about funds that were withheld and repaid as part of the fiscal year 2021 State budget midyear adjustment process.
The state should provide detail of the 5 percent cuts being made for fiscal year 2022 and beyond, including a clear summary of all dedicated fund transfers to the State’s general fund.
The legislature should omit from the Enacted Budget three extraordinary budget powers that are unnecessary and inhibit the Legislature’s ability to exercise its appropriate role in the budget process.
The state should provide information regarding withholdings and repayments monthly and broken out by agency or recipient, and major program.
The Governor and Legislature should convene to adjust the State’s spending plan if federal aid is not received by August 1, 2021, rather than granting the Executive extraordinary modification authority.
Key Data
$700 million
— Amount of withholdings in calendar year 2020 that were reported to the Legislature as payments withheld beyond a statutory payment date.
$628 million
— Total amount of transportation withholdings identified in the Assembly Majority’s 'Yellow Book' analysis.
$584 million
— Portion of transportation withholdings listed as 'non-statutory, non- 18b Transit Operating Aid, Mobility Tax.'
$426 million
— Amount withheld from and to be repaid to the Metropolitan Transportation Authority (MTA).
$98 million
— Amount to be cut from the Metropolitan Transportation Authority in fiscal year 2021, pending receipt of federal aid.
New York faces significant out-year structural budget gaps that require prudent use of federal aid and structural spending reforms rather than tax increases or extraordinary executive powers. The state should leverage federal funds to stabilize finances while addressing long-term liabilities like the $50 billion unfunded post-employment benefit obligation and restructuring Medicaid and economic development spending.
Recommendations related to Out-Year State Budget Gaps
The State should not increase rates or delay cuts to personal income taxes to avoid damaging economic competitiveness.
Legislators should use federal aid wisely to stabilize the State’s finances in both the near and long term rather than supporting recurring spending.
The Legislature should reject extraordinary Executive budget powers to reduce or hold back spending, transfer appropriations unilaterally, or issue debt for operating purposes.
The Enacted Budget should smooth year-to-year school aid and target spending to districts with the greatest need.
The State should prudently budget marijuana and mobile sports wagering revenues by not dedicating the vast majority of these funds.
The Legislature should reject and reverse cost shifts to local governments, including the NYC-specific cut to public health matching funds and the local sales tax intercept.
The State should reduce unproductive economic development spending and modify capital financing to offset harmful spending reductions.
The Legislature should support proposals to reform other post-employment benefits financing to reduce the State's outstanding liability.
The State should enact the “rail-advantaged housing” proposal to improve housing supply and affordability in the downstate region.
The State should revive and transform the Medicaid Redesign Team into a Health System Transformation Team to identify efficiencies and address broader health system issues.
Key Data
$50 billion
— The amount of the State's current unfunded liability for retiree health care benefits.
$7 billion
— The potential savings over four years from shifting capital financing to long-term debt and reducing unproductive economic development spending.
$2.5 billion
— The amount of recurring savings the Medicaid Redesign Team was reconvened to identify.
$12.6 billion
— The amount of direct federal aid current drafts in Congress would provide to New York State.
$10.6 billion
— The amount of federal aid current drafts in Congress would provide to local governments.
$500 million
— The amount of the local government sales tax intercept that the Legislature should reverse.
New York State should avoid using long-term debt to cover operating expenses, as it postpones necessary fiscal decisions and burdens future taxpayers. Instead, the state should prioritize spending restraint, utilize rainy day funds, and adopt transparent accounting practices to ensure long-term fiscal stability.
Recommendations related to Out-Year State Budget Gaps
The State should balance this year’s budget without long-term borrowing for operating expenses.
The amount used should be limited to what is needed after the State exhausts other gap-closing strategies and uses new federal aid to reduce budget gaps.
Borrowing should not be used to increase state operating spending, inclusive of any federal stimulus aid, more than 2 percent or the inflation rate, whichever is lower.
Borrowing should be part of a comprehensive and feasible multiyear plan that leads to fiscal stability and is presented in accordance with GAAP.
The State Comptroller should assess whether the fiscal stability plan is realistic and feasible, and approve each instance of borrowing for operations only if it comports with a realistic and feasible plan.
The State should adopt, in law and practice, fiscal integrity and transparency measures that include the transition to an annual State operating funds budget that is balanced in proposal, adoption and at year end in accordance with GAAP.
Key Data
$11 billion
— Proposed authority for the State to issue debt for operations.
$1.7 billion
— Medicaid payments shifted by three days in fiscal year 2019 to obscure the program's fiscal outlook.
$8 billion
— Proposed re-authorization for one year of the State ability to issue short-term debt.
$3 billion
— Proposed line of credit for state agencies.
2 percent
— Maximum permissible levy increase or inflation rate, whichever is less, for state spending.
New York faces significant out-year budget gaps of $6.0 billion in fiscal year 2024 and $8.6 billion in fiscal year 2025, threatening long-term fiscal stability. To address these shortfalls without raising taxes, the state should shift capital financing to long-term debt, reduce unproductive economic development spending, and reallocate school aid toward high-need districts.
Recommendations related to Out-Year State Budget Gaps
The State should shift more capital financing to long-term debt to provide sufficient resources to make tax increases unnecessary.
The State should reduce unproductive economic development and low-priority capital spending to improve the State's fiscal outlook.
The State should smooth the year-to-year fluctuations in school aid to avoid a sudden drop-off in funding.
The State should focus on directing aid to high-need districts and reducing aid to wealthier districts that already support a sound basic education without State funding.
The State should reduce its planned capital disbursements by 10 percent and finance up to 50 percent of the remaining paygo capital spending with debt to generate budget savings.
Key Data
$6.0 billion
— The projected budget gap for fiscal year 2024.
$8.6 billion
— The projected budget gap for fiscal year 2025.
$1.6 billion
— The amount of State aid currently disbursed to high-income districts that already support a sound basic education without State funding.
$713 million
— The potential budget savings in fiscal year 2022 from a 50 percent reduction in proposed economic development capital spending combined with financing 50 percent of the remaining paygo spending with debt.
New York State faces significant long-term fiscal challenges that extend well past 2023, requiring structural spending reforms rather than relying solely on federal aid or tax increases. While the state hopes for $15 billion in federal assistance to eliminate near-term deficits, it must also implement measures like reducing aid to wealthy school districts and cutting wasteful economic development spending to ensure future financial stability.
Recommendations related to Out-Year State Budget Gaps
The State should reduce aid to wealthy school districts to address budget gaps without raising taxes.
The State should eliminate wasteful economic development spending as a measure to close budget gaps.
The State should shift cash spending on capital projects to debt to avoid harmful tax increases.
The State should pursue structural spending reforms to ensure finances remain stable regardless of federal aid levels.
Key Data
$6 billion
— Baseline assumption of federal aid included in the Executive Budget.
$15 billion
— Amount of federal aid the State hopes to receive to wipe out near-term deficits.
New York State and City face massive combined budget gaps totaling $73.3 billion over four years, necessitating the urgent development of credible fiscal stability plans. Even with potential federal aid, significant gap-closing measures will be required to address the projected deficits of $60.1 billion for the State and $13.2 billion for the City.
Recommendations related to Out-Year State Budget Gaps
State and City leaders should act with urgency to develop and implement credible fiscal stability plans.
The State and City must implement significant actions to stabilize their finances in the long run.
The State and City must implement gap closing measures to address the projected deficits.
Key Data
$73.3 billion
— Total State and City budget gaps over four years.
$60.1 billion
— Most recent State financial plan four-year deficit.
$13.2 billion
— NYC November 2020 Financial Plan four-year gap.
$4.8 billion
— NYC adjusted gap for fiscal year 2022 that must be closed by the release of the Preliminary Budget.
$10.6 billion
— Gap closing measures the City must implement from now through January 2024.
$57 billion
— Total gap closing actions the State and City would have to implement if federal aid relieves the same portion of gaps as in the Great Recession.
New York faces significant budget gaps of $8 billion this year and $17 billion next year, leading some to propose reinstating the dormant stock transfer tax to generate revenue. However, this tax would likely drive away securities industry jobs and reduce overall tax collections, making it an ineffective and harmful solution for addressing the state's fiscal challenges.
Recommendations related to Out-Year State Budget Gaps
Policymakers should leave the STT dormant and find alternative ways to fill the budget gap.
New York’s leaders should reject proposals to revive the STT.
Key Data
$8 billion
— New York State's current budget gap.
$17 billion
— The expected growth of the state's budget gap for next year.
$13 billion
— The amount advocates claim the stock transfer tax could yield in annual revenue.
$4 billion
— The amount the stock transfer tax would have yielded in fiscal year 2020.
18 percent
— The portion of State tax collections accounted for by the securities industry in fiscal year 2020.
6 percent
— The portion of City tax collections accounted for by the securities industry in fiscal year 2020.
New York State faces a $9 billion budget gap with projected annual deficits reaching $19 billion by fiscal year 2023, necessitating the elimination of the ineffective film tax credit to help stabilize state finances. Ending this costly incentive would allow the state to reallocate resources during a period when it is already withholding payments to essential services like school districts and nonprofits.
Recommendations related to Out-Year State Budget Gaps
The State should stop awarding from future year allocations to ensure that caps effectively limit the increase in state liability each year.
The State should stop spreading claims over 3 years to reduce the extended distance between job creation and state financial impact.
The State should decrease the credit substantially to 10 percent of qualified costs and eliminate the annual cap to reduce program costs.
The State should further decrease the share of expenses that can be claimed in New York City to push production to areas with greater economic development needs.
Key Data
$7.8 billion
— Total amount allocated to film and television tax incentives in New York State since 2004.
$9 billion
— Current state budget gap.
$19 billion
— Projected annual deficits in fiscal year 2023.
$420 million
— Annual cap for the film tax credit through 2025.
New York State faces a $58 billion budget gap over the next four years, requiring difficult decisions to balance the budget through expense reductions, tax increases, or other measures. The state must move away from relying on accounting shifts and fiscal maneuvers that have obscured spending growth and instead implement a transparent plan to address these long-term fiscal pressures.
Recommendations related to Out-Year State Budget Gaps
The state should reduce school aid to wealthy districts to help close the $8 billion gap.
New York should finance capital projects with bond proceeds rather than on a pay-as-you-go basis.
The state should eliminate unproductive economic development spending to address the projected budget shortfalls.
Policymakers should walk back tax policy expenditures as part of a strategy to balance the budget.
The state must develop a timely, transparent plan that avoids relying on fiscal maneuvers and accounting shifts to balance the budget.
Key Data
$58 billion
— Projected budget gaps facing the New York State budget over the next four years.
$8 billion
— Annual amount in unidentified budget balancing actions assumed in the state's spending targets.
$1.7 billion
— Medicaid deferral amount planned for fiscal year 2021.
$726 million
— Additional federal Medicaid funding expected as of July 1, which helps offset planned state actions.
3.9 percent
— Actual State Operating Funds spending growth in fiscal year 2020.
2 percent
— Growth benchmark established by the Governor for State Operating Funds.
New York State and City face significant potential budget gaps in fiscal years 2021 and 2022, with the State facing up to $15 billion and the City up to $6.9 billion. To address these shortfalls, policymakers must prioritize controlling expenditures and seeking federal aid rather than raising taxes, which could negatively impact economic competitiveness and drive away high-income taxpayers.
Recommendations related to Out-Year State Budget Gaps
Improving the fiscal outlook for both the State and the City primarily requires controlling expenditures.
Improving the fiscal outlook for both the State and the City primarily requires advocating for federal aid.
Any consideration of tax increases should include the impact on State and local economic competitiveness.
As New York’s leaders look to close budget gaps, they must be cognizant that combined State and City PIT rates are the second highest in the nation.
As New York’s leaders look to close budget gaps, they must be cognizant that combined CFT rates are the highest.
Key Data
$15 billion
— Potential budget gap for New York State in fiscal year 2022.
$6.9 billion
— Potential budget gap for New York City in fiscal year 2022.
16.49 percent
— Combined effective corporate franchise tax rate for businesses operating in New York City.
8.82 percent
— Top personal income tax rate imposed by New York State on married couples filing jointly with incomes greater than $2.2 million.
$1.4 billion
— Additional tax revenue that could have been generated if New York’s share of national millionaire capital gains had remained at 2010 levels.
New York State faces significant fiscal stress with projected budget gaps reaching $19 billion in fiscal years 2023 and 2024, necessitating difficult decisions to balance the budget. By utilizing a framework that includes targeted spending reductions, temporary tax policy adjustments, and asset sales, the state can mitigate these gaps without resorting to extreme cuts in essential services.
Recommendations related to Out-Year State Budget Gaps
The State should modify its capital plan for the current period of fiscal stress and eliminate unproductive economic development capital spending.
The State should freeze the implementation of middle class tax cuts at the calendar year 2020 rate.
The State should identify assets that can be sold with minimal adverse impacts for a target of $1.0 billion in fiscal year 2022 and in fiscal year 2023.
The State should use some of its reserves to close current and future gaps.
Medicaid Redesign Team efforts should continue in order to find additional savings starting in fiscal year 2022.
Key Data
$19 billion
— Projected budget gap for New York State in fiscal years 2023 and 2024.
$13 billion
— Projected budget gap for New York State in fiscal year 2021.
$61 billion
— Amount of additional federal aid requested by New York State beyond what is needed to respond to the pandemic.
4.9 percent
— Reduction in State operations spending included in the Gap-Closing Plan.
New York State faced a $7 billion budget gap before the pandemic, which grew significantly due to revenue losses and unanticipated spending. The enacted budget relies on short-term borrowing and lacks sufficient transparency in its new midyear modification process, necessitating better contingency planning and fiscal restraint.
Recommendations related to Out-Year State Budget Gaps
The Executive should make its plan publicly available so that the Legislature and public can review and debate the budget modification process.
The Legislature should generate its own contingency plans as soon as possible to productively respond to potential budget shortfalls.
The State should avoid using long-term debt for operating purposes, as this obligates future generations to pay for today’s services.
The State should address the underlying structural Medicaid problem without harming the health system’s ability to respond to the pandemic.
The State should ensure that the new budget modification process is rectified in practice to include sufficient transparency and accountability.
Key Data
$7 billion
— The budget gap faced by New York State even before the current economic disruption.
$15 billion
— The high estimate of revenue loss in the current fiscal year due to economic disruption.
$1.1 billion
— The amount of increased federal aid provided for education in fiscal year 2021.
$4.5 billion
— The amount of increased federal aid provided for Medicaid in fiscal year 2021.
$250 million
— The cost of support for distressed hospitals that was shifted to local governments.
$8 billion
— The amount of short-term borrowing authorized to cover liquidity needs due to the extension of the income tax filing deadline.
New York State faces significant budget gaps totaling $38.6 billion over five years, driven largely by previously unbudgeted Medicaid spending. To address these challenges, the state should prioritize spending restraint, particularly in Medicaid and education aid, while avoiding tax increases and bolstering rainy day reserves to prepare for potential economic downturns.
Recommendations related to Out-Year State Budget Gaps
The State should implement Medicaid spending control that does not shift costs to local government to address the primary driver of the budget gap.
Legislators should limit increases in education aid to those needed to fund a sound basic education and target these funds only to underfunded districts.
The State must increase deposits to rainy day funds to prepare for economic uncertainty and avoid harmful spending cuts during future recessions.
The State should eliminate the annual Medicaid payment deferral to stop papering over fiscal problems.
The State should avoid tax increases to maintain competitiveness and protect New Yorkers.
Key Data
$38.6 billion
— Total budget gaps over five years.
$18.0 billion
— Portion of the five-year budget gap due to previously unbudgeted Medicaid spending.
$7.1 billion
— Budget gap in fiscal year 2021.
$750 million
— Potential savings from limiting school aid increases to high-need districts.
$65.1 billion
— New York State's other postemployment benefits (OPEB) liability in fiscal year 2019.
$28.8 billion is the cumulative four-year budget gap facing New York State between fiscal years 2020 and 2023. CBC President Andrew Rein joined the podcast to explain how the State should get its fiscal house in order. And for a special treat, CBC's Andrew Perry and Ana Champeny discuss regional…
New York faces a significant fiscal challenge with a projected $28.8 billion four-year budget gap, driven by accelerating spending in Medicaid and school aid rather than declining revenues. To address this imbalance, the state should implement structural spending reforms, including targeting education aid to needy districts and reducing unproductive economic development expenditures, rather than increasing taxes.
Recommendations related to Out-Year State Budget Gaps
Reconstitute the Medicaid Redesign Team to identify savings, including policies to address high long-term care costs and to reform the $3.6 billion in Medicaid supplemental payments so they are better directed to safety net hospitals in need.
The Executive, with the support of the Legislature, should exercise powers granted under the Medicaid global cap to prevent Medicaid spending from exceeding budgeted amounts in future periods.
Focus education aid on needy districts to fund fully a sound basic education, as last year spending increased $800 million more than the amount needed for each district to do so.
Reduce unproductive economic development program spending, as New York spends more than $4.4 billion annually with little evidence that many of these investments produce results.
Consider reforms to retiree health benefits that were proposed repeatedly in recent Executive Budgets to significantly reduce post-employment benefit costs and future liabilities.
Key Data
$28.8 Billion
— The actual four-year budget gap facing New York State.
$6.1 Billion
— The reported budget gap for the next fiscal year.
$12.5 Billion
— The amount of previously unbudgeted Medicaid spending contributing to the total four-year State budget gap.
$1.6 Billion
— State school aid received by wealthy districts with sufficient local resources to provide a sound basic education in school year 2017-2018.
$4.4 Billion
— Annual spending on economic development programs, which often lack evidence of producing results.
$35 Billion
— The potential revenue shortfall from a recession that could be added to the identified budget gaps.
WFXV Eyewitness News A mid-year New York State budget update shows a $6.1 billion gap estimated in Fiscal Year 2021 and even higher deficits projected in the following years.
New York State's fiscal year 2020 midyear update reveals a $14.5 billion increase in the four-year budget gap, driven largely by $4 billion in previously unbudgeted Medicaid spending for 2020 and up to $4 billion annually thereafter. To address this structural deficit, the state must look beyond Medicaid and reform other areas, such as mistargeted school aid and unproductive economic development programs, rather than relying on payment deferrals and delays.
Recommendations related to Out-Year State Budget Gaps
The State should develop and implement a plan to solve the entire budget problem rather than relying solely on the Medicaid program.
The State should consider other portions of the budget to address the budget gap, including mistargeted school aid and unproductive economic development programs.
Key Data
$4 billion
— Previously unbudgeted Medicaid spending added to the fiscal year 2020 financial plan.
$3 billion to $4 billion
— Previously unbudgeted Medicaid spending added to the financial plan annually after fiscal year 2020.
$14.5 billion
— Increase to the four-year budget gap resulting from the recognition of unbudgeted Medicaid spending.
$2 billion
— Amount of the permanent payment deferral the State will make to address the budget gap.
New York State's financial plan understates Medicaid costs by over $9 billion, leading to significant budget gaps in future years. To address this, the state must stop delaying payments and implement specific, multi-year savings plans to reduce spending in Medicaid, school aid, and economic development.
Recommendations related to Out-Year State Budget Gaps
The Mid-Year Update should identify multiyear savings targets, approaches to make programmatic changes, and programs to target.
The Fiscal Year 2021 Executive Budget should not delay payments to forestall a more serious reckoning.
The budget should include the cost of the delayed fiscal year 2019 payment and a full year of Medicaid payments for fiscal year 2020 to realign with fiscal reality.
A multiyear plan should include actions that would slow the rapid growth in school aid by better targeting aid to needy districts and cut wasteful economic development spending.
The financial plan should reflect increased annual spending and concurrent increases to out-year deficits over the previous financial plan.
Key Data
$9 billion
— Cumulative total by which the State financial plan understates Medicaid costs over four years.
$1.7 billion
— Amount of Medicaid payments the State delayed from fiscal year 2019 into fiscal year 2020.
$3 billion to $4 billion
— Estimated State share gap in fiscal year 2020.
$2.0 billion
— Amount of savings expected in FY 2020 from adjusting the timing of payments.
$3.5 billion
— Amount that would be added to State Operating Funds spending in fiscal year 2020 if the budget included the cost of the delayed fiscal year 2019 payment and a full year of Medicaid payments.
New York State's financial plan understates Medicaid costs by billions of dollars due to payment deferrals, resulting in projected budget gaps that grow to $6.6 billion by fiscal year 2023. To address this, the state must align its budget with actual costs by reducing Medicaid spending, slowing school aid growth, and cutting wasteful economic development spending.
Recommendations related to Out-Year State Budget Gaps
The State should not continue to obscure the true cost of Medicaid or financial plan spending obligations.
The State should align the budget with actual costs.
Alignment likely requires substantial reductions in spending by reinvigorating the previously successful Medicaid Redesign Team.
The State should slow the rapid growth in school aid by better targeting aid to needy districts.
The State should cut wasteful economic development spending.
Key Data
$1.7 billion
— The amount of State funds deferred from fiscal year 2019 to fiscal year 2020.
$9 billion
— The cumulative total by which the State's financial plan understates Medicaid costs.
$3.5 billion
— The projected budget gap in fiscal year 2020 after accounting for deferred payments and re-based Medicaid costs.
$6.6 billion
— The projected budget gap in fiscal year 2023 after accounting for deferred payments and re-based Medicaid costs.
$800 million
— The amount by which the State increased education aid in fiscal year 2020 more than was necessary to fund a sound basic education.
$21.8 billion
— The four-year financial plan's cumulative shortfall after accounting for deferred payments and re-based Medicaid costs.
New York State's fiscal plan fails to account for a Medicaid funding shortfall that adds over $7 billion in unrecognized expenses to the budget, increasing the projected four-year cumulative gap from $12.8 billion to more than $20 billion. To address this, the state must provide an accurate financial picture and implement spending reductions, including controlling Medicaid costs, targeting school aid to needy districts, and cutting wasteful economic development spending.
Recommendations related to Out-Year State Budget Gaps
The State should provide a clear, accurate financial picture and take actions to reduce spending to bring the State’s finances into balance.
The State should reinvigorate the previously successful Medicaid Redesign Team efforts to control costs.
The State should slow the rapid growth in school aid by better targeting aid to needy districts.
The State should cut wasteful economic development spending.
Key Data
$7 billion
— The amount the State will be short of what it needs to pay its budgeted obligations over the next four years.
$12.8 billion
— The cumulative budget gap already projected by the State’s most recent financial plan.
$3 billion
— The Medicaid State funding shortfall in the current year.
$1.5 billion
— The Medicaid State funding shortfall annually thereafter.
$20 billion
— The cumulative four-year projected State budget gaps after accounting for the Medicaid shortfall.
The Metropolitan Transportation Authority's 2020-2023 Financial Plan projects significant out-year cash deficits, reaching a cumulative total of $740 million by 2023. These financial shortfalls could increase further if anticipated savings from the Budget Reduction Program and the Transformation Plan fail to materialize.
Key Data
$740 million
— cumulative cash deficit projected for the MTA by 2023 in the 2020-2023 Financial Plan.
New York State faces significant fiscal risk from a potential recession, with projected three-year cumulative tax revenue shortfalls reaching $34.1 billion and budget gaps widening to $14.8 billion in the second year. To mitigate these risks, the state must reduce operating spending growth to 2 percent and increase rainy day fund deposits, as current reserves are insufficient to cover the projected deficits.
Recommendations related to Out-Year State Budget Gaps
Final agreement on the Adopted Budget for Fiscal Year 2020 should constrain spending growth and make additional deposits to rainy day funds.
State leaders should reduce spending growth to at most 2 percent and increase reserves.
Larger deposits are required to forestall drastic service cuts, which would be made when New Yorkers need services most, and to prevent counterproductive tax increases in the midst of a recession.
The state should amend statute (92-CC of the state finance law) to allow for deposits of more than 0.5 percent of general fund expenditures.
Key Data
$34.1 billion
— Three-year cumulative tax revenue shortfalls resulting from a hypothetical recession beginning in fiscal year 2021.
$15 billion
— Potential growth of the fiscal year 2022 budget gap.
$33.4 billion
— Amount of budget gaps that would need to be closed by other actions, as current reserves cover less than 7 percent.
$2.5 billion
— Total projected balance of the rainy day funds at the end of fiscal year 2020.
$2.6 billion
— Amount by which current-year personal income tax collections were lower than projected.
$22 billion and $44 billion
— Range of potential revenue impact below projections over three years from a potential recession.
New York State faces a $2.3 billion revenue shortfall driven by federal tax changes and economic volatility, necessitating immediate action to close budget gaps. To improve long-term fiscal health, the state should limit spending growth, repeal expiring tax credits, and redirect unused settlement funds into rainy day reserves.
Recommendations related to Out-Year State Budget Gaps
The State should restrain spending growth, avoid one-shot gap-closing actions, and bolster its rainy day funds.
The State should hold spending growth to 2 percent, which would save $1.45 billion in fiscal year 2020.
The State should increase education aid only to those districts that need additional State resources to fund a sound basic education as defined by the Foundation Aid formula.
The property tax relief credit set to expire after calendar year 2019 should be repealed to reduce the fiscal year 2020 deficit by more than $1 billion.
The State should resist short-term solutions, such as deferring retirement systems payments or business tax credits, which only exacerbate future deficits.
The State should eliminate the appropriations connected to settlement funds and dedicate them to rainy day funds to double the State’s rainy day reserves.
Key Data
$2.3 billion
— Reported shortfall in January personal income tax collections.
2 percent
— Proposed limit on annual spending growth to help close budget gaps.
$1.45 billion
— Potential savings in fiscal year 2020 from holding spending growth to 2 percent.
$500 million
— Potential savings from limiting education aid increases to districts that need additional resources.
$1 billion
— Deficit reduction in fiscal year 2020 if the property tax relief credit is repealed.
$2.9 billion
— Total value of allocated but unused settlement funds that could be redirected to rainy day reserves.
The Governor's proposal to rely on $3 billion in speculative health insurer conversion revenue to balance the budget is imprudent, as these funds are finite and irregular. Using such nonrecurring windfalls to pay for ongoing Medicaid costs will likely create or increase future budget gaps rather than providing a stable financial foundation.
Recommendations related to Out-Year State Budget Gaps
The State budget and financial plan should not depend on $2 billion from this precarious source.
Any proceeds earned by the State should not be used for multiyear budget balancing.
These revenues are episodic and finite and should be used to bolster reserves or fund one-time costs after proceeds are received by the State.
Key Data
$3 billion–$750 million
— Proposed annual revenue from health insurer conversions in the Executive Budget.
$4.6 billion
— Total proceeds generated by the Empire conversion from fiscal year 2006 to fiscal year 2010.
$95 million
— Actual revenue received by the State from fiscal year 2009 to fiscal year 2012, despite a $2.4 billion projection.
$3.75 billion
— Publicized price for the acquisition of Fidelis by Centene.
$500 million
— Annual amount of conversion revenue proposed to be used to pay for the Medicaid program.
New York is facing one of its largest budget shortfalls in nearly a decade this year, and deficits in coming years will get larger and larger -- making life more challenging for lawmakers and Governor Andrew Cuomo. Watch the original segment here .
The federal tax overhaul passed last month may have enormous impacts in New York and could upend the relationship between the federal government and the states. CBC and the CUNY Graduate School of Journalism gathered experts to assess the impact and potential city and state responses in a special half-day…
New York State's fiscal year 2019 budget relies on short-term fixes and speculative revenues rather than addressing the structural issue of spending outpacing income. These temporary measures, including tax credit deferrals, fail to solve long-term fiscal imbalances and risk creating larger budget gaps in future years.
Recommendations related to Out-Year State Budget Gaps
The Governor and Legislature need to adopt significant reforms to the State's economic development program.
The budget should be conservative in its forecasts and include spending constraints if threats to federal revenue for Medicaid and other programs are real.
The state should implement fundamental reforms to the Foundation Aid Formula to address the flawed distribution of education aid.
Key Data
$3 billion
— Revenue attributed to non-profit health insurers converting to for-profit status included in the financial plan.
$850 million
— Threshold for federal Medicaid revenue decline that would trigger state spending cuts.
$82 million
— Liability shifted out of fiscal year 2019 due to the deferral of business tax credits.
$300 million
— Proposed spending for the High Technology Innovation and Economic Development Infrastructure Program.
$600 million
— Proposed spending for a life sciences laboratory in the Capital District.
$2 billion
— Amount the operating budget will be short if health insurance conversion revenue assumptions are not met.
The state faces significant fiscal challenges in the coming year amid changes on the federal level. In 2018, the state is estimated to have a budget deficit of as much as $4.6 billion. CBC's Director of State Studies David Friedfel joined Elizabeth Benjamin on Spectrum News's Capital Tonight to talk…
New York State faces a projected budget gap between $4.4 billion and $6.3 billion, necessitating difficult decisions regarding spending and revenue in the upcoming fiscal year. Policymakers must address these shortfalls while navigating potential federal funding cuts and the need for structural reforms to ensure long-term fiscal stability.
Recommendations related to Out-Year State Budget Gaps
The state should end the poor use of state funds by discontinuing Property Tax Relief rebates.
The Governor should direct limited resources to the highest needs districts by making substantive changes to the $17 billion Foundation Aid formula.
The Legislature should add one more hearing to hear and inquire about the state budget overall.
The Governor should propose economic development reforms, including an end to project-specific appropriations and the creation of a 'database of deals'.
The state should target other aid types for needed reform or repeal in order to keep spending growth in check.
Key Data
$4.4 billion and $6.3 billion
— The reported budget gap before accounting for potential federal policy changes.
$1.2 billion
— The projected cost of Property Tax Relief rebates in state fiscal year 2019.
$1.6 billion
— The surplus expected in fiscal year 2019 when Property Tax Relief rebates were originally adopted in 2015.
$236 million
— The projected reduction in State revenues from income tax cuts in fiscal year 2018.
$1.1 billion
— The projected reduction in State revenues from income tax cuts in fiscal year 2019.
$98 million
— The surplus forecasted in fiscal year 2019 when income tax cuts were adopted as part of the fiscal year 2017 budget.
The state should veto numerous bills that expand government employee and retiree benefits, as these measures would erode the fiscal savings achieved through Tier 6 pension reforms. These proposed benefit increases, including enhanced retirement and disability packages, threaten the state's long-term fiscal restraint and financial stability.
Recommendations related to Out-Year State Budget Gaps
The Governor should veto A711B/S1411B, which provides an expensive enhancement to volunteer firefighter benefits.
The Governor should veto the 15 other bills passed by the legislature that provide expensive enhancements to government employee and retiree benefits.
The Governor should reject these bills to preserve the fiscal restraint sought over the last six and a half years.
The Governor should veto these measures to prevent the erosion of savings that New York State and its localities experience from the implementation of Tier 6.
Key Data
$13.7 million
— Past service costs associated with A5133a/S4077, which would enhance death benefits for State correction officers who are retirement eligible but die before retiring.
$8.9 million
— Immediate past-service cost for A7185A/S5484A, which provides a special accidental death benefit for uniformed New York City sanitation employees.
$6.8 million
— Annual cost to New York City for A7185A/S5484A, which provides a special accidental death benefit for uniformed New York City sanitation employees.
$1.75 million
— Immediate past service cost for A7135/S5704, which would increase disability benefits for various ambulance medical technician titles within Nassau County.
$1.15 million
— Past-service costs for A7134/S5130, which would increase disability payments for Nassau County sheriffs, deputy sheriffs, under sheriffs, and correction officers injured by a civilian.
$394,000
— Past service costs for A3332/S3670, which would allow Tier 6 uniformed court officers and peace officers to retire early.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York State's fiscal year 2018 executive budget proposals include $15.5 Billion in new spending initiatives, raising concerns about how the state will address its projected $3.5 Billion budget gap. Questions remain regarding whether the administration will implement necessary reforms to education aid and Medicaid cost-containment to manage these fiscal pressures.
Key Data
$3.5 Billion
— Projected budget gap as of November.
$15.5 Billion
— Total cost of items with fiscal impact included in the executive budget proposals.
$2 Billion
— Cost allocated for Clean Water Infrastructure.
New York State's out-year budget gaps are expanding significantly, with the fiscal year 2020 deficit growing by nearly $1.4 billion to reach $8.9 billion. This deterioration in the financial outlook is driven by declining tax revenue projections and rising costs, including those associated with minimum wage increases and collective bargaining agreements.
Key Data
$3.5 billion
— The projected fiscal year 2018 budget gap.
$7.1 billion
— The projected fiscal year 2019 budget gap.
$8.9 billion
— The projected fiscal year 2020 budget gap.
$295 million
— The growth in the fiscal year 2018 budget gap since the first quarter update.
$1 billion
— The growth in the fiscal year 2019 budget gap since the first quarter update.
$1.4 billion
— The growth in the fiscal year 2020 budget gap since the first quarter update.
New York State's projected budget deficits have consistently grown with each financial plan update, with the fiscal year 2018 gap rising to $3.2 billion by August 2016. Factors such as slowing tax collections, recurring legislative spending, and new collective bargaining agreements threaten to push the 2018 deficit above $4 billion.
Recommendations related to Out-Year State Budget Gaps
The State should fully evaluate economic development spending and cut less desirable projects.
The financial plan should accommodate raises without increasing total personnel costs.
The State should identify and include savings from healthcare cost reduction plans in the financial update.
The State should continue to slow the growth in Medicaid spending even as enrollment increases.
Key Data
$497 million
— Decrease in fiscal year tax revenue projections in May.
$626 million
— Additional decrease in fiscal year tax revenue projections in August.
$423 million
— Amount personal income tax collections fell short of projections through September.
$338 million
— Amount total receipts were below updated projections.
$260 million
— Increase in personnel costs in 2017 due to collective bargaining agreements.
$520 million
— Increase in personnel costs in 2018 due to collective bargaining agreements.
A potential future recession could cause a cumulative revenue shortfall of up to $59 billion for New York State over four years, representing 18.2 percent of projected tax revenues. To mitigate the necessity of future tax increases or spending cuts, the state should prioritize building financial reserves immediately.
Recommendations related to Out-Year State Budget Gaps
In order to counter the potential impacts of an economic downturn, the State should build its reserves now.
Key Data
$59 billion
— The potential cumulative revenue shortfall over four years if a recession of the size and scope of the 2009-2012 period were to repeat.
18.2 percent
— The percentage of tax revenues that could be lost over four years in the event of a recession similar to the 2009-2012 period.
$2.6 billion
— The reported out-year deficit for fiscal year 2017 in the State's 2017 Adopted Financial Plan.
$5.5 billion
— The reported out-year deficit for fiscal year 2018 in the State's 2017 Adopted Financial Plan.
$6.9 billion
— The reported out-year deficit for fiscal year 2019 in the State's 2017 Adopted Financial Plan.
$3 billion
— The approximate annual revenue provided by the current personal income tax surcharge set to expire on December 31, 2017.
The 2016-17 state budget agreement relies on optimistic economic growth projections to manage significant out-year deficits, necessitating future spending cuts or tax increases. Despite these fiscal challenges, the budget includes substantial increases in education and Medicaid spending, alongside tax cuts that will reduce annual revenue by billions.
Recommendations related to Out-Year State Budget Gaps
The state should rationalize retiree health insurance shares to help secure the state's financial future.
Policymakers should cap STAR benefits to improve the long-term fiscal outlook.
The state should extend rational funding plans for SUNY and CUNY to ensure sustainable financial management.
To balance the financial plan, the state must hold the line on agency spending.
The state should extend the personal income tax surcharge on high-income earners to address projected deficits.
Key Data
$1.2 billion
— Projected state budget deficit for fiscal year 2018.
$3 billion
— Projected state budget deficit for fiscal year 2019.
$3.4 billion
— Projected state budget deficit for fiscal year 2020.
$24.8 billion
— Total state education spending, which grew by 6.5 percent.
$4.2 billion
— Annual savings for taxpayers by 2025 resulting from personal income tax decreases.
$54 billion
— Total value of the five-year transportation capital plan.
The fiscal year 2017 New York State budget prioritizes spending over fiscal discipline, with school aid and Medicaid growing by 6.5% and 3.4%, respectively. Furthermore, planned tax cuts starting in 2018 and significant capital investments in projects like the $1.3 Billion nanotechnology subsidies threaten to exacerbate future out-year budget gaps.
Recommendations related to Out-Year State Budget Gaps
The State should pursue the reauthorization of a rational tuition policy for SUNY and CUNY to improve long-term fiscal stability.
The State should move toward freezing the poorly targeted School Tax Relief (STAR) program to reduce unnecessary expenditures.
The State should commit to reforming retiree health benefits in a responsible and sustainable manner to mitigate future budget pressures.
Key Data
2%
— The limit on State operating fund growth.
6.5%
— The growth rate of school aid in the fiscal year 2017 budget.
3.4%
— The growth rate of Medicaid spending in the fiscal year 2017 budget.
$1.3 Billion
— The amount allocated for subsidies for nanotechnology and high-tech manufacturing.
$1 Billion
— The funding provided for the Jacob Javits Center expansion.
$300 Million
— The investment designated for a research corridor on Long Island.
The Governor's Executive Budget for fiscal year 2017 faces significant challenges, with general fund budget gaps projected to grow from $1.1 billion to $3.6 billion between fiscal years 2018 and 2020. To address these fiscal pressures, the state must maintain strict spending discipline and reject unnecessary economic development spending and tax credits that exacerbate long-term liabilities.
Recommendations related to Out-Year State Budget Gaps
The state should maintain continued spending discipline to avoid projected general fund budget gaps growing from $1.1 billion to $3.6 billion in fiscal years 2018 to 2020.
The state should reject the use of one-time financial settlements to support ongoing operating expenses, instead using these funds for long-term benefits like capital investments or debt payments.
The state should declare a moratorium on expansions in economic development spending until the benefits of existing programs can be examined carefully and unsuccessful programs terminated.
The state should reject the Education Scholarship and Program Tax Credit (ESPTC), as it is an inappropriate and unnecessary subsidy to private and parochial schools.
The state should reject the Thruway Toll Tax Credit (TTTC), as it would encourage additional driving and put further stress on the Thruway’s infrastructure.
Key Data
$1.1 billion to $3.6 billion
— Projected growth of general fund budget gaps in fiscal years 2018 to 2020 without specified savings.
$2.5 billion
— The amount of one-time financial settlements the state currently holds.
$2.3 billion
— The amount of expenses shifted from the State to New York City over three years through CUNY and Medicaid proposals.
$600 million
— The amount of sales tax revenue shifted from New York City to the State over three years through the Sales Tax Asset Receivable Corporation.
$1 billion
— The amount of additional spending for economic development proposed in the Executive Budget.
$340 million
— The cost of the proposed Thruway Toll Tax Credit.
New York State has committed to nearly $1.5 billion in new annual spending obligations, including a property tax relief rebate program, despite facing projected out-year budget gaps that are expected to reach $4.2 billion by fiscal year 2018-2019. Lawmakers must now implement significant cost-saving measures to address these deficits, as the projected surpluses used to justify this new spending rely on unrealistic constraints on overall state spending growth.
Recommendations related to Out-Year State Budget Gaps
Lawmakers must be prepared to enact cost-saving measures to produce the surpluses they just spent.
Key Data
$1.5 billion
— New state obligations annually.
$8.4 million
— Funding for the State Education Department to print more versions of state exams.
$25 million
— Funding for the Yonkers school district.
$19 million
— Funding to address economic hardship in municipalities with fossil fuel plant closures.
$6 million
— Funding for an anti-poverty initiative in Rochester.
$250 million
— Increase in aid to nonpublic schools.
New York's fiscal outlook has improved significantly, with cumulative budget gaps over the four-year financial plan dropping from $64.5 billion in 2011 to $14.2 billion in the current budget. To maintain this progress, the state must avoid new, large unfunded commitments and ensure that one-time settlement funds are used for investments that yield long-term returns rather than recurring expenses.
Recommendations related to Out-Year State Budget Gaps
The state should maintain disciplined spending growth by adhering to the 2 percent spending cap to manage the fiscal outlook.
New York should reject the proposal to defer pension fund contributions, as the state's fiscal circumstances have improved and it is currently awash in surplus resources.
The state should modify the use of bank settlement funds to focus on high-yield investments that provide a long-run return for taxpayers, rather than funding projects of dubious value.
Policymakers should reject excessive economic development spending and declare a moratorium on expansions until the benefits of existing programs can be carefully examined.
The state should repurpose existing resources to provide more targeted property tax relief rather than creating large, new unfunded commitments like the proposed "circuit breaker" credit.
Key Data
$64.5 billion
— Cumulative budget gaps over the four-year financial plan in January 2011.
$14.2 billion
— Cumulative budget gaps over the four-year financial plan in the current budget.
$3.2 billion
— Amount of required payments to state employee pension funds that will have been deferred by the end of the current fiscal year.
$395 million
— Additional borrowing from pension funds proposed in the fiscal year 2016 Executive Budget.
$1.7 billion
— Cost of the proposed "circuit breaker" property tax credit when fully phased in.
$5.4 billion
— Amount in settlements with banks for regulatory violations that New York benefits from this year.
The fiscal year 2016 executive budget masks a $1.8 billion baseline gap by relying on placeholder savings and one-time resources, while failing to address potential future deficits created by expiring tax policies. Viable financing plans are required to address the significant funding shortfalls facing the MTA and Thruway Authority capital programs.
Recommendations related to Out-Year State Budget Gaps
It is time to overhaul antiquated and byzantine school aid formulas to ensure funding flows according to need and district ability to pay.
Viable financing plans are imperative for both the MTA and Thruway Authority to address the gigantic holes in their capital plans.
The state should make design-build permanent and expand it to all State agencies to reduce construction costs.
The state must develop viable capital plans for the Thruway Authority and the MTA to ensure the proposed allocation of settlement funds pays off.
Key Data
$1.8 billion
— The true baseline gap in the FY2016 financial plan.
$92 million
— Savings achieved by holding state agency spending flat.
$1.4 billion
— Amount subtracted from planned spending in local government assistance to close the budget gap.
$373 million
— Resources provided by the use of prior year surplus.
$121 million
— Resources provided by capital and debt management initiatives.
$1.3 billion
— Funds from bank settlements proposed for the Thruway Authority for the new Tappan Zee Bridge and other needs.
New York State's fiscal condition has improved significantly, with projected cumulative budget gaps over the four-year financial plan falling from $64.5 billion in 2011 to $14.2 billion in the 2016 Executive Budget. However, the financial plan relies on aspirational surpluses and continued pension payment deferrals, necessitating caution against adopting large, long-term spending commitments or tax reductions.
Recommendations related to Out-Year State Budget Gaps
The Legislature should understand the aspirational aspect of the financial plan and refrain from adopting large, long-term spending commitments or tax reductions.
The State should repay all outstanding liabilities related to pension payment deferrals.
The State should target the increase in school aid to the neediest districts and make allocation details available to the public for review and analysis well in advance of budget adoption.
The State should invest the $1.5 billion in one-time settlement funds in infrastructure needs rather than economic development.
The State should permanently extend design-build authority to all state agencies to produce better-designed and lower-cost projects.
Key Data
$64.5 billion
— Cumulative budget gaps over the four-year financial plan projected in January 2011.
$14.2 billion
— Cumulative budget gaps over the four-year financial plan in the fiscal year 2016 budget.
$3.2 billion
— Required pension payments deferred by the State by the end of the current fiscal year.
$395 million
— Additional borrowing of required pension payments proposed in the fiscal year 2016 budget.
$1.7 billion
— Phased-in income tax credit program proposed against the assumed surplus.
$1.5 billion
— One-time bank settlement funds proposed for the Upstate Revitalization fund.
New York State's financial plans rely on aspirational surpluses that mask significant underlying budget gaps, which are projected to reach $4 billion by fiscal year 2018. Meeting the state's 2 percent spending growth target requires difficult reductions in spending across agencies and programs, particularly as major costs like school aid and Medicaid continue to rise.
Recommendations related to Out-Year State Budget Gaps
Agencies and state-funded programs must be tasked with bringing spending growth down to make projected surpluses a reality.
Savings in every area should be under consideration before new commitments are made.
Key Data
$4.0 billion
— Projected budget gap in fiscal year 2018.
$1.8 billion
— Projected budget gap in fiscal year 2016.
$5.5 billion
— Reductions in projected growth required in fiscal year 2018 to close budget gaps and produce surpluses.
$2.1 billion
— Reductions in projected growth required in fiscal year 2016 to close budget gaps and produce surpluses.
7.5%
— Projected increase for school aid in the next fiscal year.
3.6%
— Projected Medicaid growth in the next fiscal year.
New York State faces growing budget gaps reaching $3.4 billion by fiscal year 2018, which are currently masked by unrealistic projections of unspecified future savings. To maintain the state's 2 percent spending cap, officials must replace these accounting placeholders with concrete savings plans and transparent financial reporting.
Recommendations related to Out-Year State Budget Gaps
The State must close projected budget gaps with concrete savings plans rather than relying on unspecified future savings.
State officials should reform overly rich reimbursement formulas for functions such as transportation and capital construction to achieve baseline reductions in school aid.
Policymakers should better target school aid resources to the neediest districts to help achieve baseline reductions.
The State should return to a straightforward and transparent financial plan that clearly displays the baseline budget gaps resulting from current budget actions.
Key Data
$3.4 billion
— Projected budget gap by fiscal year 2018.
$4.9 billion
— Amount of unspecified future savings used to plug gaps in fiscal year 2018.
16 percent
— Projected growth for school aid, Medicaid, pension contributions, and debt service from fiscal years 2015 to 2018.
$7.6 billion
— Amount of new bond authorizations included in the adopted budget.
42 percent
— Portion of the state operating fund budget comprised by school aid and Medicaid.
$8 billion
— Amount of federal funds the Department of Health plans to distribute over five years from a Medicaid waiver.
New York's fiscal plan relies on unspecified spending reductions of up to $3.6 billion to achieve a projected $2 billion surplus, masking underlying budget gaps that would otherwise range from $1.5 billion to $3.5 billion. Achieving this surplus requires maintaining state operating fund growth at or below 2 percent, a difficult task given that major expenses like school aid and Medicaid are growing at nearly double that rate.
Recommendations related to Out-Year State Budget Gaps
The state must replace the reliance on placeholders with concrete plans to achieve the unspecified spending reductions of $1.7 billion, $2.4 billion, and $3.6 billion in the out-years.
The legislature and the Governor must collaborate to keep state operating fund growth at 2 percent or less to ensure the projected surplus becomes a reality.
Key Data
$2 billion
— Projected annual surplus beginning in fiscal year 2016-17.
$1.7 billion
— Unspecified spending reduction placeholder for fiscal year 2015-16.
$2.4 billion
— Unspecified spending reduction placeholder for fiscal year 2016-17.
$3.6 billion
— Unspecified spending reduction placeholder for fiscal year 2017-18.
$1.5 billion
— Projected budget gap in fiscal year 2015-16 without the inclusion of placeholder savings.
$3.5 billion
— Projected budget gap in fiscal year 2017-18 without the inclusion of placeholder savings.
New York State faces significant challenges in achieving a projected $2.4 billion surplus, as capping annual spending growth at 2% requires deep cuts to agency operations and local assistance programs. Because Medicaid and school aid are statutorily capped at higher growth rates, other areas of the budget must bear the brunt of these reductions to avoid future deficits.
Recommendations related to Out-Year State Budget Gaps
The State must exercise continued discipline and serious efforts at agency reform and redesign to keep State Operating Funds spending growth under 2 percent.
Policymakers should curtail expectations for growth in other local government assistance to align with the goal of limiting overall spending growth.
The State must rein in the expectations of legislators and interest groups that growth in state spending is necessary, even when discussing potential surpluses.
To achieve the 2 percent spending growth goal, the State must make offsetting reductions to agency operations because Medicaid and school aid are growing at higher rates.
Key Data
$2 billion
— Tax cuts proposed by Governor Cuomo in his State of the State address.
$2.4 billion
— Surplus to be generated if State Operating Funds spending growth is held to 2 percent.
$101.5 billion
— Projected State Operating Funds spending in fiscal year 2016-17.
$1.6 billion
— Budget gap projected for fiscal year 2014-15.
$2.7 billion
— Budget gap projected for fiscal year 2015-16.
40 percent
— Portion of total State Operating Funds spending comprised by Medicaid and school aid.
New York State faces growing fiscal challenges, with projected budget gaps expanding from $2 billion to $3 billion by fiscal year 2016-17 due to spending outpacing revenue growth. To address these pressures, the state should prioritize reforming existing tax relief programs like STAR and the Family Tax Relief Rebate rather than creating new, costly initiatives.
Recommendations related to Out-Year State Budget Gaps
The Commission should focus on repurposing and improving the significant sums already directed to local tax relief, rather than spending for new programs.
The Commission should re-examine and reform the local tax relief programs on which the State already spends $4 billion annually.
The Commission could achieve its objective by better targeting STAR aid and the Family Tax Relief rebate and by expanding the Real Property Tax Credit to provide deeper relief for low and moderate income households.
Key Data
$2 to $3 billion
— Projected out-year budget gaps by fiscal year 2016-17.
$4 billion
— Annual state spending on local tax relief programs.
$3.4 billion
— Cost of the STAR program in fiscal year 2014.
$410 million
— Amount allocated for Family Tax Relief rebates.
$20.2 million
— Amount provided by the circuit breaker credit to 209,691 taxpayers.
Expanding universal prekindergarten to all three- and four-year-olds in New York would require significant new expenditures, potentially adding up to $4 billion to the state's $51 billion public education budget. This expansion would place a substantial fiscal burden on the state, which is already facing structural budget gaps projected to grow from $1.7 billion to $3.0 billion by fiscal year 2017-18.
Recommendations related to Out-Year State Budget Gaps
New York’s leaders should review the history of pre-k expansion efforts and take stock of some key realities before raising public expectations.
Policymakers should recognize that calling the current pre-k program 'universal' does not make it so.
The state should avoid underfunding services for those students who could benefit most for the sake of achieving universality.
Leaders must acknowledge that adding as much as $4 billion to the $51 billion cost of public education would impose a significant new fiscal burden on already highly taxed New Yorkers.
Key Data
$1.7 to $3.0 billion
— Projected growth of structural budget gaps by fiscal year 2017-18.
$4 billion
— Estimated cost to make pre-k both richly-resourced and fully universal.
$2.2 billion
— Cumulative reductions in education aid for K-12 endured by school districts from peak to trough.
$80.60
— Local tax burden per $1,000 of personal income in New York.
$51 billion
— Total cost of public education in New York State.
The fiscal year 2014 budget added $1.8 billion in annual commitments by its final year, relying on tax increases and one-time accounting shifts that exacerbate future budget gaps. These spending increases and tax breaks significantly widened projected deficits for fiscal years 2015 through 2017, reversing previous efforts to maintain fiscal discipline.
Key Data
$1.8 billion
— annual commitments added by the final year of the financial plan.
$6.0 billion
— projected budget gap for fiscal year 2017 without new ways to pay for added spending and tax breaks.
$1.5 billion
— increase in projected budget gaps for fiscal year 2015.
$1.7 billion
— increase in projected budget gaps for fiscal year 2016.
$1.8 billion
— increase in projected budget gaps for fiscal year 2017.
$677 million
— new business tax breaks committed over three years.
New York faces persistent out-year budget gaps, with a projected shortfall of close to $2 billion in fiscal year 2015-16, making the creation of new rebate and credit programs fiscally irresponsible. Instead of extending the temporary income tax surcharge to fund these programs, the state should allow the tax commission to examine New York’s tax structure as originally planned.
Recommendations related to Out-Year State Budget Gaps
The tax commission should be allowed to do its work and state leaders should reconsider this hastily crafted plan.
New York faces persistent out-year budget gaps that should deter any inclination to spend significant sums.
State leaders should reconsider this hastily crafted plan before the tax changes take effect in fiscal year 2014-15.
Key Data
2%
— Limit on state-funded spending growth for the 3rd consecutive year.
12.7 percent
— State and local income tax rate for high earners in New York City.
$2 billion
— Projected budget gap in fiscal year 2015-16 even if the Governor's proposals were accepted.
3 years
— Duration of the extended temporary personal income tax surcharge.
The New York State Assembly introduced eight bills that would increase public employee pension benefits, adding at least $1.35 billion in costs to state and local employers. The most expensive proposal, A4890, would impose a one-time cost of $1.1 billion by increasing the benefit multiplier for long-term service.
Key Data
$1.35 billion
— The total cost added to state and local employers by the eight bills introduced to enhance pension benefits.
$1.1 billion
— The one-time cost imposed on the State by bill A4890.
1.5 percent to 2 percent
— The proposed increase in the benefit multiplier for final average salary for service rendered after 30 years.
0.2 percent
— The additional annual contribution required to cover members of the Tiers 2, 3 and 4 pension plans under bill A4890.
New York State faces a projected budget gap of $982 million for fiscal year 2013-14, necessitating strategic reforms to maintain fiscal stability. Key priorities include reforming school aid formulas, extending the Medicaid global cap, providing mandate relief to local governments, and freezing economic development spending until better accountability tools are implemented.
Recommendations related to Out-Year State Budget Gaps
State leaders should redesign the school aid formulas to eliminate inequities and reduce reliance on flawed methods like 'hold harmless' provisions.
The Legislature and the governor should extend the Medicaid growth cap for at least five years to help assure realization of savings projections.
Mandate relief needs to be given renewed priority by Governor Cuomo who should press for adoption of the pending proposals in the fiscal year 2013-14 budget.
No additional funds should be authorized for economic development programs until a thorough review of all of them has been conducted.
Key Data
$982 million
— Projected budget gap in fiscal year 2013-14.
$20.1 billion
— Education aid, the largest item in the state budget in the current year.
$1.5 billion
— Amount education aid will grow over the next two years.
$15.9 billion
— Medicaid spending, the second-largest item in the state budget in the current year.
$245 million
— Estimated annual savings from mandate relief proposals left on the table.
$365 million
— New capital grants authorized in the last two budgets for Regional Economic Development Councils.
Deferring pension fund contributions provides temporary budget relief but creates significant long-term financial liabilities for the state. This practice is fiscally imprudent because it increases future costs by adding approximately $1 billion in interest expenses for the state alone.
Recommendations related to Out-Year State Budget Gaps
The state should avoid taking short-run budget relief in exchange for far greater long-run costs as it is not prudent fiscal policy.
Jurisdictions should avoid the comptroller’s amortization plan, which is an expensive way to extend an already “smoothed” payment plan.
Key Data
$1 billion
— total added interest expense for the state alone resulting from the comptroller’s amortization plan
The Metropolitan Transportation Authority faces significant financial instability, with projected deficits reaching billions of dollars under generally accepted accounting principles, necessitating strict control over labor costs. To avoid further fare hikes or service cuts, the agency should pursue a "net-zero" wage increase for transit workers while implementing efficiency measures like merging conductor and train operator roles.
Recommendations related to Out-Year State Budget Gaps
The MTA should implement a "net-zero" wage increase for transit employees to avoid further financial strain.
The MTA should pursue work rule changes, such as merging the positions of "conductor" and "train operator," to improve operational efficiency.
The MTA should increase employee responsibility for health care costs through premium-sharing or salary contributions to align with other public and private sector norms.
The MTA should prioritize the accelerated installation of clear partitions for buses to enhance the safety of transit workers.
The MTA should seek additional productivity concessions to fund any potential wage increases that do not exceed inflation.
Key Data
$720 million
— Projected savings from the MTA's "top-to-bottom" efficiency program in 2012.
$42 million
— The cost increase for every one percentage point wage increase awarded to the TWU.
$1.4 billion
— The total amount expected to be raised from biennial fare increases by 2015.
$256.4 million
— The projected budget gap in 2014 if an award along the lines of projected inflation is granted.
$100,000
— The benefit amount provided to surviving spouses of workers killed on the job.
$3.5 billion
— The projected deficit in 2013 under generally accepted accounting principles (GAAP).
New York faces a structural budget deficit driven by rising costs in pensions, school aid, and Medicaid, necessitating structural reforms rather than reliance on one-time revenue injections or fiscal gimmicks. To achieve long-term sustainability, the state must control spending growth and reevaluate its distribution of school aid and economic development subsidies.
Recommendations related to Out-Year State Budget Gaps
The state should enact a new pension tier for new hires that raises the retirement age and vesting period while reducing pension spiking from overtime.
New York should rejigger school-aid programs to run more efficiently by reopening the basic formulas to address disparities in local districts' wealth and capacities.
Albany must continue curbing growth in Medicaid spending and phase out the inequitable local financing scheme that requires poorer counties to shoulder an unfair share of costs.
The state should resist the temptation for more economic-development spending and instead ensure that existing subsidies are used with transparency and accountability.
Policymakers should reduce reliance on fiscal gimmicks like the deferral of business-tax credits and the amortization of pension payments, which mask the state's structural deficit.
The state should forgo one-shot revenues that disappear in future years, as these cash injections do not address the underlying structural budget gap.
Key Data
$1.7 billion
— The remaining budget gap after the implementation of a tax hike on high earners.
$120 billion
— The projected savings over 30 years resulting from the proposed new pension tier for new hires.
$970 million
— The amount of business-tax credits deferred as a fiscal gimmick to mask the structural deficit.
$782 million
— The amount of pension payments amortized as a fiscal gimmick to mask the structural deficit.
$800 million
— The total amount of one-shot revenues used by the state in the previous year to close budget gaps.
$15 billion
— The total increase in state spending, including federally financed programs, since fiscal year 2008.
New York State faces a $3.2 billion budget gap for the 2012-13 fiscal year, and rather than raising more taxes, the state should focus on structural reforms to control spending. Key strategies include curbing costs in pensions, school aid, and Medicaid, while ending the use of fiscal gimmicks and unnecessary economic development grants.
Recommendations related to Out-Year State Budget Gaps
The State should close the remaining budget gap with structural reform measures that slow down the fastest cost drivers—pensions, school aid, and Medicaid.
The State should implement a pension tier for new hires that increases the retirement age and vesting period and reduces pension spiking from overtime.
The basic formulas by which school aid is distributed should be reopened to address better the great disparities in local districts’ wealth and capacities to fund their schools.
New York’s inequitable local financing scheme for Medicaid should be phased out to reduce the burden on poorer counties.
The State should end the use of fiscal gimmicks, such as the deferral of business tax credits and the amortization of pension payments, while addressing underlying cost drivers.
Key Data
$3.2 billion
— Estimated budget gap in New York State’s fiscal year 2012-13 budget.
$1.9 billion
— Additional annual revenues provided by the overhaul of New York’s tax code.
$1.5 billion
— Amount of new revenue dedicated to closing the budget gap.
$400 million
— Amount of new revenue dedicated to new commitments.
7 percent
— Amount by which New York’s tax base has contracted compared to four years ago.
$4.1 billion
— The value of the 7 percent contraction in the tax base.
The 2011 tax agreement in New York, while increasing the state's reliance on high earners, provides a net gain of $1.9 billion in annual revenue and introduces long-term structural reforms. To ensure fiscal stability, the state must limit budget growth to 2% and implement pension reforms, such as the 'Tier 6' proposal, which is projected to save over $120 billion over the next 30 years.
Recommendations related to Out-Year State Budget Gaps
Next year’s budget should not be allowed to grow more than 2%.
Additional actions should be taken to slow future growth.
Reform the state and local pension system along the lines of the Governor’s “Tier 6” proposal to reduce future pension costs.
Key Data
$1.9 billion
— Net gain in annual revenue over letting the 'millionaire tax' expire.
12.7%
— State and local income tax rate for high earners in New York City.
2%
— Recommended limit for next year's budget growth.
$120 billion
— Projected savings from pension reform over the next 30 years.
New York is halfway to meeting its $2.2 billion Medicaid savings target for fiscal year 2012, but concerns remain regarding the timely implementation of utilization controls and the potential for enrollment spikes to pressure the Global Medicaid Spending Cap. Achieving long-term fiscal discipline requires successfully navigating these challenges, as the state prepares for a second round of comprehensive reforms to address future budget pressures.
Key Data
$2.2 billion
— Budgeted Medicaid savings target for fiscal year 2012.
$1.5 billion
— Provider-led savings target for fiscal year 2013 under the Global Medicaid Spending Cap.
$640 million
— Provider-led savings target for fiscal year 2012 under the Global Medicaid Spending Cap.
$173 million
— Amount by which Medicaid spending was below the threshold in August.
3.6 percent
— Increase in Family Health Plus enrollment since April.
New York State should avoid using temporary mid-year revenue increases for new spending or tax cuts, as the likelihood of a true surplus is low and existing fiscal challenges remain. Instead, any unexpected funds should be prioritized to address nearly $2 billion in fiscal gimmicks and the projected $2.4 billion budget gap for the upcoming fiscal year.
Recommendations related to Out-Year State Budget Gaps
Talk of a surplus and using it for new initiatives should end immediately because the likelihood of any surplus is remote.
Before committing to any new spending or tax reductions, New York should reduce reliance on existing fiscal gimmicks, particularly ones that add to long-term costs.
Any surprise surplus should be used in ways that help lower the upcoming budget gap, such as paying down debt or reversing deferrals, rather than making the gap grow.
The Governor and the Legislature should view any unexpected revenues as a temporary blessing and keep the lid on the piggy bank sealed shut.
The Governor and the unions need to finalize the remaining $377 million in savings from labor to meet the year-end target.
Key Data
$2.4 billion
— The projected budget gap for the upcoming fiscal year.
$2 billion
— The amount of undesirable fiscal gimmicks in the current-year budget.
$377 million
— The remaining savings from labor that the Governor and unions need to finalize.
$799 million
— The amount by which tax collections exceeded original projections for the first quarter of the fiscal year.
$1.2 billion
— The amount by which disbursements came in below projections for the first quarter of the fiscal year.
$174 billion
— The amount of federal income taxes paid by New Yorkers, the second highest of all states.
New York State faces significant budget gaps driven by a shrinking tax base and rising spending, necessitating a shift away from temporary revenue measures and one-time fixes. To achieve long-term fiscal sustainability, the state must restructure spending commitments to align more closely with its actual revenue growth.
Recommendations related to Out-Year State Budget Gaps
It is now time to allow temporary revenue measures to phase out and to begin to restructure spending commitments.
In order to avoid a perpetual reliance on one-shot revenues and tax increases, spending growth must be more closely aligned with long-term revenue growth.
Key Data
$9.5 billion
— Budget gap addressed in the Governor’s plan.
$21.2 billion
— Projected budget gap for the next fiscal year without the inclusion of revenue measures.
$25.8 billion
— Projected increase in state spending in fiscal year 2013-14 compared to fiscal year 2007-08 without new action.
$11.7 billion
— Revenues attributable to actions taken since the start of fiscal year 2008-09.
$19.4 billion
— Total revenue enhancements and temporary revenues currently benefiting the State.
$8.5 billion
— Reduction in base tax collections in the current fiscal year due to the national recession.
New York State's Medicaid program is the most expensive in the nation, with spending per enrollee for elderly and disabled populations nearly double the national average. Despite efforts to contain costs through managed care expansion and hospital reimbursement reforms, Medicaid spending continues to grow, necessitating further examination of cost-containment opportunities.
Recommendations related to Out-Year State Budget Gaps
The state should examine the substantial rates of increase in long-term care spending more closely to isolate their causes and determine whether cost containment and program management actions are warranted.
The state should further analyze the growth in prescription drug spending, particularly given the implementation of the Medicare Part D program and the increased proportion of generic drugs used.
The state should continue to evaluate the effectiveness of budget initiatives implemented since 2008 to reduce the cost base for inpatient hospital services.
Key Data
$50 billion
— Total Medicaid spending in New York State, projected to grow to $53 billion in State Fiscal Year 2010-11.
$8,450
— New York's Medicaid spending per enrollee in Federal Fiscal Year 2007, the second highest nationally.
$1.02 billion
— Annual reported cost savings (State share) from Medicaid fraud, waste, and abuse control activities in State Fiscal Year 2009-10.
26 percent
— Percentage of New Yorkers enrolled in Medicaid in 2007, the fourth highest percentage nationally.
72 percent
— Proportion of total Medicaid expenditures in Federal Fiscal Year 2008 accounted for by elderly, blind, and disabled enrollees in New York.
New York faces a $9 billion budget gap that is projected to grow to $14.6 billion in 2012 as federal stimulus aid and tax surcharges expire. To address these shortfalls, the state must reform spending in school aid, Medicaid, and public employee compensation, which currently exceed national norms.
Recommendations related to Out-Year State Budget Gaps
Aid to the wealthiest school districts, which can raise more than the national average per pupil on their own, should be eliminated.
Greater fiscal discipline is needed regarding Medicaid spending on the elderly and disabled.
Since public employee contracts will expire on March 31, 2011, savings should be negotiated to adjust to new fiscal realities.
Key Data
$9 billion
— The size of the budget gap the new governor must close upon taking office.
$14.6 billion
— The projected budget gap in 2012 following the expiration of federal stimulus aid and the personal income tax surcharge.
$650 million
— The amount of state tax dollars currently allocated to the wealthiest school districts.
72%
— The portion of total Medicaid expenses in New York spent on the elderly and disabled.
New York State leaders are proposing to defer pension contributions to provide short-term budget relief, a strategy that creates significant long-term debt and increases future costs. This approach, combined with the ongoing expansion of public employee benefits, exacerbates the state's existing fiscal challenges and shifts financial burdens onto future taxpayers.
Recommendations related to Out-Year State Budget Gaps
Efforts to please labor unions with benefit sweeteners should be foresworn.
More aggressive plans to provide permanent, long-run savings should be developed.
The state should avoid pushing pension costs onto future taxpayers, as this practice is irresponsible.
Key Data
$1.7 billion
— Taxpayer contribution required to support New York State employee pensions in fiscal year 2010-11.
$3.2 billion
— Taxpayer contribution required to support New York State employee pensions in fiscal year 2013-14.
$4.5 billion
— Estimated cumulative reductions in pension fund contributions over the six-year period from 2010-11 to 2015-16.
$5.8 billion
— Estimated cost to repay the deferred pension loan.
$1.5 billion
— Cost to the State pension funds in fewer total assets by fiscal year 2025-26.
85 percent
— Increase in required taxpayer support for New York State employee pensions from fiscal year 2010-11 to fiscal year 2013-14.
New York City and State face significant fiscal pressure from rapidly growing retirement benefit costs, which are more generous than those provided by other large public and private employers. To address these budget gaps, the state and city should implement structural reforms to health insurance and pension plans, including increasing employee contributions and shifting toward defined contribution models.
Recommendations related to Out-Year State Budget Gaps
Require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
Stop reimbursing retirees for Medicare Part B premiums.
The City and State should seek to place all new workers in defined contribution plans.
Increase required employee contributions.
Raise the minimum age requirement for retirement.
Base pension benefits on the more standard definition of final average salary.
Define work-related disabilities more rigorously.
Eliminate the variable supplements available to some retired New York City uniformed workers.
Key Data
$4.7 Billion
— Projected required pension fund contributions for the City in fiscal year 2008.
$6.3 Billion
— Combined cost of health insurance for the City and State in 2008.
$1.5 Billion
— Combined cost to the City and State of health insurance for retirees in 2004.
43 percent
— Percentage of retired firefighters receiving additional benefits due to a disability deemed to be job related.
28 percent
— Percentage of retired police officers receiving additional benefits due to a disability deemed to be job related.
$12,000
— The amount of the variable supplement for some retired New York City uniformed workers in 2007.
New York faces a projected $12.4 billion budget gap in three years, even if $5 billion in immediate spending reductions are achieved. To address this fiscal challenge without raising taxes, the state must reform spending in Medicaid, education, and employee benefits by eliminating entitlements for those who do not need them.
Recommendations related to Out-Year State Budget Gaps
Albany will need to make cuts to Medicaid soon; restricting access to long-term care benefits so they go only to the truly needy is the place to start.
The state should stop providing aid to wealthy school districts, as that money could be saved, or better spent elsewhere.
To close the budget gap without raising New York’s already high taxes, entitlements must end for those who do not need them.
Key Data
$12.4 billion
— The projected budget gap in three years.
$5 billion
— The amount of spending reductions state leaders need to agree to this year.
70%
— The portion of the state budget accounted for by Medicaid, education, and employee benefits.
$28,754
— The amount spent per pupil in the richest 10% of New York school districts during the 2007-2008 school year.
$3,809
— The amount of state aid provided per pupil to support spending in wealthy school districts.
132%
— The expected increase in pension costs over three years.
New York faces a $7.5 billion budget gap for the 2010-11 fiscal year, necessitating unavoidable reductions in school aid that should be implemented through targeted cuts rather than across-the-board decreases. By reducing state aid to the wealthiest school districts, the state could restore funding to the neediest districts and ensure resources are directed where they are most required.
Recommendations related to Out-Year State Budget Gaps
Harm to the neediest districts could be further minimized by even greater targeting of school aid reductions.
The state should halve the $900 million in state aid provided to the wealthiest districts to restore funding to the six poorest deciles of school districts.
Limited available funding should be targeted to the neediest schools and pupils rather than distributed across-the-board.
Key Data
$7.5 billion
— Estimated budget gap for the 2010-11 fiscal year.
$1.1 billion
— Proposed absolute cut in school aid for the coming year.
$20.5 billion
— Proposed school aid amount for the coming year.
$21.6 billion
— Baseline projected school aid.
$78.4 billion
— Total budget size.
$900 million
— State aid received by the 136 wealthiest districts in the state.
New York City faces a $4.1 billion budget gap for the upcoming fiscal year, while the State struggles with a $6.7 billion deficit that threatens to reduce aid to the City. To address these fiscal challenges, the City should develop realistic contingency plans for potential aid reductions and reform the use of the Retiree Health Benefits Trust rather than treating it as a general rainy day fund.
Recommendations related to Out-Year State Budget Gaps
The City needs a realistic plan for how to deal with inevitable cuts in State aid rather than relying on optimistic projections.
The City should adopt a policy for the Retiree Health Benefits Trust's future use that links withdrawals to growth in the current year liability for retiree health insurance premiums instead of using it as a rainy day fund.
The City should evaluate whether the Department of Education should continue to be exempt from budget cuts given the current fiscal situation.
Key Data
$6.7 billion
— The size of the State budget gap.
$1.3 billion
— The estimated fiscal year 2011 impact of the Executive Budget as a loss of aid to the City.
$4.1 billion
— The gap in the City budget for fiscal year 2010-11.
$2.9 billion
— The surplus generated in the current year to be used for expenses in fiscal year 2010-11.
$241 million
— The amount of new taxes added to next year's revenues.
$1,149 million
— The total amount scheduled to be used from the Retiree Health Benefits Trust in fiscal years 2010 thru 2012.
New York faces a $6.7 billion budget deficit for the 2010-11 fiscal year, with long-term projections indicating the gap could reach $12.2 billion by fiscal year 2013-14. To address these challenges, the state budget proposal emphasizes spending controls in school aid and Medicaid while avoiding reliance on temporary federal stimulus aid or extended tax surcharges.
Recommendations related to Out-Year State Budget Gaps
The Legislature should seize the opportunity to move the State's finances toward structural balance by embracing the Governor's proposal for real and recurring spending reductions.
Key Data
$6.7 billion
— The size of the budget hole in the 2010-11 fiscal year.
$12.2 billion
— The projected budget gap for fiscal year 2013-14 even if all proposed measures are adopted.
$565 million
— The amount of one-shot measures proposed to close the budget gap.
The state's Deficit Reduction Program addresses a $3.2 billion current-year deficit with a $2.8 billion package, though it relies heavily on non-recurring items that exacerbate future fiscal challenges. While new pension tier legislation helps control long-term costs, concessions regarding retiree health insurance benefits for teachers limit local school districts' ability to manage future expenses.
Recommendations related to Out-Year State Budget Gaps
The Governor and all future Governors must stand firm against demands from other employee groups for the same health insurance benefit protections granted to teachers.
The Legislature must refrain from the past practice of passing various 'sweetener' bills that raise pension costs.
Key Data
$2.8 billion
— Total value of the Deficit Reduction Program package.
$400 million
— Amount by which the Deficit Reduction Program fell short of the Governor’s proposed target.
$3.2 billion
— Total current-year deficit.
59%
— Share of the final Deficit Reduction Program package comprised of non-recurring items.
40%
— Share of the Governor's original proposal comprised of non-recurring items.
New York's reliance on one-time fixes and federal stimulus funds to close the current $3.2 billion deficit exacerbates future fiscal instability, with the budget gap projected to reach $19.5 billion by fiscal year 2012-13. To avoid drastic service cuts in the future, the state must implement meaningful, recurring spending reductions rather than relying on short-term patches.
Recommendations related to Out-Year State Budget Gaps
If the State is to avoid a slash and burn assault on its services in 24 months, spending must come down in meaningful ways that have recurring value.
The State should add a new pension tier, which would also provide significant long-term local budget relief.
Key Data
$3.2 billion
— current deficit being closed by the Governor's deficit reduction proposals
52 percent
— portion of the current deficit being closed by one-shot measures
$19.5 billion
— projected budget gap for fiscal year 2012-13
$45 million
— expected state savings from the Medicaid gross receipts tax measure
23 percent
— expected increase in employee compensation over the next three years
1.58 percent
— flat cut applied to school aid allocations
New York State faces a growing fiscal crisis with a projected budget gap reaching $18.2 billion by 2012-13, driven by unsustainable growth in Medicaid, personnel costs, and education spending. To address this, the state must implement aggressive spending cuts rather than relying on tax increases, borrowing, or shifting costs to local governments.
Recommendations related to Out-Year State Budget Gaps
The state must implement aggressive spending cuts to address the fiscal crisis rather than relying on tax increases, borrowing, or shifting costs to local governments.
New York must curb the growth of Medicaid spending, which is expected to rise by 36% over the next three years.
The state should reduce the growth of personnel costs, including compensation and fringe benefits, which are currently outpacing private sector realities.
New York must limit education aid increases, as current spending is already 65% higher than the national average per pupil.
Key Data
$18.2 billion
— The projected state budget gap by 2012-13.
$4.6 billion
— The projected state budget gap for the upcoming year.
36%
— The expected growth in Medicaid spending over the next three years.
24%
— The expected growth in compensation expenses for state employees over the next three years.
$58 billion
— The amount of outstanding state-supported debt planned by 2013-14.
65%
— The amount by which New York's per-pupil education spending exceeds the national average.
New York's fiscal year 2009-10 budget relies heavily on temporary federal stimulus aid and tax increases to support recurring spending, creating a significant risk of future fiscal instability. This approach postpones necessary structural changes, leading to a projected budget gap of $13.7 billion that will need to be addressed in just three years.
Recommendations related to Out-Year State Budget Gaps
The $7.4 billion in federal stabilization aid should have been used primarily as a substitute for tax and fee increases, not as a substitute for the kinds of spending changes that will be needed when the funds run out.
State leaders should use the federal funds to create a path to a more sustainable long-term spending level.
State leaders should lower spending in General and State Operating funds to respond to the crisis.
The State should avoid relying on temporary federal stimulus aid to sustain recurring spending commitments to prevent future budget gaps.
The State should implement structural spending changes rather than postponing the inevitable through temporary revenue measures.
Key Data
$13.7 billion
— Projected budget gap to address in just three years due to expiring federal aid and the personal income tax surcharge.
$17.9 billion
— Size of the budget gap created by existing gaps and severe revenue losses in the fiscal year 2009-10 budget.
$24.6 billion
— Total expected federal stimulus package for New York over 27 months.
$131.9 billion
— Expected total All Funds spending in fiscal year 2009-10.
$10.3 billion
— Increase in All Funds spending over the previous fiscal year.
$3.2 billion
— Total spending reductions in the budget from baseline estimates.
New York State faces significant fiscal instability, with the current budget projected to create a $4.2 billion gap in the upcoming fiscal year. To address these recurring deficits and improve accountability, the state must implement more extensive multi-year financial planning and adopt binding revenue forecasts.
Recommendations related to Out-Year State Budget Gaps
Prepare more extensive multi-year financial plans to address long-run fiscal consequences.
Discontinue the issuance of State-funded debt to cover operating deficits that contribute to recurring budget gaps.
Adopt a binding revenue forecast mechanism to obligate parties to agree on available revenues early in the budget process.
Require that lump-sum appropriations meet specific program criteria and be subject to sunshine provisions to improve budget accountability.
Publish the Adopted Budget in a format similar to the Executive Budget to increase transparency.
Key Data
$4.2 billion
— Projected budget gap for the next fiscal year resulting from the budget enacted for the current year.
$1.6 billion
— Projected general fund deficit for the current fiscal year.
$1.1 billion
— Additional expenditures added by the Legislature in June 2006, delaying the actual budget implementation.
$11.5 billion
— Amount of outstanding State supported debt used to pay for operating expenses, representing 21 percent of that total.
$105.8 billion
— Estimated total debt outstanding for the State and its authorities at the end of fiscal year 2004–05.
New York faces a significant budget gap, with a projected $18.7 billion shortfall in the third year of the financial plan, necessitating prudent use of federal stimulus funds. Rather than relying on one-time gimmicks or harmful tax increases, the state should implement structural spending reforms and prioritize long-term fiscal sustainability.
Recommendations related to Out-Year State Budget Gaps
The state should avoid harmful tax increases, such as hikes to the personal income tax and gross receipts tax, to protect economic competitiveness.
New York should form a commission to examine the question of how to reform the state's tax structure to address issues of fairness and stability.
The state should roll back assessments on health insurance providers that were recently enacted as part of the deficit reduction program.
New York should adopt the Governor's proposed changes to the Medicaid program to bring costs more in line with other states.
The state should avoid adopting the foundation aid cuts to school districts proposed in the budget.
New York should phase out unnecessary payments to the wealthiest school districts by ending 'high tax' and 'hold harmless' aid increases.
The state should end the middle class STAR program, as it is poorly crafted and difficult to administer.
New York should eliminate ineffective or unnecessary programs, such as the Empire Zones program and underutilized institutions like prisons.
The state should adopt a new pension tier and other compensation changes for public employees to address rising costs.
The state should avoid raiding public authorities or relying on other one-shots to close budget gaps.
Key Data
$18.7 Billion
— The projected budget gap in the third year of the financial plan.
$14.0 Billion
— The revised estimate for the fiscal year 2009-10 budget gap.
$4.4 Billion
— The amount of harmful budget actions that should be avoided.
$4.8 Billion
— The amount of federal aid available to help the State’s operating budget in fiscal year 2009-10.
New York faces a severe fiscal crisis with budget gaps projected to reach $14 billion next year and $18.6 billion by fiscal year 2011-12. To address this, the state should avoid tax increases and instead implement structural spending reforms in areas like Medicaid, school aid, and public employee benefits to ensure long-term competitiveness.
Recommendations related to Out-Year State Budget Gaps
The state should reduce the Governor's proposed $5 billion in new revenue measures to no more than $2 billion to avoid discouraging investment.
The state should close eligibility loopholes for long-term care, which would save $400 million annually by tightening eligibility for individuals with homes worth less than $500,000.
The state should control excessive utilization of personal care services and expand managed care, which would save $600 million annually.
The state should eliminate high tax aid and hold harmless provisions in school aid formulas, which would save $205 million and $670 million respectively.
The state should reduce the Department of Correction’s staff and facilities to a level commensurate with the 15 percent decline in inmate population, which would save $280 million annually.
The state should require a 50 percent contribution to retiree health insurance premium costs and eliminate reimbursement for Medicare Part B premiums, which would save $430 million and $200 million respectively.
The state should increase contributions to family healthcare plans for current employees from 18 percent to 22 percent, for a savings of $75 million annually.
The state should reduce the size of the workforce in key agencies like SUNY, CUNY, and the judiciary to fiscal year 2006-07 levels, which would achieve savings of $283 million per year.
Key Data
$14 billion
— The projected budget gap for the upcoming fiscal year.
$18.6 billion
— The projected budget gap for fiscal year 2011-12.
$5 billion
— The amount of new revenue measures proposed in the Governor's Executive Budget.
$1 billion
— The annual savings from closing Medicaid eligibility loopholes and controlling personal care utilization.
$280 million
— The annual savings from reducing Department of Correction’s staff and facilities to match the 15 percent decline in inmate population.
$3.1 billion
— The minimum savings provided by the recommended reforms over the term of the financial plan.
New York faces significant fiscal challenges that require structural spending reforms rather than just relying on broad cuts to local aid. By eliminating ineffective programs like Empire Zones and reforming state employee benefits and school aid, the state can achieve substantial, recurring savings to close budget gaps.
Recommendations related to Out-Year State Budget Gaps
The state should eliminate the Empire Zones program to achieve annual savings of $582 million.
New York should scale back the Centers of Excellence high-tech-promotion program, which would save taxpayers $244 million annually.
The state should close unneeded correctional facilities, which could result in annual savings of about $310 million.
New York should reform Medicaid by closing eligibility loopholes for nursing homes and home care.
The state should create a new "tier" for future state employee pension benefits to eventually save $216 million annually.
The state should eliminate state aid to the wealthiest school districts, saving $389 million annually.
New York should increase the work week for state employees to 40 hours from the current 37.5 hours to save $227 million.
The state should develop a comprehensive capital plan to help provide greater spending discipline, saving $96 million by the third year.
Key Data
$582 million
— Annual savings from eliminating the Empire Zones program.
$244 million
— Annual savings from scaling back the Centers of Excellence high-tech-promotion program.
$310 million
— Annual savings from closing unneeded correctional facilities.
$100 million
— Annual savings from implementing successful alternatives to incarceration.
$216 million
— Annual savings from creating a new pension tier for future state employees.
$389 million
— Annual savings from eliminating state aid to the wealthiest school districts.
New York faces significant budget gaps reaching $7.9 billion in the coming years, necessitating annual savings of $6 billion to $7 billion to avoid tax increases. By reforming Medicaid, restructuring state employee benefits, and eliminating ineffective economic development programs, the state can generate at least $5 billion in annual savings without reducing services.
Recommendations related to Out-Year State Budget Gaps
The state should restructure pensions for future employees by creating a new tier to address the unusually generous benefits compared to other public and private-sector workers.
New York should reduce non-competitive institutional rates for nursing homes, close eligibility loopholes for individuals with significant personal assets, and limit the hours of personal care services covered by Medicaid.
The state should end the Empire Zone program and scale back the Centers of Excellence program to cover only SUNY/Albany, as these economic development initiatives are not working.
The state should restructure health insurance to bring it in line with other public-sector employers, including requiring an additional 4 percent contribution toward family plan premiums from current workers.
The state should shrink the size of the prison system to reflect the 11 percent drop in the number of inmates since 1999.
The state should increase the work week for state employees to 40 hours from 37.5.
The state should streamline the judiciary system as recommended by Chief Judge Judith Kaye.
The state should limit spending to programs that serve the public effectively rather than sustaining inefficient services through fiscal gimmicks.
Key Data
$4.3 billion
— Projected budget gap in the coming year.
$6.2 billion
— Projected budget gap in the next two years.
$7.9 billion
— Projected budget gap in the next two years.
$6 billion to $7 billion
— Amount of annual savings needed over the next three years to avoid tax increases.
$5 billion
— Amount of annual savings that can be generated without reducing state services.
New York State faces significant fiscal challenges as spending growth consistently outpaces revenue, leading to projected budget gaps rising from $4.3 billion to $7.6 billion by 2011. To address these deficits, the state should implement targeted savings initiatives across major spending areas, including school aid, Medicaid, employee benefits, and economic development programs.
Recommendations related to Out-Year State Budget Gaps
The state should phase out school aid for the wealthiest 10% of school districts to eliminate unnecessary and ineffective aid.
New York should reduce Medicaid rates paid to hospitals and nursing homes by 15% and 29% respectively to align with national norms.
The state should increase the work week for non-managerial, civilian employees to 40 hours to allow for productivity gains through a reduction of the workforce.
New York should close unnecessary correctional facilities and implement additional alternatives to incarceration to better fit infrastructure to the current inmate population.
The state should streamline the judiciary by reconfiguring the trial court structure to reduce administrative costs.
Key Data
$4.3 billion
— Projected state budget gap for fiscal year 2008-09.
$7.6 billion
— Projected state budget gap for fiscal year 2011.
$5.4 billion
— Total potential savings from the proposed budgetary initiatives.
$3.8 billion
— Estimated required annual contribution for retiree health insurance and benefits if converted to an actuarially-funded system.
$2.7 billion
— Annual budget for the Department of Correctional Services.
$59 million
— Estimated annual savings from streamlining the judiciary.
New York State's budget process suffers from structural deficiencies, including a lack of long-term fiscal stewardship, excessive reliance on debt, and inadequate rainy day reserves. Implementing comprehensive reforms, such as establishing a meaningful debt limit and a rigorous balanced budget requirement, is essential to ensure fiscal stability and accountability.
Recommendations related to Out-Year State Budget Gaps
Establish a more rigorous and comprehensive balanced budget requirement.
Establish a more meaningful debt limit.
Enhance the capacity for preparing for a rainy day.
Expand the Legislature’s budgetary powers.
Allow more time for deliberation by changing the fiscal year.
Create more meaningful and formal committee roles for members of the Legislature.
Provide legislators and the public more timely fiscal information.
Reduce and make more accountable spending on member items.
Develop a comprehensive approach to performance measurement and reporting.
Key Data
$11.2 billion
— Long-term borrowing authorized by the State to help support operating expenses since 1991.
$39.4 billion
— Total state-supported debt outstanding that was of the back-door type as of the end of fiscal year 2007.
92 percent
— Portion of all State-supported debt outstanding that was of the back-door type as of the end of fiscal year 2007.
$1,031 million
— Tax Stabilization Reserve Fund balance reached by fiscal year 2006-07.
$4.7 billion
— Total cost of the School Tax Reduction (STAR) program in fiscal year 2008.
$2.1 billion
— Total cost of Health Care Reform Act (HCRA) programs in fiscal year 2008.
New York's recent budget inflated spending by 9%, creating a $5 billion budget gap that must be closed within 18 months. To address this and future fiscal challenges, the state needs to implement structural reforms, including fixing the broken budget process, controlling Medicaid costs, and reducing the size of the state workforce.
Recommendations related to Out-Year State Budget Gaps
The state should close the loopholes in this year's new budget-reform law to ensure an active role for conference committees, sufficient time for review, and timely public release of fiscal impact documents.
The state should move the start of its fiscal year from April 1 to July 1 to allow for more accurate revenue estimates and provide more time for budget negotiations.
The state should reduce the size of its workforce through productivity gains to help close coming multibillion-dollar budget gaps.
The state should tighten eligibility rules for long-term care and stimulate the market for private long-term-care insurance to control Medicaid costs.
The state should restructure the STAR program to deliver property-tax relief where it is needed most, rather than to the wealthiest homeowners.
Key Data
$121 billion
— The size of the budget legislators had less than two hours to review.
9%
— The rate by which this year's budget inflated spending.
$5 billion
— The budget gap the state has to close in 18 months.
$60 billion
— The amount New York's debt load will soon exceed.
$10 billion
— The amount by which New York's debt load exceeds what is affordable under reasonable standards.
New York faces significant fiscal challenges, with state debt exceeding $50 billion and projected to reach $60 billion within two years, alongside recurring budget deficits growing from $4.2 billion in fiscal year 2008 to $5.1 billion in fiscal year 2009. To address these issues, the state must pursue constitutional debt reform and implement fiscal discipline, including potential cuts to the expensive Medicaid program by tightening eligibility loopholes and reducing payments to high-cost providers.
Recommendations related to Out-Year State Budget Gaps
The only enduring solution is an amendment to the state Constitution, limiting the amount of debt based on criteria for affordability and restricting its uses to long-term capital improvements.
Spitzer and the Legislature should agree on a budget for the coming year that closes these recurring budget gaps.
The state's Medicaid program can be cut without reducing services to poor New Yorkers by limiting support for long-term care of wealthier residents and by curbing generous payments to nursing homes and hospitals.
Legislators should pursue a debt-reform amendment with a higher priority than the one increasing their budgetary powers.
Key Data
$50 billion
— The amount state debt exceeded in the current fiscal year.
$60 billion
— The expected level of state debt in the next two years.
$11 billion
— The amount of outstanding debt taken on to support operating expenses rather than capital investments.
$4.2 billion
— The projected budget gap for fiscal year 2008.
$5.1 billion
— The projected budget gap for fiscal year 2009.
New York faces significant out-year budget gaps, with a projected shortfall of at least $3.2 billion for the 2007 fiscal year and an estimated $5.4 billion for the following year. These fiscal constraints complicate the state's ability to fund the court-mandated school finance reforms required to provide a sound basic education to all students.
Recommendations related to Out-Year State Budget Gaps
The State should bear full responsibility for raising the additional funds needed for a sound basic education to mitigate the impact of out-year budget gaps on school funding.
New York should pursue revenue through forms of gambling limited to 'destination' type casinos to help close the state's projected budget gaps.
The State should broaden the base of the current sales tax to include currently exempt items to generate necessary revenue.
The base of the existing corporate income tax should be redefined to include certain forms of income now excluded to increase state revenue.
The base of the existing sales tax should be extended to include retail or consumer sales of selected professional services such as law and accounting.
Key Data
$3.2 billion
— Projected budget gap for the fiscal year beginning April 1, 2007.
$5.4 billion
— Estimated budget gap for the fiscal year following 2007.
$8.4 billion
— Estimated cost of a statewide solution to the CFE-generated mandate.
New York City and State face rapidly growing fiscal burdens from generous public employee retirement benefits, which are significantly more costly than those provided by private sector employers. To address these long-term costs and reduce the tax burden, the state and city should transition to defined contribution plans and implement reforms to existing pension and health insurance structures.
Recommendations related to Out-Year State Budget Gaps
The City and State should seek to place all new workers in defined contribution plans.
Require retirees to pay 50 percent of the premium for health insurance for themselves and their dependents.
Base pension benefits on a more standard definition of final average salary, based on five years of experience and excluding overtime and other supplements.
Increase required employee contributions, as the current 3 percent for ten years is lower than in most other systems.
Raise the minimum age requirement for retirement to reflect increased life spans and working lives, similar to the federal Social Security system.
Define work-related disabilities more rigorously to prevent workers from claiming benefits without clear evidence of a work-related cause.
Eliminate the variable supplements available to some retired New York City uniformed workers, which contradict the principle that pension payments should be a regular and predictable source of income.
Stop reimbursing retirees for Medicare Part B premiums, as this practice is out-of-line with benefits provided by other large employers.
Key Data
$4.7 Billion
— Projected City pension fund contributions for fiscal year 2008.
$1.5 Billion
— Combined cost to the City and State of health insurance for retirees in 2004.
43 percent
— Percentage of retired firefighters receiving additional benefits due to a disability deemed to be job related.
$12,000
— The amount of the variable supplement 'Christmas bonus' for certain NYC uniformed workers in 2007.
$6.3 Billion
— Combined cost of health insurance for the City and State in 2008.
$1.4 Billion
— Projected pension fund contributions for the State in fiscal year 2008.
New York State faces significant budget gaps of $2.7 billion and $2.8 billion in fiscal years 2007 and 2008, respectively, which require immediate spending discipline and the rejection of one-time revenue gimmicks. To address these structural deficits, the state should prioritize recurring revenue sources, implement Medicaid cost containment, and adopt long-term structural reforms rather than relying on temporary borrowing or one-shot measures.
Recommendations related to Out-Year State Budget Gaps
The Legislature should reject the proposal for pension borrowing, as developing a taste for such schemes would erode the long-run health of the system and potentially compromise future benefit payments to retirees.
The Legislature should reject the Governor’s proposals for expanding the STAR-Plus and Co-STAR programs, as these initiatives are poorly targeted and fail to provide relief where it is most needed.
The Legislature should permanently repeal the sales tax exemption on clothing and eliminate the two sales-tax free weeks, as exemptions from the sales tax serve to cut revenues and distort consumer choices.
The Legislature should increase the usefulness of the rainy day fund by increasing its permissible limit to at least 5 percent of revenues.
The Legislature should start by balancing this year’s enacted budget on a GAAP basis, but a requirement should be written into the Constitution.
The Legislature should use the CBC’s and the Comptroller’s analyses and recommendations to help craft a workable solution for effective limits on State-supported debt.
Key Data
$4.2 billion
— The total budget gap in fiscal year 2006 that the Executive Budget fails to fully address.
$2.7 billion
— The projected budget gap for fiscal year 2007.
$2.8 billion
— The projected budget gap for fiscal year 2008.
$685 million
— The amount of one-shot revenues proposed to close the fiscal year 2006 budget gap.
$321 million
— The amount of borrowing from the pension system proposed to close the fiscal year 2006 budget gap.
$561 million
— The gross revenue that would be generated by re-imposing the sales tax on clothing.
New York faces a persistent structural imbalance in its budget, with projected gaps of at least $5 billion in fiscal year 2004-05 and $8 billion in fiscal year 2005-06. To address these recurring deficits and improve fiscal stability, reforms such as implementing multi-year financial planning, establishing an independent budget office, and requiring balanced budgets based on generally accepted accounting principles are necessary.
Recommendations related to Out-Year State Budget Gaps
Require that the adopted budget be balanced in accord with generally accepted accounting principles.
Require a four-year financial plan with quarterly modifications.
Replace the constitutional requirement for voter approval of general obligation debt with a constitutional limit on the amount of all state debt that is set based on relevant, changing economic factors.
Create a professional, non-partisan Legislative Budget Office to provide fiscal information to both houses of the Legislature and to the public.
Require that independently prepared revenue projections be used in the adopted budget, if the Governor and Legislature do not agree on revenue projections in a timely way.
Require a “rainy day” fund larger than the current Tax Stabilization Reserve Fund.
Eliminate the use of “off-budget” accounts.
Change the budget calendar to allow more time for deliberation on the Executive Budget by the Legislature.
Strengthen the committee process of the State Legislature to allow more participation by members in budgetary decisions.
Key Data
$9.3 billion
— The state budget gap for fiscal year 2003-04.
$5 billion
— The estimated budget gap for fiscal year 2004-05.
$8 billion
— The estimated budget gap for fiscal year 2005-06.
23 percent
— The portion of the general fund represented by the fiscal year 2003-04 budget gap.
$5.7 billion
— The amount of one-time actions and disappearing revenues the state relied upon to close the current year's gap.
New York State faces a persistent fiscal crisis with projected multi-year deficits reaching $11 billion by fiscal year 2005-06, driven by rising baseline spending and reliance on one-shot revenue measures. To achieve long-term stability, the state must implement a three-year plan to align expenditures with recurring revenues through productivity gains and service cuts, while avoiding long-term borrowing and adopting more transparent accounting practices.
Recommendations related to Out-Year State Budget Gaps
Bring the budget into balance over three years by reducing expenditures to what the current revenue system supports by making productivity gains and by cutting services in a way that protects the neediest New Yorkers.
Close the gap between spending and revenues in the three-year, interim period by imposing a temporary and declining tax and by avoiding borrowing.
The State should be required to balance its budget based on Generally Accepted Accounting Principles (GAAP) in order to prevent the accumulation of a deficit.
The Division of Budget should be required to prepare a four-year financial plan with quarterly updates.
All off-budget accounts should be brought on budget to ensure a unified statement of all planned revenues and expenditures.
The State should pursue a long-run effort to both lower total Medicaid costs and finance them more from statewide sources.
Key Data
$9.3 billion
— The gap to be closed in fiscal year 2003-04.
$11 billion
— The projected gap in fiscal year 2005-06 due to baseline spending increases.
$2.9 billion
— The projected general fund deficit for fiscal year 2004-05.
$4.4 billion
— The projected general fund deficit for fiscal year 2005-06.
$4.4 billion
— The deficit incurred in the fiscal year that ended March 31, 2002.
$2.5 billion
— The annual deficit under the Governor's plan for the fiscal year beginning April 1, 2003.
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