State budget reserves are the funds New York sets aside to maintain fiscal stability and provide a financial cushion during economic downturns or unexpected emergencies. This page covers CBC’s work on rainy day reserves, recessionary reserve targets, mandatory deposit rules, the use of surplus funds, and the role of reserves in mitigating federal funding cuts.
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..
The state should prioritize fiscal stability by adding the $1 billion allocated for energy rebate checks to recessionary reserves, which are currently less than half of the amount deemed necessary.
The State should relieve the City from the Class-Size Reduction Mandate to help stabilize the budget.
The City should be much more ambitious in its effort to reduce inefficient spending as a means to stabilize the budget rather than raising taxes.
Bolster and protect reserves, as the current $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.
Hold the line on spending, ensuring any additional expenditures are offset with savings elsewhere to avoid expanding the Executive Budget’s already sizable gaps.
Reject costly, unnecessary Tier 6 pension enhancements that may drive property tax increases or service cuts, thereby protecting the state's fiscal stability.
Hold the line on taxes, as New York State and its local governments already collect the most taxes per person in the country.
Help New York City—smartly, by relieving the class size mandate to save the City $1.2 billion, which would create a bridge to fiscal stability.
Key Data
In March 2026, the State's principal reserves stood at $14 billion, which was less than half of the low-end impact of a recession as reported by the State Division of the Budget.
In December 2025, the CBC noted that New York State moved $1 billion from the Economic Uncertainties Fund to the Rainy Day Reserves in fiscal year 2025, with another $2.9 billion planned to be moved between fiscal years 2026 and 2028.
In June 2025, the State's enacted budget withdrew more than $7 billion from its reserves, leaving the balance one-third smaller than it was in March and less than half of what is needed to weather a typical recession.
In January 2025, the CBC highlighted that while building reserves from just over $2 billion to more than $20 billion was a major achievement, nearly $14 billion remained unprotected outside of the statutorily-protected Rainy Day Reserve.
In November 2024, the State made a $1.5 billion deposit to the Rainy Day Reserve lockbox at the start of the fiscal year, but deposited only $35 million from a monetary settlement into the unprotected Economic Uncertainties Fund.
New York's recent budget increased spending to $277 billion while failing to adequately bolster financial reserves, leaving the state vulnerable to future economic instability. Instead of prioritizing long-term fiscal health, the state allocated funds toward rebate checks and new programs that exacerbate structural budget gaps.
Recommendations related to State Budget Reserves
If Albany wants to build on these achievements, it must bring the same discipline and resolve to the state’s finances by strengthening reserves, controlling spending growth, and ensuring that today’s commitments do not become tomorrow’s crises.
The state should prioritize long-term stability over short-term political appeal by avoiding broadly distributed rebate checks that come at the expense of strengthening reserves.
Key Data
$277 billion
— The total size of the New York state budget following recent spending increases.
$18 billion
— The structural budget gap facing the state, indicating that current spending levels are not sustainable.
$1 billion
— The cost of broadly distributed rebate checks that came at the expense of strengthening reserves.
9.1%
— The rate at which state spending increased this year, contributing to fiscal instability.
The New York State Fiscal Year 2027 Enacted Budget Financial Plan fails to stabilize the state's fiscal future, keeping rainy day reserves virtually flat while increasing total spending to $277.0 billion. This approach creates a structural budget gap of nearly $18.0 billion, posing a significant fiscal risk that could lead to future service cuts.
The New York State fiscal year 2027 budget fails to bolster the state's financial stability by neglecting to add any funds to the Rainy Day Reserves despite strong revenues. This oversight leaves the state facing a structural budget gap of over $17 billion, highlighting a missed opportunity to strengthen the state's fiscal foundation.
Recommendations related to State Budget Reserves
The State should have utilized the opportunity to shore up the State’s fiscal foundation by adding to the Rainy Day Reserves.
The Governor should continue to resist calls to increase personal income and corporate taxes next year.
The State should hold New York City accountable for shoring up its own finances to prevent future requests for massive aid or tax increases.
Key Data
$17 billion
— The amount by which the State's structural budget gap exceeds.
8 percent
— The minimum increase in State Operating Funds spending.
$30 billion
— The amount by which decade-long spending growth exceeds inflation.
$1 billion
— The amount spent on energy rebates across millions of households.
$700 million
— The amount wasted annually on increasing school aid to districts with shrinking enrollment.
$547 million
— The cost of increasing Tier 6 pension benefits.
The state's fiscal plan adds $5 billion above the executive proposal, potentially increasing future budget gaps and the risk of a fiscal wall. Instead of distributing $1 billion in energy rebate checks, these funds should be directed toward recessionary reserves, which currently sit at less than half of the recommended level.
Recommendations related to State Budget Reserves
The state should prioritize fiscal stability by adding the $1 billion allocated for energy rebate checks to recessionary reserves, which are currently less than half of the amount deemed necessary.
The State should relieve the City from the Class-Size Reduction Mandate to help stabilize the budget.
The City should be much more ambitious in its effort to reduce inefficient spending as a means to stabilize the budget rather than raising taxes.
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 would be better used for recessionary reserves.
$268 billion
— Total amount the State plans to spend in the final budget.
New York's state budget is late for the fifth consecutive year, raising concerns about short-term decision-making that could lead to future fiscal instability. To ensure long-term fiscal health, the state must curb spending growth, maintain tax competitiveness, and significantly increase its current $14 billion in principle reserves, which remain insufficient to cover the potential impact of a recession.
Recommendations related to State Budget Reserves
Bolster and protect reserves, as the current $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.
Hold the line on spending, ensuring any additional expenditures are offset with savings elsewhere to avoid expanding the Executive Budget’s already sizable gaps.
Reject costly, unnecessary Tier 6 pension enhancements that may drive property tax increases or service cuts, thereby protecting the state's fiscal stability.
Hold the line on taxes, as New York State and its local governments already collect the most taxes per person in the country.
Help New York City—smartly, by relieving the class size mandate to save the City $1.2 billion, which would create a bridge to fiscal stability.
Key Data
$14 billion
— The amount currently held in principle reserves, which is less than half of the low-end impact of a recession.
$12.8 billion
— The size of the Executive Budget gaps projected for fiscal year 2030.
$30 billion
— The amount by which spending has increased more than inflation over the last decade.
$5 billion
— The amount the Legislature proposes to add to the budget next year.
$3 billion
— The amount the Legislature proposes to add to the budget annually after next year.
$1.2 billion
— The potential savings for New York City from relieving the class size mandate.
New York State's fiscal year 2027 budget faces a $20 billion structural imbalance, necessitating a shift toward fiscal stability through restrained spending and increased reserves. To protect against future economic downturns, the state should prioritize building its rainy day fund and mandate deposits when revenues are strong.
Recommendations related to State Budget Reserves
Bolster and protect reserves by depositing some of the strong receipts to rainy day reserves and adopting rules requiring deposits when revenue is strong.
Make additional deposits to the Rainy Day Reserve.
Implement mandatory deposits for the Rainy Day Reserve.
Instead of using current surpluses to fund spending, the State should direct these funds to building the State’s reserves.
Key Data
$14.6 billion
— The amount of state reserves in the current fiscal year.
$3 billion
— The amount of state reserves in fiscal year 2021.
$1.9 billion
— The amount the Executive plans to shift from the non-statutory Economic Uncertainties Fund to the protected Rainy Day Reserve by fiscal year 2028.
$2.5 billion
— The amount of current surplus funds the State plans to use for fiscal year 2027 spending instead of building reserves.
New York faces a $20 billion structural budget gap and should prioritize fiscal stability by spending less than the executive budget proposed. Instead of issuing rebate checks, the state should preserve resources to hedge against looming economic risks and federal funding cuts.
Recommendations related to State Budget Reserves
The State should spend less, not more, than the executive budget proposed to address the structural budget gap.
The State must ensure its own fiscal stability, and any one-time aid should serve as a bridge with the condition that the City is accountable for bringing spending in line with its current revenue base.
Rather than sending checks to New Yorkers who may not need them, the State should be saving these resources 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
— Structural budget gap facing the State.
78 percent
— Amount more in taxes per capita collected by New York State and its localities than the national average.
40 percent
— Amount more in taxes per capita collected by New York State and its localities than California.
37 percent
— Amount more in taxes per capita collected by New York State and its localities than New Jersey.
New York State's fiscal stability relies on maintaining adequate recessionary reserves, which are currently insufficient to cover potential revenue losses during a future economic downturn. While shifting funds into the Rainy Day Fund is a positive step, the state must prioritize increasing these reserves instead of using them to cover recurring federal funding cuts.
Recommendations related to State Budget Reserves
The State should add to the recessionary reserves.
The State should not use recessionary reserves to offset recurring federal cuts.
Key Data
$1 billion
— Amount of money being shifted within the state's reserves to the Rainy Day Fund.
New York faces a $20 billion structural budget gap and must prioritize fiscal stability by shifting funds from ineffective programs to high-impact priorities while maintaining current tax levels. To ensure long-term economic competitiveness and prepare for potential recessions, the state must curb unnecessary spending and bolster its insufficient rainy day reserves.
Recommendations related to State Budget Reserves
Albany should protect and build Rainy Day reserves, as they are currently insufficient to weather a recession.
State leaders should hold the line on taxes, as higher taxes risk dislocation and are unnecessary.
The state should shift dollars from lower-impact programs to affordability and other priority programs, such as by ending aid increases to districts with declining enrollment.
Albany should deliver services that work by driving quality and efficiency with performance data, accountability, and targeted programs.
Key Data
$20 billion
— The size of the state's current structural budget gap.
$8 billion
— The amount Albany likely has at its disposal for the next budget from strong tax revenues, lower spending, and a budget cushion.
$500 million
— The amount that could be saved annually by ending aid increases to school districts with declining enrollment.
$2.5 billion
— The amount of state aid provided to wealthy districts that could be redirected to other priorities.
$5 billion
— The amount in economic development tax breaks and programs that fail to deliver results.
17.44%
— The combined corporate tax rate in New York City.
New York State faces a structural budget gap of $20 billion annually, necessitating smarter financial management and the strengthening of fiscal reserves. To ensure long-term stability, the state should legally mandate deposits into rainy day reserves when tax receipts are strong and continue transferring funds from the Economic Uncertainties Fund to the reserve lockbox.
Recommendations related to State Budget Reserves
State leaders should further bolster rainy day reserves by legally mandating deposits when tax receipts are strong.
State leaders should continue transferring the Economic Uncertainties Fund balance to the Rainy Day Reserve lockbox to ensure it remains preserved until needed.
Key Data
$1 Billion
— Amount moved from the Economic Uncertainties Fund to the Rainy Day Reserves in fiscal year 2025.
$2.9 Billion
— Amount planned to be moved from the Economic Uncertainties Fund to the Rainy Day Reserves between fiscal years 2026 and 2028.
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New York State's fiscal foundation is weakening due to increased spending and growing budget gaps, leaving the state ill-prepared for potential federal funding cuts or economic downturns. By depleting rainy day reserves to pay for unemployment insurance debt, the state has reduced its financial cushion to less than half of what is required to weather a typical recession.
Recommendations related to State Budget Reserves
The State should set aside additional money to mitigate the initial impact of federal cuts rather than increasing spending.
The State should have repaid the unemployment insurance debt with other funds instead of using rainy day reserves.
Key Data
$7 billion
— Amount taken from the State’s rainy day reserves in the budget.
$14.1 billion
— The amount of Principal Reserves projected for fiscal years 2026 through 2029.
$21.6 billion
— The amount of Principal Reserves in fiscal year 2025.
New York's fiscal plan includes a 12 percent increase in adjusted State Operating Funds spending, contributing to future annual budget gaps of $14 billion and a long-run imbalance exceeding $20 billion. Despite these financial pressures, the state failed to set aside additional funds to mitigate potential federal cuts and spent $49 billion before providing transparency on how the money was allocated.
Recommendations related to State Budget Reserves
State leaders should protect recession-mitigating reserves to help the state deal with impending federal cuts.
State leaders should preserve core programs that have the greatest impact while re-balancing the budget.
State leaders should shrink other programs despite their likely popularity to re-balance the budget.
State leaders should hold the line on taxes to ensure New York’s competitiveness.
Key Data
$14 billion
— The amount of future annual budget gaps caused by 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 disclosing how the money was being used.
12 percent
— The increase in adjusted State Operating Funds spending, which is approximately four times the rate of inflation.
The $254 billion New York State budget for fiscal year 2026 increases spending by 12 percent, creating a $20 billion structural imbalance while failing to adequately prepare for potential federal cuts or a recession. By siphoning $7 billion from state reserves to replenish the Unemployment Insurance Trust Fund, the budget misses opportunities to utilize other available resources and jeopardizes long-term fiscal stability.
Recommendations related to State Budget Reserves
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, instead of siphoning $7 billion from the State’s reserves.
The State should put aside $2 billion to soften the initial blow of federal cuts.
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 late New York State budget.
12 percent
— The increase in State Operating Funds spending, which is four times the rate of inflation.
$20 billion
— The structural imbalance between future receipts and disbursements.
$7 billion
— The amount siphoned from the State’s reserves to replenish the Unemployment Insurance Trust Fund.
$2 billion
— The amount recommended to be set aside to soften the initial blow of federal cuts.
$3 billion
— The amount the MTA will contribute to support the plan.
The $254 billion state budget agreement fails to prepare for looming federal cuts by neglecting to set aside funds to cushion the initial impact, despite the Governor's correct focus on protecting existing Rainy Day reserves. Policymakers should prioritize building financial cushions for future federal reductions rather than increasing spending that exacerbates the $18 billion structural budget gap.
Recommendations related to State Budget Reserves
The State should put money aside now to cushion the initial blow of likely huge federal budget cuts.
The State should save Rainy Day reserves for a recession and not use them to plug recurring budget holes.
New York faces a significant structural budget gap and potential federal funding cuts, necessitating a disciplined approach to fiscal management. State leaders should prioritize maintaining existing rainy day reserves and establishing a contingency fund to mitigate the impact of future economic downturns or federal aid reductions.
Recommendations related to State Budget Reserves
Set aside at least $2 billion in a federal cut contingency fund to prevent an abrupt dislocation of services if federal aid drops suddenly.
Protect the $20 billion already set aside for a rainy day fund, ensuring it is held for an economic downturn rather than used to backfill lost federal dollars.
Keep spending growth close to inflation to restrain spending in anticipation of a recession and federal cuts.
Key Data
$2 billion
— Amount that should be set aside in a federal cut contingency fund.
$20 billion
— Amount already set aside for a rainy day fund that should be protected.
$35 billion
— Increase in State operating funds since fiscal year 2020.
$18 billion
— Amount the State is on track to spend more than it takes in a few years down the road.
New York State faces a significant fiscal challenge with proposed spending increases between 10.9% and 13.8%, creating an $18.2 billion structural gap. To ensure long-term stability, the state should prioritize setting aside at least $2 billion to buffer against potential federal funding cuts rather than spreading $3 billion thinly among taxpayers.
Recommendations related to State Budget Reserves
The budget should set aside at least $2 billion to mitigate potential federal cuts.
The budget should prepare for looming federal cuts.
The budget should restrain exploding spending growth.
Key Data
$2 billion
— Amount the state should set aside to mitigate potential federal cuts.
$3 billion
— Amount that should not be spread so thinly among taxpayers.
10.9%
— Lower bound of the largest spending increase in recent State history.
13.8%
— Upper bound of the largest spending increase in recent State history.
$18.2 billion
— Size of the structural gap left by the Governor’s and Legislature’s budget proposals.
New York State's fiscal foundation is threatened by rapidly rising spending and a structural budget gap of at least $18.2 billion. To strengthen the state's long-term financial health and prepare for potential federal budget cuts, the state should reserve at least $2 billion of the projected $3.5 billion fiscal year 2025 surplus as a contingency fund.
Recommendations related to State Budget Reserves
The State should reserve at least $2 billion of the projected $3.5 billion fiscal year 2025 surplus as a contingency fund if needed to mitigate the initial impact of federal cuts.
The State should preserve and protect the State’s current reserves.
Key Data
$2 billion
— Amount of the projected fiscal year 2025 surplus that should be reserved as a contingency fund to mitigate the initial impact of federal cuts.
$3.5 billion
— Projected fiscal year 2025 surplus from which a contingency fund should be established.
The proposed state budget includes an $18.2 billion structural gap and significant spending increases that threaten fiscal stability in the face of potential federal aid reductions. To manage these risks, state leaders must prioritize essential services and preserve Rainy Day reserves for genuine emergencies rather than using them to cover recurring expenses.
Recommendations related to State Budget Reserves
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 size of the structural gap in the precarious State budget.
$4 billion
— The amount of recurring spending added by the Assembly and Senate on top of the Governor's proposal.
13.7 percent
— The year-over-year adjusted State Operating Funds growth rate proposed by the Legislature.
$11 billion
— The total increase in State Operating Funds spending in the Assembly plan.
New York State's government spending is growing at an unsustainable rate, with the proposed fiscal year 2026 budget projecting a 10.9 percent increase that threatens the state's long-term fiscal health. To address a projected $18.2 billion structural imbalance and close future budget gaps, spending growth must be restrained to 2.7 percent annually through fiscal year 2029.
Recommendations related to State Budget Reserves
Lawmakers should find savings that restrain spending growth rather than adding more spending.
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.
The state budget should prioritize new deposits to the State’s reserves to address missing fiscal priorities.
Key Data
$15.5 billion
— The proposed increase in State Operating Funds spending for the Fiscal Year 2026 Executive Budget.
$18.2 billion
— The amount of the structural imbalance masked by spending growth supported temporarily by extraordinary receipts.
$11.0 billion
— The projected budget gap for fiscal year 2029.
2.7 percent
— The annual spending growth rate required from fiscal year 2025 to fiscal year 2029 to close the State’s structural imbalance.
$31.6 billion
— The total increase in State Operating Funds spending between fiscal years 2025 and 2029.
$65.7 billion
— The projected growth in State Operating Funds spending over the eight years between fiscal years 2021 and 2029.
The New York State Legislature is urged to reject Fiscal Year 2026 Executive Budget provisions that would grant the Governor unilateral authority to spend, borrow, and transfer funds without oversight. These measures, which include reducing the 'Special Emergency Appropriation' and limiting borrowing powers, are deemed unnecessary and fiscally risky.
Recommendations related to State Budget Reserves
Reject universal appropriation transfer and interchange authority within the State Operations bill.
Reject the Governor’s permanent authority to issue up to $4 billion in short-term revenue anticipation notes.
Reject a $1 billion transfer from the General Fund to the “Health Care Transformation Account” unless its uses are more clearly defined in appropriations.
Reject provisions added to individual appropriations that remove competitive bidding requirements and the Comptroller’s oversight.
Reduce the “Special Emergency Appropriation” from $2 billion to $1 billion.
Key Data
$4 billion
— The amount of short-term revenue anticipation notes the Governor is seeking permanent authority to issue.
$1 billion
— The amount of the proposed transfer from the General Fund to the 'Health Care Transformation Account' that should be rejected unless uses are clearly defined.
$2 billion
— The current amount of the 'Special Emergency Appropriation' that is recommended to be reduced.
$1 billion
— The reduced amount to which the 'Special Emergency Appropriation' should be lowered.
New York State's executive budget fails to allocate any new funding to reserves despite having a multi-billion-dollar surplus. While $4 billion is being shifted from the Economic Uncertainties Fund to the Rainy Day Reserve, the decision to forgo additional deposits to these reserves is short-sighted.
Recommendations related to State Budget Reserves
The State should prioritize fiscal stability by making a new deposit to reserves despite the current multi-billion-dollar surplus.
The State should act to strengthen its financial position by choosing to deposit some of this year’s closeout surplus into the rainy day reserves.
Key Data
$4 billion
— Amount shifted from the unprotected Economic Uncertainties Fund to the stronger Rainy Day Reserve.
The state should avoid including extraordinary budget powers in the Fiscal Year 2026 Executive Budget, as these measures undermine the Comptroller's oversight and are no longer necessary. These proposals include increasing emergency appropriations and limiting review of bond transactions, which were originally enacted only as temporary pandemic-era responses.
Recommendations related to State Budget Reserves
The budget should not remove competitive bidding requirements and the Comptroller’s oversight via provisions added to individual appropriations.
The budget should not limit the scope of Comptroller review of certain bond transactions, as proposed for the first time in last year’s Executive Budget.
The budget should not allow universal appropriation transfer and interchange authority within the State Operations bill.
The budget should not authorize up to $4 billion in short-term revenue anticipation notes.
The budget should not authorize transfer of $1 billion from the General Fund to the “Health Care Transformation Account,” absent more clearly defined uses in appropriations.
The budget should not increase the “Special Emergency Appropriation” from $1 billion to $2 billion.
Key Data
$4 billion
— Amount of short-term revenue anticipation notes the budget proposes to authorize.
$1 billion
— Amount proposed for transfer from the General Fund to the “Health Care Transformation Account.”
$1 billion
— Current level of the “Special Emergency Appropriation” that the budget proposes to increase.
$2 billion
— Proposed level of the “Special Emergency Appropriation” in the budget.
New York State faces a $15.6 billion structural imbalance, necessitating a focus on restraining spending to ensure long-term fiscal stability while pursuing tax reductions. To maintain financial health, the state should utilize surplus funds to pay for capital projects, restructure government operations, and further bolster reserves.
Recommendations related to State Budget Reserves
The State should use its surplus funds to further bolster reserves.
The State should use its surplus funds to restructure State government to be lower cost and higher quality.
The State should use its surplus funds to pay cash for capital projects.
The State must restrain spending elsewhere to afford tax cuts in the long run.
The State needs to implement major savings plans to reduce the growth in Medicaid costs and education aid.
Key Data
$15.6 billion
— The State already has a $15.6 billion structural imbalance.
$33 billion
— There is a $33 billion hole in the MTA’s capital plan that lacks a proposal to be filled.
New York State has successfully grown its reserves to over $20 billion, yet nearly $14 billion of these funds remain outside the protection of the statutorily-protected Rainy Day Reserve. To ensure long-term fiscal stability, the state should transfer these unprotected funds into the reserve and avoid using them to cover short-term recurring budget gaps.
Recommendations related to State Budget Reserves
The State should use the surplus to further bolster reserves, pay cash for capital projects instead of borrowing, or invest in restructuring that reduces recurring spending.
The Governor should transfer the full balance to the RDR, as well as add $1.9 billion from the closeout surplus.
The State should not deplete reserves to plug a recurring hole for just the short term.
Key Data
$2 billion
— The amount of reserves the State had previously, before building them up to over $20 billion.
$20 billion
— The current level of State reserves, which is a major fiscal achievement.
$14 billion
— The amount of State reserves that remain unprotected and outside of the statutorily-protected Rainy Day Reserve.
$1.9 billion
— The amount the Governor should add to the Rainy Day Reserve from the closeout surplus.
New York State has made progress in building reserves, but current projections indicate that by fiscal year 2027, these funds will fall short of the state's 15 percent target. To ensure long-term fiscal stability, the state should increase reserves to 22 percent of State Operating Funds and transfer the balance of the unprotected Economic Uncertainties Fund into the protected Rainy Day Reserve.
Recommendations related to State Budget Reserves
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 Rainy Day Reserve, to ensure these funds are saved for a true emergency.
The State should increase reserves to 22 percent of State Operating Funds based on prior recessions.
Additional receipts recognized during the closeout this fiscal year should be deposited into the Rainy Day Reserve.
Higher receipts in the current year should be deposited to the Rainy Day Reserve, and additional tax receipts in the out-years should be used to close gaps and reduce the structural imbalance.
Key Data
$1.5 Billion
— Deposit made to the Rainy Day Reserve lockbox at the beginning of the current fiscal year.
$35 Million
— Amount from a monetary settlement deposited to the unprotected Economic Uncertainties Fund.
15 percent
— The State's target for reserve levels as a percentage of State Operating Funds.
22 percent
— The recommended reserve level as a percentage of State Operating Funds to withstand potential recessions.
New York State's fiscal year 2025 enacted budget includes a total of $21.1 billion in reserves after an additional $1.5 billion was added due to strong tax receipts. Despite this, the state faces a structural budget gap projected to exceed $16.1 billion by fiscal year 2028, driven by spending growth and reliance on temporary, non-recurring resources.
Key Data
$21.1 billion
— Total amount of state reserves following the addition of funds.
$1.5 billion
— Amount added to state reserves due to strong tax receipts at the end of fiscal year 2024.
$16.1 billion
— Projected structural budget gap driven by the enacted budget.
$239 billion
— Total All-Funds spending for fiscal year 2025.
$2 billion
— Amount by which total All-Funds spending for fiscal year 2025 is higher than initially reported.
$2.3 billion
— Low end of the range for structural budget gaps in the Financial Plan, occurring in fiscal year 2026.
The New York State fiscal year 2025 budget agreement fails to address a structural deficit likely exceeding $16 billion while lacking necessary transparency regarding financial plan tables. Although the budget avoids tax increases and maintains reserves, all such funds should be deposited into the Rainy Day Reserve to prevent potential squandering.
Recommendations related to State Budget Reserves
All state reserves should be deposited into the Rainy Day Reserve to protect them from potential squandering.
Key Data
$16 billion
— The likely structural budget deficit left by the fiscal year 2025 budget.
$237B
— 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 addition of Tier 6 retirement-plan sweeteners.
$377 million
— The amount of unnecessary costs imposed on state and local government budgets next year due to Tier 6 retirement-plan sweeteners.
New York faces a significant structural budget gap of over $16 billion, necessitating restrained spending growth and the avoidance of using speculative federal funds for recurring costs. To ensure long-term fiscal stability, the state should prioritize transparency in financial planning, reject unnecessary retirement-plan enhancements, and avoid tax increases that could harm economic competitiveness.
Recommendations related to State Budget Reserves
Shrink the structural gap and strengthen long-term stability.
Restrain spending growth to reduce the structural budget gap that already is $16+ billion.
Include basic financial-plan tables to give New Yorkers a clear-eyed view of how their money is being spent next year.
Not include speculative, short-term federal money derived from a Medicaid/MCO tax to pay for ongoing costs.
Reject proposed Tier 6 retirement-plan enhancements because these sweeteners are expensive and unnecessary.
Reject tax increases because New York and its localities already collect more taxes per person than any other state.
Boost housing production to address the housing-supply and affordability crisis.
Defer decisions on the Heat Act until there is a full analysis and proposal about the consumer and economic impact of capping household utility bills.
Key Data
$16+ billion
— The size of the structural budget gap that needs to be reduced by restraining spending growth.
3.5 percent
— The proposed increase in adjusted State Operating Funds spending for the current year.
32 percent
— The growth in adjusted State Operating Funds from FY 2020 to FY 2025.
$33.8 billion
— The dollar growth in adjusted State Operating Funds from FY 2020 to FY 2025.
$6.4 billion
— The inflation-adjusted increase in State Operating Funds from FY 2020 to FY 2025.
New York State's current budget trajectory relies heavily on non-recurring resources and fails to adequately fund reserves, leaving the state vulnerable to future economic downturns. To ensure long-term fiscal stability, the state must prioritize building reserves with closeout balances and restrain annual spending growth to 2.0 percent.
Recommendations related to State Budget Reserves
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
$8 billion
— Additional funding currently required to make principal reserves sufficient to cover receipts losses and spending growth of a typical recession.
$20.3 billion
— Projected structural imbalance in the State budget beginning in fiscal year 2029 based on the one-house budgets.
$16.4 billion
— Projected structural imbalance in the State budget beginning in fiscal year 2029 based on the Executive Budget.
$16.8 billion
— Amount of non-recurring resources the Executive Budget relies on to achieve budget balance in fiscal year 2025.
$6.3 billion
— Additional amount of non-recurring resources the Legislature’s one-house budget proposals rely on.
New York State has significantly increased its principal reserves from $2 billion in 2020 to $20 billion today, yet these funds remain insufficient to meet the target of $28 billion needed to withstand potential economic downturns. To ensure long-term fiscal stability, the state should strengthen its reserve structure by mandating automatic deposits during economic growth and increasing the maximum allowed balance to 30 percent of state operating funds spending.
Recommendations related to State Budget Reserves
Deposit additional closeout balances to the Rainy Day Reserve: If additional receipts are realized during the closeout of fiscal year 2024, the balance should be deposited to the Rainy Day Reserve.
Transfer the full balance of the Economic Uncertainties Fund to the Rainy Day Reserve: The State has sufficient capacity to immediately transfer the full balance of the EUF to the RDR to protect the reserved funds for use only in a catastrophe or economic downturn.
Set a target for the Rainy Day Reserve to 22 percent of State Operating Funds spending: The State’s current goal of 15 percent is sound, but does not reflect the volatility of the State’s resources, so a target of 22 percent is needed to cover two years’ receipts losses and spending growth.
Increase the maximum allowed Rainy Day Reserve balance to 30 percent of State Operating Funds spending: Under current law, the balance of the RDR is capped at 25 percent of General Fund spending, but the cap should be raised to allow at least 22 percent SOF in reserves.
Mandate automatic Rainy Day Reserve deposits when the economy is growing: Sound fiscal management dictates that the State make deposits while the economy is growing so that it can use the balance when the economy is struggling.
Key Data
$2 billion
— The amount of principal reserves in 2020, which has since grown to $20 billion.
$20 billion
— The current total of principal reserves, including $500 million intended for migrant costs in fiscal year 2026.
$500 million
— The portion of the current $20 billion in principal reserves intended for migrant costs in fiscal year 2026.
$28 billion
— The estimated amount needed to meet the target standard of being able to withstand two years of recessionary receipts losses plus two years of 1 percent growth in State Operating Funds spending.
$14 billion
— The amount of the total principal reserves balance maintained in the Economic Uncertainties Fund, which is a non-statutory fund with no restrictions on its deposits or withdrawals.
New York City and State face significant fiscal challenges driven by years of unsustainable spending growth and structural budget gaps that require immediate restraint rather than tax increases or the depletion of financial reserves. Leaders must prioritize effective programs, improve government efficiency, and align recurring expenditures with revenues to avoid a looming fiscal reckoning that threatens the state's economic competitiveness.
Recommendations related to State Budget Reserves
Leaders should ignore calls to increase taxes and deplete reserves to patch structural budget problems.
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 and shrinking or eliminating those that are ineffective.
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 rather than increasing aid to wealthy districts that already self-fund a sound basic education.
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.
$15 billion
— The structural gap—recurring expenses compared to recurring revenue—in fiscal year 2028.
$3.6 billion
— The additional fiscal year 2025 expenses required to serve migrants and asylum seekers.
$8 billion to $9 billion
— The estimated outyear budget gaps for New York City.
40%
— The growth in Medicaid spending over the last three years.
New York State's Executive Budget for fiscal year 2025 maintains record reserves of more than $19 billion while attempting to address a structural budget gap of approximately $15 billion. To ensure long-term fiscal stability, the State must align future spending with its ongoing revenue base and improve budget transparency by avoiding fiscal maneuvers like lump sum appropriations.
Recommendations related to State Budget Reserves
The State must get on a path to align future spending with its ongoing receipts base to avoid structural budget imbalances.
Lawmakers should 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.
The State should publish basic financial plan tables with one-house and enacted budgets to improve budget transparency.
Lawmakers should avoid the use of lump sum appropriations and messages of necessity to improve budget accountability.
Key Data
$19 billion
— The Executive Budget maintains record State reserves at more than $19 billion.
$15 billion
— The State's structural budget gap is approximately $15 billion.
$9.9 billion
— The fiscal year 2028 budget gap is projected to widen to $9.9 billion.
$5.5 billion
— The State's spending base is supported in part by at least $5.5 billion in temporary tax increases and pre-payments.
New York State's principal reserves have grown to nearly $20 billion, yet this amount remains insufficient to withstand a two-year economic downturn, which would require approximately $28 billion. Future fiscal year 2024 surpluses should be directed into the Rainy Day Reserve, and current reserves must be better protected from being tapped for immediate fiscal stress.
Recommendations related to State Budget Reserves
Any fiscal year 2024 surpluses should be deposited into the Rainy Day Reserve.
The State needs to implement further improvements to the Rainy Day Reserve, especially mandatory deposits and protecting the full balance of reserves for a recession or true economic catastrophe.
Key Data
$20 billion
— The State's principal reserves, which have significantly improved under Governor Hochul's leadership.
$28 billion
— The estimated amount needed to weather two years of receipts losses and support spending growth in a downturn.
ten times
— The factor by which current principal reserves are greater than pre-pandemic levels.
New York State has increased its principal reserves to $19.6 billion, but this amount remains insufficient to weather a potential recession, which would require over $27 billion. Furthermore, the majority of these funds are currently held in the unprotected Economic Uncertainties Fund and should be moved into statutory lockboxes to ensure they are available for emergencies.
Recommendations related to State Budget Reserves
To deal with two years of recessionary tax receipt losses and fund modest annual SOF spending growth of 1 percent for two years of a recession, the State should have more than $27 billion in reserves.
If receipts exceed projections this year, additional funds should be deposited in the Rainy Day Reserve.
The full balance of the State’s principal savings should be moved immediately into statutory lockboxes.
Key Data
$19.6 billion
— The amount to which the State's principal reserves have increased over the past two years.
$2.4 billion
— The previous level of the State's principal reserves before the recent increase.
$27 billion
— The amount the State should have in reserves to weather two years of recessionary tax receipt losses and fund modest spending growth.
Two-thirds
— The portion of the State's principal reserves that remain in the unprotected Economic Uncertainties Fund.
New York State faces significant long-term structural imbalances, with budget gaps projected at $9.5 billion in fiscal year 2026 and $7.7 billion in fiscal year 2027. To address these challenges and avoid future cuts, the state must exercise spending restraint, particularly given its reliance on $9.1 billion in reserves, prepayments, and temporary tax increases to balance the fiscal year 2027 plan.
Recommendations related to State Budget Reserves
The State should take decisive action to rein in spending in the upcoming budget in order to stave off significant future cuts.
Significant spending restraint is still needed to stabilize and strengthen the State's fiscal foundation.
Key Data
$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 reliance on prepayments, reserves, and sunsetting tax increases in fiscal year 2027.
$16.8 billion
— The State's long-term structural imbalance.
$4.3 billion
— The reduced budget gap for next year.
New York faces a projected $22 billion structural budget deficit driven by unsustainable spending growth and the expiration of temporary revenue sources. To maintain fiscal stability and avoid future crises, the state must restrain spending in major programs like Medicaid and education rather than depleting reserves or raising taxes.
Recommendations related to State Budget Reserves
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 focus on understanding and reversing 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.
Another round of tax increases or drawing down reserves should not be part of the package.
To start bringing budget stability back, the state should start tightening its belt now.
Key Data
$22 billion
— The projected structural budget hole the state will face once temporary funds are removed.
$9 billion
— The projected budget gap for the upcoming fiscal year.
9.0%
— The annual rate at which state spending grew over the past three years.
$1.5 billion
— The amount included in the budget for migrant costs over two years.
$135 million
— The amount of federal funding provided for migrant costs to date.
$1.7 billion
— The amount by which actual tax receipts exceeded forecasts through the first half of the year.
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 has significantly increased its rainy day reserves to $19.5 billion, but further improvements are needed to ensure the state can weather future economic downturns without harmful service cuts. The state should consolidate its reserves into a single lockbox, mandate automatic deposits during economic growth, and set a target reserve level of 22 percent of operating spending.
Recommendations related to State Budget Reserves
Combine all principal reserves into the Rainy Day Reserve (RDR) lockbox immediately.
Deposit up to an additional $2.4 billion to the RDR this year.
Set a target for the RDR of 22 percent of SOF spending.
Increase the maximum allowed RDR balance to 30 percent of SOF spending.
Mandate automatic RDR deposits when the economy is growing.
Key Data
$19.5 billion
— Current amount held in New York State's principal reserves.
$27.9 billion
— Recommended rainy day savings level for fiscal year 2024.
$24.2 billion
— Projected two-year shortfall based on historical recessionary tax receipt losses.
$2.4 billion
— Additional amount recommended for deposit into the Rainy Day Reserve this year.
45 percent
— Portion of New York State's own source revenue derived from the economically sensitive personal income tax.
$2.0 billion
— Total reserves held by the state at the onset of the COVID-19 pandemic.
New York has made progress in strengthening its rainy day fund by raising balance and deposit caps, yet current reserves remain insufficient to withstand a potential recession. The state's $19 billion in savings falls short of the recommended $27 billion target, and a significant portion of these funds remains unprotected.
Recommendations related to State Budget Reserves
The state should strengthen the Rainy Day Fund by raising deposit and balance caps, tying fund size to State Operating Funds instead of the General Fund, combining all reserve funds in the Rainy Day Reserve, and mandating deposits when revenues are strong.
Key Data
$19 billion
— The current level to which reserve balances have increased.
$27 billion
— The recommended savings target for the Rainy Day Fund.
25%
— The new balance cap for General Fund spending.
15%
— The new annual deposit cap for General Fund spending.
New York State has increased its budget reserves to more than $19 billion, yet these funds remain at risk due to a structural budget gap exceeding $20 billion and projected future deficits of $9.1 billion next year and $13.4 billion in fiscal year 2027. The state's fiscal stability is further threatened by the failure to secure these reserves within the Rainy Day Reserve lockbox.
Key Data
$19 billion
— The amount of state reserves increased by the government.
$20 billion
— The state's annual structural budget gap that will be revealed once one-time revenues disappear.
$9.1 billion
— The projected future budget gap for the upcoming fiscal year.
$13.4 billion
— The projected future budget gap for fiscal year 2027.
$5 billion
— The amount by which annual tax receipt estimates were revised downward.
New York State's enacted budget includes deposits to reserves to protect against economic downturns, though some new spending was financed by reducing these proposed deposits. While the expansion of the Rainy Day Fund's maximum size allows for increased savings, prioritizing additional deposits remains essential for fiscal stability.
Recommendations related to State Budget Reserves
The State should prioritize additional deposits to the Rainy Day Fund to ensure the State can save more.
The State should avoid financing new spending by decreasing deposits to reserves, as this weakens the ability to respond to crises.
New York State's fiscal year 2024 budget framework, announced four weeks late, lacks the necessary financial transparency to clarify how the $229 billion spending plan will be managed. While the inclusion of a plan to increase reserves is a positive step, the state must release detailed financial tables to ensure the budget is sustainable and supported by recurring receipts.
Recommendations related to State Budget Reserves
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.
The State should stabilize its finances to ensure it is stronger and more able to take care of New Yorkers’ needs, rather than putting them at greater risk.
Key Data
$229 billion
— The total amount the State plans to spend and afford in the Fiscal Year 2024 budget.
New York State's budget proposals for fiscal year 2024 create unsustainable spending growth that risks future fiscal instability and deep service cuts. To ensure long-term security, the state must restrain spending, allow temporary tax increases to expire, and strengthen its rainy day reserve funds.
Recommendations related to State Budget Reserves
Restrain SOF spending growth to 2 percent annually.
Allow temporary tax increases to sunset as scheduled or earlier.
Maintain or expand the Governor’s Rainy Day reserves plan.
Publish basic financial plan tables with the enacted budget.
Reform the State’s budgeting and fiscal management to improve services, stability, and accountability.
Key Data
$19 billion
— Amount accumulated in the Rainy Day Fund and other reserve funds over three years.
$15 billion
— Projected structural deficit by fiscal year 2027 under the Governor's plan.
$20 billion
— Projected structural deficit by fiscal year 2027 if the Legislature's plans are enacted.
$7.2 billion
— Total budget gaps by fiscal year 2027 under the Governor's proposal.
$23.8 billion
— Growth in State Operating Funds from fiscal year 2020 to fiscal year 2023.
$28.2 billion
— Amount the Executive Budget proposal would exceed the prior spending trend by fiscal year 2027.
The New York State Assembly's budget proposal includes a reduction in deposits to reserves, which diminishes the state's capacity to withstand economic downturns. While both legislative houses propose strengthening the structure of the Rainy Day Fund, the overall budget plans add nearly $5 billion in new, largely recurring spending.
Recommendations related to State Budget Reserves
The final budget should adopt or even improve upon the Governor's version to strengthen the structure of the Rainy Day Fund.
The state should avoid plans to reduce deposits to reserves, as this decreases the State’s ability to weather an economic storm.
New York should prioritize fiscal stability by accelerating deposits into the Rainy Day Fund and increasing its allowable size to better protect against future economic downturns. The state should also mandate automatic reserve deposits during periods of growth and maximize transfers from the Economic Uncertainties Reserve to the Rainy Day Fund lockbox to ensure adequate protection.
Recommendations related to State Budget Reserves
The State should maximize multi-year transfers into the Rainy Day Fund lockbox from the Economic Uncertainties Reserve.
Automatic Rainy Day Fund deposits in periods of strong economic and fiscal growth should be required.
The allowable size of the Rainy Day Fund should be increased beyond the 20 percent of State Operating Funds that the Executive Budget proposes.
Key Data
$19 billion
— The amount of principal reserves targeted in last year's plan to build state financial stability.
20 percent
— The proposed allowable size of the Rainy Day Fund relative to State Operating Funds in the Executive Budget.
30 percent
— The recommended savings level relative to State Operating Funds that is considered beneficial based on analysis of prior recessions.
New York State's fiscal year 2024 executive budget utilizes a projected $8.7 billion surplus to bolster reserves and prepay debt, though it faces widening out-year budget gaps reaching $7.5 billion by 2027. The proposal to increase Rainy Day Fund caps and link them to State Operating Funds is a critical step to better protect savings for future economic downturns.
Recommendations related to State Budget Reserves
The state should raise the balance and deposit caps on the Rainy Day Fund significantly to better protect savings for use only during a downturn.
The state should tie the Rainy Day Fund to State Operating Funds rather than the General Fund to ensure savings are better protected.
Key Data
$8.7 billion
— Projected surplus at the end of fiscal year 2023.
$5.4 billion
— Amount allocated to accelerate planned Rainy Day Fund deposits from fiscal years 2024 and 2025.
$19 billion
— Total of the State's principal reserves by the end of fiscal year 2023.
$5.7 billion
— Widened out-year budget gap projected for fiscal year 2025.
$9.0 billion
— Widened out-year budget gap projected for fiscal year 2026.
$7.5 billion
— Widened out-year budget gap projected for fiscal year 2027.
New York faces a structural budget gap exceeding $12 billion annually, necessitating a focus on aligning spending with recurring revenues to avoid future fiscal cliffs. To ensure long-term stability and protect future generations, the state must restrain spending growth, which has increased by an average of 7.1 percent annually over the last three years.
Recommendations related to State Budget Reserves
New York should focus on aligning spending with revenues, and should not create new fiscal cliffs.
The State should close its gaps, stabilize its finances and services, and be better positioned to protect New Yorkers by restraining spending growth above its already high level to be in line with its recurring revenue.
All New York State leaders should focus not just on today, but on protecting generations of New Yorkers from a future downturn and self-made fiscal crises arising from unaffordable spending or counter-productive taxes.
At least half of any MTA stabilization plan should come from productivity improvements that reduce spending, which will require changes agreed to with labor.
The enacted budget should include a well-crafted successor to 421-a, which is critical for New York City’s production of affordable rental housing.
Key Data
$12 billion
— The amount by which the structural budget gap exceeds 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 increase in State Operating Funds spending over the past three years.
12.8 percent
— The growth in State Operating Funds spending for the current year.
New York State should bolster its financial stability by increasing its Rainy Day reserves with available mid-year revenues and enacting statutory changes to raise deposit limits. Strengthening these reserves is essential to better prepare for future economic downturns and fiscal risks.
Recommendations related to State Budget Reserves
The State should add at least $2 billion more than already planned to the Rainy Day reserves.
Statutory changes should be made to increase the allowed reserves deposits and balance.
Key Data
$2 billion
— Available revenues identified in the mid-year budget update that should be added to planned Rainy Day reserves.
New York State faces a $12 billion structural budget problem as pandemic-era federal aid expires and economic risks threaten future tax receipts. To ensure long-term fiscal stability, the state must restrain spending growth, reject extraordinary budget powers, and prioritize building reserves to weather potential economic downturns.
Recommendations related to State Budget Reserves
The State needs to bring the costs of Medicaid, education, transportation, housing, and environmental mitigation and sustainability in line with available revenues.
Reducing SOF spending growth to 2 percent annually would eliminate the current 2027 budget gap and accommodate the loss of nonrecurring resources.
Extraordinary powers and broadly defined lump sum appropriations should not be proposed this year, and should be rejected if they are.
The best proximate opportunity is to save the $2 billion in unallocated receipts for a rainy day.
The budget should also include proposals for more structural reforms, such as establishment of an independent fiscal analyst’s office, a transition to budgeting on a modified accrual basis, and implementation of a performance management system.
Stabilizing the MTA’s operating budget should rely significantly more on efficiency savings.
Key Data
$12 billion
— The total structural problem the State has in its sights for fiscal year 2027.
$40 billion
— The estimated amount needed to cover about three years' worth of tax receipts losses to weather a typical recession.
$19 billion
— The planned reserve amount by fiscal year 2025.
$9 billion
— The amount of reserves in fiscal year 2022.
$2 billion
— The amount of unallocated receipts that should be saved for a rainy day.
$2.5 billion
— The annual structural operating budget deficit of the Metropolitan Transportation Authority.
New York State's budget processes are hindered by cash-basis accounting and inadequate reserve funds, which leave the state vulnerable to fiscal shocks. Strengthening the Rainy Day Fund and adopting GAAP-compliant accounting would improve fiscal stability and ensure the state can better manage economic downturns.
Recommendations related to State Budget Reserves
Strengthen the Rainy Day Fund by raising deposit and balance caps, combining all reserve funds, and mandating deposits when revenues are strong.
Manage, report, and balance the budget in accordance with Generally Accepted Accounting Principles (GAAP) on a modified accrual basis.
Strengthen the debt cap to ensure debt and debt service are affordable.
Tightly tie appropriations to planned spending by reducing unfunded and undefined spending authority.
Implement comprehensive, transparent long-term capital planning processes.
Key Data
$9.0 billion
— Total principal reserves at the end of fiscal year 2022.
$27 billion
— Estimated amount needed to cover two years of average recessionary receipt shortfalls plus one percent spending growth.
$23 billion
— Potential balance the Rainy Day Fund would have exceeded in 2020 if automatic annual deposits and extraordinary receipts had been added.
$3.3 billion
— Amount held in the Rainy Day funds (Rainy Day Reserve and Tax Stabilization Reserve) at the end of fiscal year 2022.
$5.7 billion
— Amount held in the Reserve for Economic Uncertainties at the end of fiscal year 2022.
$1.2 billion
— Total amount added to the Rainy Day Reserve from fiscal year 2008 to fiscal year 2021.
New York faces future budget gaps approaching $6 billion, with projections reaching $12.7 billion by fiscal year 2028 if spending is not restrained. To maintain fiscal stability and prepare for potential economic downturns, the state must prioritize building reserves, limiting annual spending growth to 2%, and reevaluating education and health care expenditures.
Recommendations related to State Budget Reserves
The state should stay the course on reserves to ensure a lifeline for needy New Yorkers during the next recession.
The state should restrain spending growth, as limiting growth to 2% annually through 2028 would be enough to close that year’s $12 billion projected gap.
The state should charge a diverse panel of stakeholders to identify ways to transform Medicaid and New York’s health system overall to improve health and control costs.
The state should better target education aid to high-need districts and reevaluate assistance to wealthy districts that receive over $3 billion annually.
The state should implement comprehensive performance management to deliver high-quality, efficient services and focus funds where the impact is greatest.
Key Data
$6 billion
— Future budget gaps approaching this amount.
$12.7 billion
— Projected gap for the year following FY 2027.
$10 billion
— Current state reserves.
$19 billion
— Planned reserves over the next few years.
2%
— Annual spending growth limit.
$3 billion
— Annual aid received by wealthy districts.
New York State plans to deposit $15.4 billion into reserves over four years to reach a total balance of $19.4 billion, a strategy that remains critical as future budget gaps are projected to grow from $310 million in fiscal year 2024 to $6.2 billion by fiscal year 2027. To maintain fiscal stability, the State must continue building these reserves while simultaneously reducing recurring spending in high-growth areas like Medicaid and school aid.
Recommendations related to State Budget Reserves
The State must build reserves, vigilantly restrain spending growth, and identify and implement long-run cost savings.
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
$15.4 billion
— Amount the State plans to deposit into reserves over four years.
$19.4 billion
— Total reserve balances after the planned four-year deposit.
$310 million
— Projected budget gap in fiscal year 2024.
$6.2 billion
— Projected budget gap by fiscal year 2027.
$2.1 billion
— Increase in tax receipts in fiscal year 2023 based on collections to date.
$801 million
— Enhanced federal Medicaid funding provided for the next quarter.
New York State's Unemployment Insurance Trust Fund is currently $8.1 billion in debt, forcing employers to face higher tax burdens to repay the federal government. Lawmakers should consider options to accelerate debt repayment or provide targeted relief to businesses, while also pursuing structural reforms to ensure the system is better prepared for future economic downturns.
Recommendations related to State Budget Reserves
The State could take no action and let higher taxes replenish the Trust Fund over time, though this leaves employers facing elevated tax rates.
The State could partially accelerate repayment of the debt using State resources to reduce the time needed to return to a positive balance.
The State could completely pay off the debt immediately to reduce State and federal UI taxes on employers and allow the Trust Fund’s balance to grow more quickly.
State lawmakers should balance these tradeoffs when deciding whether to address the UI Trust Fund debt.
Lawmakers should consider reforming the UI system to ensure it is better equipped to meet claims during economic downturns.
Key Data
$8.1 billion
— Outstanding debt owed to the federal government for the Unemployment Insurance Trust Fund as of June 7, 2022.
$2.65 billion
— Balance of the Unemployment Insurance Trust Fund in February 2020, prior to the pandemic.
$110 million
— Interest accumulated on the Unemployment Insurance debt for the federal fiscal year 2022.
$6.5 billion
— Total unemployment insurance benefits paid out in New York in the second quarter of 2020.
27 percent
— New York's share of the total outstanding unemployment insurance debt across all U.S. states.
New York State's fiscal plan includes unprecedented deposits of $15.4 billion into reserves over four years, with $10.8 billion allocated to the Rainy Day Fund lockbox and $4.7 billion to unrestricted reserves. Maintaining this fiscal balance and securing these reserves will require strict adherence to spending targets and prudent financial management to avoid future budget gaps.
Recommendations related to State Budget Reserves
The State should ensure fiscal prudence by maximizing Rainy Day Fund deposits to maintain the financial plan's balance.
To preserve service levels and quality while maintaining reserve deposits, the State should adhere to spending targets established in the financial plan.
Key Data
$15.4 billion
— Total planned deposits to reserves over a four-year period.
$10.8 billion
— Amount of the total reserve deposits allocated to the Rainy Day Fund lockbox.
$4.7 billion
— Amount of the total reserve deposits allocated to unrestricted reserves.
New York's fiscal year 2023 budget agreement includes a 15 percent reserve set-aside, which should be secured in a locked Rainy Day Fund to protect against future economic downturns. While the reserve is a positive step, the budget adds billions in recurring spending without sufficient restraint, risking future fiscal stress given that past recessions have reduced receipts by over $40 billion.
Recommendations related to State Budget Reserves
The reported set aside of reserves equal to 15 percent of State operating funds 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 ensure last year’s tax increases expire on time or early.
Key Data
15%
— The reported set aside of State operating funds for reserves.
$40 billion
— The average reduction in expected receipts over three years caused by recent recessions prior to 2020.
$10 billion
— The amount of the Governor's proposed spending increase.
New York State's fiscal year 2023 budget negotiations should prioritize maintaining proposed reserve deposits to safeguard against future economic downturns rather than reducing them to fund recurring spending. Leaders should utilize the available $6 billion in flexible funding to meet priorities while ensuring that any additional spending is offset by savings to avoid future service cuts or tax increases.
Recommendations related to State Budget Reserves
Any additional recurring spending should be offset by savings elsewhere and not by reducing the amount the Executive Budget smartly allocated to reserves or by opening budget gaps that will require future service cuts or economically damaging tax increases.
Maintaining reserve deposits proposed by the Governor will help protect future New Yorkers from the next recession or emergency.
Key Data
$6 billion
— Likely amount of flexible funding available for the new year, comprised of the Executive Budget’s proposed property tax credit, COVID relief funds, and additional tax receipts.
New York State's proposed legislative budget plans threaten fiscal stability by significantly reducing planned reserve deposits to just $4.8 billion, compared to the Governor's $15 billion proposal. These spending increases risk creating future budget gaps of up to $7.7 billion, potentially necessitating future tax hikes or service cuts.
Recommendations related to State Budget Reserves
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 prioritize putting funds in reserves as the Governor proposed to ensure the continued fiscal stability needed to take care of New Yorkers over time.
The State should implement improvements in budgeting transparency, including publishing basic financial plan tables that show the receipts and disbursements with the one-house and enacted budgets.
The State should implement performance management to ensure and assess how successful its spending is in delivering results efficiently for New Yorkers.
Key Data
$15 billion
— Amount the Governor's budget proposes to add to reserves by fiscal year 2025.
$4.8 billion
— Amount the Legislature's proposals would add to reserves.
$7.7 billion
— Estimated budget gap in fiscal year 2026 under the Legislature's proposals.
$4.2 billion
— Estimated budget gap in fiscal year 2024 under the Legislature's proposals.
$19 billion
— Total emergency savings the State could lift to keep the budget balanced.
$15 to $17 billion
— Estimated annual tax receipts shortfall in a typical recession.
$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 should prioritize building state reserves to 15 percent of State Operating Funds to ensure the state can withstand future economic downturns or emergencies. Maintaining these reserve levels is critical for protecting the most vulnerable populations during inevitable fiscal crises.
Recommendations related to State Budget Reserves
State leaders should deposit funds into reserves as proposed to ensure the State can weather the next storm and protect New Yorkers.
Key Data
15 percent
— The Executive Budget includes a multi-year plan to build reserves to this percentage of State Operating Funds (SOF) spending.
New York State should increase its Rainy Day Fund to at least 17 percent of State Operating Funds spending, with a goal of 27 percent, to better prepare for future economic downturns. Additionally, the state should implement automatic deposits equal to two-thirds of tax receipts growth exceeding 2 percent to ensure consistent reserve growth.
Recommendations related to State Budget Reserves
The Legislature should support the Governor’s proposal to add $15 billion to reserves over the next four years.
The Legislature should support the Governor’s proposals to increase the legal limits to deposits and balances to the Rainy Day Fund, which would protect the reserved funds for a true emergency.
The State should target at least 17 percent of SOF spending in the Rainy Day Fund, with a goal of 27 percent.
Requiring deposits equal to two-thirds of common rate and base tax receipts growth in excess of 2 percent would help consistently build the reserve balance going forward.
The enacted budget should include and improve the proposed reserves to ensure the State's ability to care for those most in need during the next recession or emergency.
Key Data
$15 billion
— Amount the Governor proposes to add to reserves over the next four years.
$19 billion
— Proposed total reserve funds by fiscal year 2025, representing 15 percent of State Operating Funds spending.
17 percent
— Minimum target for the Rainy Day Fund as a percentage of State Operating Funds spending.
27 percent
— Goal for the Rainy Day Fund as a percentage of State Operating Funds spending.
2 percent
— Threshold for common rate and base tax receipts growth above which automatic deposits should be made.
$216 billion is the size of New York State fiscal year 2023 budget proposed by Governor Kathy Hochul. The proposed spending plan is balanced over five years and makes significant deposits to reserves, but also maintains high taxes and accelerates State spending growth. At an event with CBC Trustees, Governor…
New York's executive budget includes deposits into reserve funds that will eventually total 15 percent of state operating funds. To align with a commonly accepted national benchmark, these reserves should be increased to at least 17 percent, requiring an additional $2.5 billion in funding over time.
Recommendations related to State Budget Reserves
The state should increase its reserve funds to at least 17 percent of state operating funds, which would require adding $2.5 billion over time to meet the commonly accepted national benchmark.
Key Data
15 percent
— The total amount of state operating funds that the Executive Budget's reserve fund deposits will eventually reach.
17 percent
— The commonly accepted national benchmark for state operating fund reserves that the state should aim to meet.
$2.5 billion
— The additional funding required over time to increase state reserve funds to the 17 percent national benchmark.
New York faces a looming $3.5 billion fiscal cliff that necessitates careful budget management and the continued expansion of the state's Rainy Day Fund. While the state's budget appears sound in the short term, long-term fiscal stability requires prioritizing reserves and ensuring that new programs are affordable and well-managed.
Recommendations related to State Budget Reserves
The State should continue to enlarge the Rainy Day Fund to bolster fiscal stability.
Key Data
$3.5 billion
— The looming fiscal cliff facing the State budget.
New York State should prioritize building its rainy day reserves and Retiree Health Benefits Trust by depositing any tax receipts that exceed current projections to prepare for inevitable future recessions. Additionally, the state needs to identify recurring savings to address a projected $3.5 billion fiscal cliff in 2025 caused by the exhaustion of federal pandemic aid.
Recommendations related to State Budget Reserves
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.
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 fund other spending priorities by reallocating planned uses of State funds and federal aid rather than relying on new spending.
Key Data
$3.5 billion
— Recurring program spending supported by federal aid in fiscal year 2025 but not thereafter, creating a 'fiscal cliff'.
$19.6 billion
— The estimated two-year impact of a typical recession on state revenues.
$15 billion
— The amount of annual tax receipt shortfalls the State was projecting last January due to the pandemic.
$8.9 billion
— The amount State Operating Funds spending is projected to increase in fiscal year 2022.
$3.2 billion
— The amount State Operating Funds spending is projected to increase in fiscal year 2023.
New York State's reliance on non-recurring federal aid to support recurring programs creates a $3.5 billion fiscal cliff by fiscal year 2025. To ensure long-term stability, the state must improve financial transparency, abandon fiscal maneuvers, and prioritize bolstering reserves to prepare for future economic downturns.
Recommendations related to State Budget Reserves
The State should identify actions to reduce existing out-year gaps, avoid the fiscal cliff, and bolster reserves needed to mitigate the inevitable next downturn.
The State should retain flexibility in how it will reduce future budget gaps, including restraining new aid growth for wealthy districts since that is preferable to other alternatives to meaningfully control spending.
The State should improve budgeting and financial reporting, including foregoing fiscal maneuvers to make clear how accounting practices affect spending growth.
The State should shift to budgeting and reporting in accordance with Generally Accepted Accounting Principles (GAAP) to ensure transparency.
The State should present timely adopted financial plans and quarterly financial plan updates to improve transparency and accountability.
Key Data
$3.5 billion
— The projected fiscal cliff 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.
5.7 percent
— The decline in State Operating Funds (SOF) spending in fiscal year 2021 after adjusting for fiscal maneuvers.
15.5 percent
— The projected increase in State Operating Funds (SOF) spending in fiscal year 2022 after adjusting for fiscal maneuvers.
New York State's recent financial update includes $2.2 billion in additional annual tax receipts, with $2.4 billion allocated to the state's Rainy Day and Economic Uncertainties reserve funds. Despite these additions, the state's total reserves of $7.2 billion remain insufficient to adequately prepare for future economic downturns.
Recommendations related to State Budget Reserves
The State should deposit the vast majority of the additional $3 billion in projected receipts into Rainy Day reserves.
Key Data
$2.2 billion
— Additional tax receipts recognized in the First Quarter Financial Plan Update for the current year.
$8.5 billion
— Additional tax receipts projected over the next four years.
$2.4 billion
— Amount added to the State’s Rainy Day and Economic Uncertainties reserve funds.
$3 billion
— Potential additional current year receipts based on the Comptroller’s monthly cash reports.
$7.2 billion
— Total amount of reserves following the deposits outlined in the update.
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 prioritize fiscal stability by increasing rainy day funds to prepare for future economic downturns and transitioning recurring programs currently funded by temporary federal aid to permanent state revenue sources. Building sufficient reserves now, while the state has excess receipts, is essential to mitigate the impact of the impending federal fiscal cliff.
Recommendations related to State Budget Reserves
The state should put more funds aside for a rainy day to prepare for the next recession or severe emergency.
The state should shift priority recurring programs from federal to recurring state revenues over time to reduce the future federal fiscal cliff.
The state should build sufficient reserves now using the more than $5 billion in excess receipts identified this year.
Key Data
$5 billion
— The amount of excess receipts the state received this year, which should be used to build sufficient reserves.
$3.5 billion
— The cost of recurring programs currently supported by federal aid that will be in trouble when that aid runs out in four years.
$1.7 billion
— The amount of a state Medicaid payment that was delayed by three days to make spending appear lower.
New York State should prioritize fiscal restraint and avoid long-term borrowing for operating expenses, utilizing reserves and other strategies instead. Implementing strict oversight and transitioning to GAAP-based budgeting would ensure long-term fiscal stability and prevent the postponement of difficult financial decisions.
Recommendations related to State Budget Reserves
The State should balance this year’s budget without long-term borrowing for operating expenses.
Borrowing 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 more than 2 percent or the inflation rate, whichever is lower.
Any borrowing must 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 that plan.
The State should adopt fiscal integrity and transparency measures that include the transition to an annual State operating funds budget that is balanced in accordance with GAAP.
Key Data
$11 billion
— The amount of debt the State is proposed to be authorized to issue for operations.
$1.7 billion
— The amount of Medicaid payments the State shifted by three days to appear to spend less in fiscal year 2019.
2 percent
— The maximum rate by which state operating spending, inclusive of federal stimulus aid, should increase if borrowing is used.
$8 billion
— The amount of short-term debt the Fiscal Year 2022 Executive Budget proposes re-authorizing for one year.
$3 billion
— The amount of a line of credit for state agencies proposed in the Fiscal Year 2022 Executive Budget.
New York State faces significant budget gaps for fiscal years 2021 and 2022, necessitating a combination of spending cuts, federal aid, and revenue adjustments to achieve balance. The state holds $7 billion in total reserves, including rainy day and economic uncertainty funds, which could be utilized alongside other fiscal strategies to address the ongoing financial crisis.
Recommendations related to State Budget Reserves
The Executive Budget should present a plan to close the entire State budget gap if it does not receive federal aid.
Spending reductions should be targeted to minimize impact rather than reduce all spending uniformly.
The Fiscal Year 2022 Executive Budget should increase use of debt to finance capital expenses and limit capital expenses to investments that are necessary to maintain critical infrastructure, preserve public health and safety, and provide demonstrable economic benefits.
New York State should focus its scarce resources on those districts that lack the local resources to fund a sound basic education.
The State should avoid balancing this year’s budget using cost shifts or revenue intercepts that harm local governments.
The State should not convert this short-term debt to long term debt.
Key Data
$7 billion
— Total amount held in New York's rainy day funds, Economic Uncertainties Fund, and other reserves.
$16.7 billion
— The projected budget gap for fiscal year 2022, absent $8 billion in recurring local aid cuts.
$8.2 billion
— The reported budget gap for the current year prior to adjustments.
$3.5 billion
— The amount of short-term debt the State reportedly plans to repay within the current fiscal year.
$1.6 billion
— The amount of annual school aid going to wealthy districts that already spend enough local revenues to fund a sound basic education.
$2.5 billion
— The amount contained in New York's rainy day funds.
New York State faces a $58 billion budget gap over the next four years, exacerbated by a failure to adequately save for economic downturns during periods of growth. To address this shortfall, the state must implement a transparent plan that includes reducing aid to wealthy school districts, cutting unproductive economic development spending, and avoiding reliance on accounting shifts.
Recommendations related to State Budget Reserves
The State should implement a timely, transparent plan that makes the hard choices needed to balance the budget.
To close the $8 billion gap, the State should consider reducing school aid to wealthy districts.
The State 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 help close the budget gap.
The State should walk back tax policy expenditures as a method to address the budget shortfall.
The budget plan should not rely on fiscal maneuvers and accounting shifts that have obscured spending growth.
Key Data
$58 billion
— Projected budget gaps for New York State over the next four years.
$8 billion
— Amount of to-be-determined State aid to localities reductions included in the gap-closing plan.
$1 billion
— Amount of State agency spending reductions included in the gap-closing plan.
$726 million
— Additional federal Medicaid funding expected to offset a portion of planned State actions.
$69 billion
— Total receipts shortfall without accounting for Fiscal Year 2021 Enacted budget actions.
$1.7 billion
— Medicaid payments deferred into fiscal year 2020 and planned to be repeated in fiscal year 2021.
New York can address its fiscal deficits by utilizing $3.5 billion in rainy day funds and financing $3 billion in capital investments through bonds rather than relying on a stock transfer tax. Additionally, the state could improve its fiscal outlook by curtailing $1.6 billion in aid to wealthy school districts and $4.4 billion in ineffective economic development spending.
Recommendations related to State Budget Reserves
The state should utilize its $3.5 billion in rainy day funds to help balance the budget.
The state should finance $3 billion in capital investments through bonds instead of cash to preserve liquidity.
The state should curtail $1.6 billion in aid to school districts that possess sufficient local resources to fund a sound, basic education.
The state should curtail $4.4 billion in economic development spending that has demonstrated little impact, particularly in upstate communities.
The state should delay the Jan. 1, 2021 personal income tax cut as part of a sustainable, comprehensive, and balanced budget package.
The state should suspend the sales tax exemption on clothing to contribute to a balanced budget.
Key Data
$3.5 Billion
— Amount available in rainy day funds to help balance the state budget.
$3 Billion
— Amount of capital investments that could be financed through bonds instead of cash.
$1.6 Billion
— Amount of aid provided to school districts that already have sufficient local resources to fund a sound, basic education.
$4.4 Billion
— Amount spent on economic development programs that have demonstrated little impact, particularly in upstate communities.
Legislation to establish a Rainy Day Fund for New York City requires significant revisions to prevent the fund from becoming a slush fund. The Governor should negotiate a chapter amendment to ensure that withdrawals are strictly limited to defined periods of economic recession or severe emergency.
Recommendations related to State Budget Reserves
Any withdrawal should be limited only to times of economic recession or severe emergency, which should be defined in law.
Define a recession as two successive quarters of economic contraction as indicated by declines in real gross city product or employment.
Specify that a severe emergency should be accompanied by revenue losses or increased expenditures of at least one percent of city-funded spending.
Negotiate a chapter amendment with the bill sponsors and legislative leaders to require that any withdrawal be limited only to times of economic recession or severe emergency, as defined in law based on economic and fiscal indicators.
Key Data
1%
— The minimum threshold of revenue losses or increased expenditures of city-funded spending required to define a severe emergency.
50%
— The portion of the Rainy Day Fund balance that can be withdrawn to balance the budget under the proposed legislation.
New York State faces significant budget gaps due to revenue shortfalls, requiring a combination of expenditure reductions, asset sales, and the use of reserves to balance the fiscal plan. By implementing these strategies, the state can avoid deep cuts to essential services while managing long-term fiscal stress.
Recommendations related to State Budget Reserves
The State should use some of its reserves to close current and future 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 reduce school aid by $800 million in the current year without undermining districts’ ability to fund a constitutionally guaranteed Sound Basic Education.
Key Data
$3.1 billion
— Amount of reserves the State would need to use in fiscal year 2021 to close budget gaps.
$8.2 billion
— Budget gap remaining in fiscal year 2021.
$1.0 billion
— Target for asset sales in fiscal year 2022 and fiscal year 2023.
$800 million
— Recommended reduction in local aid, rather than the $8 billion presented in the Gap-Closing plan.
New York State and local governments face acute fiscal stress due to the pandemic, requiring careful management of reserves and other financial tools to balance budgets. Officials should prioritize limited use of rainy day funds to bridge gaps while avoiding long-term debt and ensuring intergenerational equity.
Recommendations related to State Budget Reserves
State and local leaders should choose among options based on their impacts, with the aim of minimizing harm, particularly to New Yorkers most in need, and maximizing benefit for the greatest number of New Yorkers.
The Citizens Budget Commission has recommended using no more than two-thirds of any rainy day fund in the first year.
The more fiscally prudent policy is to use proceeds from assets sales to create equivalent value on the balance sheet; that is, use the proceeds for capital investments or keep them as reserves.
Shifting costs in a manner that inappropriately burdens local jurisdictions for services that should be financed from the broadest possible tax base is inequitable and should be avoided.
Sound public finance generally requires that capital investments be financed with bonds of a duration equal to the useful life of the asset purchased.
Key Data
$100 million
— Amount of capital spending avoided that saves about $6.5 million annually in debt service.
$6.5 million
— Annual savings in debt service achieved by avoiding $100 million of capital spending.
New York faces significant fiscal uncertainty due to the pandemic, with projected revenue shortfalls potentially reaching $34 billion over three years and a $35 billion five-year budget gap. To manage this crisis, the state must adopt a "bare bones" budget that utilizes available reserves prudently while developing long-term strategies to ensure adequate funding for future emergencies.
Recommendations related to State Budget Reserves
The state should ensure the prudent use of available reserves to address emergencies such as the current pandemic.
The state should make plans for long-term strategies that provide more adequate reserves when difficult times recur.
Key Data
$4 billion
— Estimate of revenues likely to be below Executive Budget projections.
$7 billion
— Potential revenue decline if a recession or sharper stock market drops occur.
$34 billion
— Potential state revenue shortfall over three years based on previous recession analysis.
$18 billion
— Portion of the state's $35 billion five-year budget gap caused by unsustainable Medicaid expenditure growth.
$35 billion
— Total five-year budget gap facing the state.
$4.5 billion
— Potential relief provided through a temporarily increased federal share for Medicaid.
New York City and State are currently underprepared for a recession, with potential revenue shortfalls of $34 billion for the state and $15-20 billion for the city. To improve fiscal emergency preparedness, leaders should restrain spending, redirect excess revenues into rainy day funds, and enact legislation to ensure those reserves are only used during economic crises.
Recommendations related to State Budget Reserves
State leaders should close state budget gaps by restraining recurring spending without tax increases or fiscal gimmicks.
The state should ensure that any revenues coming in above current projections are saved in its rainy day funds.
The state should stop increasing school aid to wealthy districts and instead put those funds into reserves to protect New Yorkers in the future.
The mayor should immediately ask agencies to develop plans for productivity-based savings totaling 1% or more of city-funded expenditures to be included in the executive budget.
Both the mayor and the City Council should commit to putting all funds above projections into reserves.
The State must pass legislation enabling the use of a rainy day fund.
The state must require that the rainy day fund only be used during an economic recession or severe emergency.
Key Data
$34 billion
— Estimated three-year revenue shortfall for New York State in the event of an average recession.
$15-20 billion
— Estimated three-year revenue shortfall for New York City in the event of an average recession.
6-16%
— Percentage of the potential recession-related revenue shortfall that the city and state currently have in reserve.
$700 million
— Amount of revenue the state has already identified above current projections that should be saved in rainy day funds.
New York State's rainy day funds are currently inadequate, with reserves at only 2.8 percent compared to California's 12.4 percent. Increasing these deposits is essential to prepare for economic uncertainty and avoid harmful spending cuts or tax increases during a potential recession.
Recommendations related to State Budget Reserves
The State should increase deposits to rainy day funds to ensure they are sufficient to weather an eventual economic downturn.
Key Data
2.8 percent
— New York State's current rainy day fund reserves as a percentage of annual general fund expenditures.
12.4 percent
— California's rainy day fund reserves as a percentage of annual general fund expenditures.
$428 million
— The planned deposit into rainy day funds at the end of the current fiscal year.
$678 million
— The total growth in rainy day reserves since fiscal year 2018 if the planned deposit is made.
$34 billion
— The three-year revenue shortfall experienced during the average recession.
New York's current rainy day fund deposits are insufficient to weather a potential recession, as the state's reserves remain only a fraction of the necessary amount. To better manage fiscal risks, all unallocated settlement funds should be directed into the state's rainy day funds rather than relying on other budgetary maneuvers.
Recommendations related to State Budget Reserves
The State should ensure that all unallocated settlement funds are placed into the State’s rainy day funds to better prepare for economic downturns.
To address potential fiscal risks, the State should build reserves, control spending, and make changes as needed in the budget process.
Key Data
$428 million
— The amount of the previously planned deposit to the rainy day fund in fiscal year 2020.
New York faces a significant fiscal challenge with a cumulative four-year budget gap of $28.8 billion, exacerbated by a failure to adequately prepare for economic downturns. To ensure long-term stability, the state must prioritize building rainy day reserves and implementing transparent, realistic budgeting practices rather than relying on fiscal gimmicks.
Recommendations related to State Budget Reserves
The State should make every effort to increase its rainy day reserves, starting by moving $890 million in settlement funds from an ad hoc “economic uncertainty reserve” to the State’s official rainy day reserves, in addition to the $428 million in already planned deposits.
The State should not use gimmicks that inappropriately balance the budget, such as shifting expenses onto local governments, into future fiscal years, or off-budget, which undermines the ability to build sustainable reserves.
The State should develop a plan for addressing potential federal cuts to the disproportionate share hospital program, the Essential Plan under the Affordable Care Act, or the supplementary nutrition assistance program (SNAP) to protect fiscal stability.
Key Data
$2 billion
— Current amount held in two statutorily created budget reserve funds.
$22 billion to $44 billion
— Potential three-year recession-driven revenue shortfall that current reserves are insufficient to cover.
$890 million
— Amount of settlement funds the State should move from an ad hoc “economic uncertainty reserve” to official rainy day reserves.
$428 million
— Amount of already planned deposits to the State's rainy day reserves.
New York faces a significant fiscal imbalance with a projected four-year budget gap of $28.8 billion, driven by accelerating spending in Medicaid and school aid rather than revenue declines. To ensure the state can weather future economic recessions and maintain competitiveness, policymakers must restrain spending and identify recurring savings rather than increasing the already high tax burden.
Recommendations related to State Budget Reserves
Reconstitute the Medicaid Redesign Team to identify savings, specifically by evaluating policies to address rising long-term care costs and reforming supplemental payments.
Focus education aid on needy districts to fully fund a sound basic education, as current spending exceeds the amount needed.
Reduce unproductive economic development program spending, as there is little evidence that the current $4.4 billion annual investment produces results.
Consider reforms to retiree health benefits that were proposed in recent Executive Budgets to reduce post-employment benefit costs and future liabilities.
Exercise powers granted under the Medicaid global cap to prevent spending from exceeding budgeted amounts in future periods.
Key Data
$28.8 billion
— The total four-year budget gap, which is understated in official reporting.
$6.1 billion
— The projected 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
— The amount of state school aid received by wealthy districts with sufficient local resources to provide a sound basic education in the 2017-2018 school year.
$4.4 billion
— The amount New York spends annually on economic development programs with little evidence of results.
$35 billion
— The potential revenue shortfall that could be added to identified gaps in the event of a recession.
New York's education funding formula is flawed, leading to inequitable distribution where wealthy districts receive excess aid while some districts lack resources to provide a sound basic education. Reforming these formulas to better target aid would allow the state to reduce unnecessary spending and increase reserves to better withstand future economic downturns.
Recommendations related to State Budget Reserves
The State should revamp the Foundation Aid formula and other education aid formulas to properly account for local wealth and actual local funding.
The State should eliminate hold-harmless provisions and guaranteed minimum funding increases to ensure aid is directed where it is needed most.
Taking responsible steps to reform and redirect state education spending would allow the State to set aside more in reserves, which in turn would increase the State’s ability to sustain education funding through the next recession.
Expense-based aids and other types of education aid, such as high tax aid, should be redirected towards those districts without the resources to provide a sound basic education.
The State should use the most up to date data available when calculating aid to ensure every district has the resources needed to fund a sound basic education.
Key Data
10 percent
— State reserves are currently at a level that is barely 10 percent of what may be needed to compensate for recession-driven revenue losses.
$13.6 billion
— New York spent $13.6 billion more than necessary to fund a sound basic education as defined by the Foundation Aid Formula in school year 2017-2018.
$1.6 billion
— In school year 2017-2018, 129 districts raised enough revenues from local resources to fund a sound basic education and still received $1.6 billion in state aid.
$75 million
— The total amount of funding needed to bring the 25 districts that lacked sufficient resources to fund a sound basic education up to the required level is less than $75 million.
$4 billion
— Medicaid spending is $4 billion over budget in the current year.
$3 billion
— Medicaid spending is forecast to be $3 billion over budget next year.
New York's current education funding formula is flawed, leading to the overfunding of wealthy districts while failing to ensure all districts can provide a sound basic education. Reforming this formula would not only improve equity but also enable the state to increase its budget reserves to better withstand future economic recessions.
Recommendations related to State Budget Reserves
The state should significantly revamp the Foundation Aid formula and other education aid formulas to properly account for local wealth and actual local funding, which would allow the state to set aside more in reserves to increase the likelihood that state education funding could be sustained through the next recession.
The state should eliminate hold-harmless provisions and minimal growth rates to ensure aid is directed where it is needed most, thereby freeing up resources to increase state budget reserves.
The state should use the most up-to-date data available when calculating education aid to ensure resources are targeted effectively, allowing for greater fiscal stability and the ability to build adequate state reserves.
Key Data
10 percent
— State reserves are currently at only 10 percent of the amount potentially required to offset revenue losses during a recession.
$13 billion
— New York is on track to spend $13 billion more than is necessary to provide a sound basic education across the state.
$2 billion
— Wealthy districts that already raise enough local revenue to fund a sound basic education still receive almost $2 billion in State aid.
$1.9 billion
— The wealthiest decile of school districts are on track to spend $1.9 billion more than is needed to fund a sound basic education in school year 2020.
New York State should avoid spending the $829 million in settlement funds currently held in a reserve for economic uncertainties, as total rainy day reserves remain under $3 billion. This amount is insufficient to cover potential recessionary revenue shortfalls, which could exceed $30 billion over a three-year period.
Recommendations related to State Budget Reserves
The state should avoid spending the $829 million in settlement funds that were deposited into a reserve for economic uncertainties.
Key Data
$829 million
— Amount of settlement funds deposited into a reserve for economic uncertainties that the state should avoid spending.
$3 billion
— Total amount of state rainy day reserves available to cover potential shortfalls.
$30 billion
— Projected recessionary revenue shortfalls over a three-year period.
The New York State budget agreement fails to adequately prepare for a potential economic downturn, as the current rainy day fund of less than $3 billion is insufficient to cover a projected three-year recession gap of $34 billion. To mitigate future fiscal instability, state leaders should prioritize restraining spending growth and increasing reserve funds rather than relying on temporary tax surcharges to support increased spending.
Recommendations related to State Budget Reserves
If State leaders fear an imbalance while adopting the budget, they should restrain spending growth and increase the State's paltry rainy day funds.
The State should phase out the 'temporary' personal income tax surcharge to ease an option to raise revenues to weather the next recession.
Key Data
$3 billion
— The size of the Rainy Day Reserve fund, which is insufficient to cover potential recessionary impacts.
$34 billion
— The estimated three-year potential revenue gap the state could face during a recession.
$500 million
— The threshold of state general fund imbalance at which the Division of the Budget is authorized to develop plans to cut local aid.
New York State faces significant revenue volatility due to its reliance on high-income earners, with potential recessions threatening to create multi-billion dollar budget gaps that current reserves are insufficient to cover. To mitigate these risks, the state must constrain spending growth and increase deposits into its rainy day funds to better prepare for economic downturns.
Recommendations related to State Budget Reserves
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.
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
$2.5 billion
— The projected balance of New York State's rainy day reserves at the end of fiscal year 2020.
$34.1 billion
— The estimated three-year cumulative tax revenue shortfall if a hypothetical recession began in fiscal year 2021.
$12 billion
— The amount of one-time monetary settlements accumulated between 2014 and 2019 that the state missed the opportunity to save.
$33.4 billion
— The portion of budget gaps that would need to be closed by other actions because current reserves are insufficient.
7 percent
— The maximum combined fund balance of general fund disbursements allowed under law for rainy day reserves.
New York State faces a $2.3 billion revenue shortfall driven by federal tax changes and economic volatility, necessitating immediate fiscal adjustments to close budget gaps. To improve long-term fiscal health and weather economic uncertainty, the state should limit spending growth, repeal specific tax credits, and double its $2.3 billion in rainy day reserves by repurposing $2.9 billion in unused settlement funds.
Recommendations related to State Budget Reserves
The State should restrain spending growth, avoid one-shot gap-closing actions, and bolster its rainy day funds.
The State should shore up reserves by eliminating the appropriations connected to unused settlement funds, which total approximately $2.9 billion, and by dedicating them to rainy day funds.
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 hold spending growth to 2 percent to be in the best position to weather potential economic uncertainty.
The State should repeal the property tax relief credit set to expire after calendar year 2019 to reduce the fiscal year 2020 deficit.
Key Data
$2.3 billion
— Shortfall in January personal income tax collections reported by Governor Cuomo.
$2.9 billion
— Total of allocated but unused settlement funds that could be dedicated to rainy day reserves.
$2.3 billion
— Total amount of the State's current rainy day reserves under the Governor’s budget proposal.
$1.45 billion
— Savings achieved by holding spending growth to 2 percent in fiscal year 2020.
$1 billion
— Deficit reduction achieved by repealing the property tax relief credit set to expire after calendar year 2019.
$500 million
— Potential savings from increasing education aid only to districts that need additional resources to fund a sound basic education.
New York State's fiscal year 2020 budget fails to adequately build necessary reserves, with rainy day funds totaling only $2.3 billion, or 3 percent of general revenues. This amount is insufficient to withstand an economic recession, which historically has caused revenue losses exceeding $20 billion.
Recommendations related to State Budget Reserves
The State should build reserves to address potential economic and fiscal risks.
The State should increase rainy day funds to a level sufficient to withstand an economic recession, as the current balance falls far short.
The State should control spending as a primary method to address potential risks rather than relying on expanded executive authority.
Key Data
$2.3 billion
— The current balance of the State's rainy day funds.
3 percent
— The portion of general revenues represented by the State's rainy day funds.
$20 billion
— The amount of multiyear revenue losses experienced during each of the past three recessions.
$500 million
— The increase in the State's rainy day funds over two years.
New York faces a $3.1 billion budget gap in fiscal year 2020 and a $16.1 billion cumulative gap through 2022, necessitating a strategy that prioritizes fiscal stability over increased spending. To prepare for potential economic downturns, the state should cease using one-time revenues for recurring expenses and increase its rainy day fund deposits, which currently sit at less than 3 percent of general fund tax revenues.
Recommendations related to State Budget Reserves
The State should build reserves by making deposits into its rainy day funds, as it has not done so since fiscal year 2015.
The State should avoid using one-time revenues from financial settlements and conversions to fund recurring operations, which exacerbates future deficits.
The State should refrain from expanding Executive Authority to manage fiscal uncertainty, as the Legislature has already rejected proposals to allow the executive branch to transfer spending or cut local aid without legislative approval.
Key Data
$1.8 billion
— The current amount in the State's rainy day funds, which is less than 3 percent of general fund tax revenues.
$383 million
— One-time revenue from financial settlements currently used to fund operations.
$500 million
— One-time revenue from the Fidelis conversion currently used to fund operations.
$800 million
— Amount in settlements received by the State after the fiscal year 2019 budget was adopted.
$3.1 billion
— The budget gap the State faces in fiscal year 2020.
$16.1 billion
— The cumulative budget gap the State faces through fiscal year 2022.
8 is the number of years Andrew Cuomo has served as the 56th Governor of New York State. CBC's David Friedfel and Patrick Orecki join the podcast to discuss the demographic, fiscal, and policy trends of the last 8 years.
Watch the original segment here . Progressive, first, best are all terms have been used to describe New York’s economy. One non-partisan watchdog group took a look at how responsible the state has been with its money since Andrew Cuomo took office eight years ago. "See what has actually changed…
New York State has received over $11 billion in litigation settlements since 2014, yet none of these funds have been directed toward rainy day reserves, which currently sit at only 2.7 percent of general fund tax revenues. Instead of using these windfalls for operating expenses or economic development, the state should reallocate unused settlement funds to reach the recommended reserve level of 10 percent.
Recommendations related to State Budget Reserves
The State should bolster the State’s rainy day funds to the recommended level of 10 percent of general fund tax revenues.
Where practical, unused settlement funds should be reappropriated to the State’s reserves.
At a minimum, the recently realized $205 million, and $76 million that remains unallocated, should be deposited directly into the State’s rainy day fund.
Key Data
$11 billion
— Total litigation settlements received by New York State since fiscal year 2014-2015.
2.7 percent
— Current rainy day reserves as a percentage of general fund tax revenues.
10 percent
— Recommended level of general fund tax revenues for rainy day funds.
$5 billion
— Unused settlement funds remaining at the end of fiscal year 2018.
$205 million
— Settlement with Deutsche Bank announced on June 20.
$652 million
— Amount of settlement funds used to close the operating budget gap in the fiscal year 2019 budget.
The Governor's proposal to rely on $3 billion in speculative revenue from health insurer conversions to balance the budget is imprudent because these funds are uncertain and nonrecurring. Instead of using these finite resources for ongoing Medicaid spending, they should be directed toward bolstering reserves, repaying debt, or funding one-time capital investments.
Recommendations related to State Budget Reserves
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.
Nonrecurring resources are best used to repay debt, support capital investments, increase reserves, or make possible other desirable one-time expenses.
Key Data
$3 billion–$750 million
— The amount of revenue the Governor's Executive Budget and Financial Plan for fiscal year 2019 proposed to receive annually over four years from health insurer conversions.
$4.6 billion
— The total revenue generated for the State from the Empire conversion from fiscal year 2006 to fiscal year 2010.
$1.2 billion
— The amount projected to be received from the Empire conversion in the fiscal year 2005 enacted budget.
$95 million
— The actual amount received by the State in conversion proceeds from fiscal year 2009 to fiscal year 2012.
$3.75 billion
— The publicized price for the acquisition of nonprofit Fidelis by for-profit Centene.
$250 million
— The amount of annual revenue proposed to be put into a reserve to offset future federal cuts in health programs.
New York maintains only $1.8 billion in rainy day reserves, leaving the state ill-prepared for a potential recession that could cost between $9.2 billion and $12.0 billion in the first two years alone. To mitigate the impact of future economic downturns, the state should implement mandatory deposit legislation and establish a more robust reserve fund similar to California's model.
Recommendations related to State Budget Reserves
New York State should consider legislation to mandate deposits into a rainy day fund.
The level of reserves should be thoroughly analyzed with respect to tax revenue volatility to establish a healthy level that protects New Yorkers from the impacts of budget cuts.
New York should make significant deposits to reserves to prepare for economic downturns, similar to the approach taken by California.
Key Data
$13.5 billion
— The proposed amount for California's rainy day fund in fiscal year 2019.
$1.8 billion
— The current balance of New York State's rainy day reserves.
$43.9 billion
— The estimated four-year impact of a recession on a financial plan that assumed economic growth.
$10.7 billion
— The amount in monetary settlements New York State received from fiscal years 2015 to 2018 that were not placed into rainy day funds.
$9.2 billion and $12.0 billion
— The range of estimated tax revenue losses in the first two years of a prospective recession.
$6.6 billion
— The amount more in reserves New York would have achieved had it made deposits similar to California.
New York's fiscal health is ranked 39th nationally, largely due to high long-term debt and significant unfunded postemployment benefit liabilities. To improve its financial standing, the state should prioritize reducing long-term debt through pay-as-you-go capital funding and reform post-retirement health benefits by contributing to the newly created trust fund.
Recommendations related to State Budget Reserves
New York's leaders should focus on decreasing long-term debt and reducing the State’s OPEB liabilities.
New York must do a better job of funding its capital expenses on a pay-as-you-go basis to avoid increasing the State’s debt burden.
The State should look to innovative development tools, such as public-private partnerships, to expand capital investment more efficiently.
New York should adopt proposals to reform post-retirement health benefits that were previously rejected by the Legislature.
The State should begin contributing toward the new postemployment benefit trust fund created in the Enacted Budget for Fiscal Year 2018.
Key Data
$9.4 billion
— New York’s All Funds cash balance at the end of March 2015.
$14.8 billion
— New York’s All Funds cash balance at the end of June 2015.
$23.6 billion
— Total cash, cash equivalents, and investments on hand at the end of fiscal year 2015.
45th
— New York's national ranking for outstanding OPEB liability per thousand dollars of income.
New York State should prioritize using one-time financial settlements to bolster long-term fiscal health by enhancing reserves, paying down debt, and funding capital investments rather than operating expenses. Additionally, the state needs to establish a dedicated fund for Other Post Employment Benefits (OPEB) liabilities to ensure future savings for taxpayers.
Recommendations related to State Budget Reserves
The State should use one-time financial settlements to provide long-term benefits such as pay-as-you-go capital investments that replace borrowing, enhance reserves, or accelerate debt payments.
The State should save for its OPEB liabilities by dedicating one-time settlements to this purpose to provide long-term savings for the state’s taxpayers.
Key Data
$150 million
— Amount dedicated to the state’s rainy day fund from one-time financial settlements.
$1.8 billion
— Total amount of one-time financial settlements available in the current year.
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.
The Fiscal Year 2018 Executive Budget increases statutory reserves to $2 billion, though this amount, combined with settlement and debt management funds, remains less than 6% of state operating spending. These reserves are insufficient to withstand a recession, highlighting the need to restructure tax brackets and preserve the option of a temporary surcharge for future economic downturns.
Recommendations related to State Budget Reserves
Consideration should be given to restructuring the standing tax brackets and reserving for future economic downturns the option of a temporary surcharge.
Key Data
$150 million
— The increase in statutory reserves in the Fiscal Year 2018 Executive Budget.
$2 billion
— The total amount of statutory reserves.
$3 billion
— The amount of settlement funds allocated but not yet disbursed.
$500 million
— The amount available in debt management funds.
6%
— The maximum portion of state operating spending covered by the combined total of reserves, settlement funds, and debt management funds.
New York State's heavy reliance on volatile personal income taxes makes its budget highly susceptible to economic downturns, with a potential recession causing revenue shortfalls of up to $59 billion over four years. To mitigate these risks, the state must prioritize building its financial reserves now to avoid necessary tax increases or spending cuts during future economic contractions.
Recommendations related to State Budget Reserves
The State should build its reserves now to counter the potential impacts of an economic downturn.
Key Data
$59 billion
— Potential cumulative revenue loss over four years if a recession of the size and scope of the 2009-2012 period were to repeat.
18.2 percent
— Percentage of tax revenues that could be lost over four years in a recession of the size and scope of the 2009-2012 period.
$3 billion
— Annual revenue provided by the personal income tax surcharge on high income earners, which is set to expire on December 31, 2017.
63 percent
— Share of total tax revenues derived from personal income taxes in 2016.
41.5 percent
— Contribution of the top 1 percent of taxpayers to personal income tax revenues in 2015.
$74.7 billion
— Total tax revenues collected by New York State in 2016.
New York State should utilize its $2.5 billion in one-time financial settlements to fund long-term benefits like pay-as-you-go capital investments, debt payments, and enhanced reserves rather than ongoing operating expenses. Allocating $215 million of these funds to reserves is a fiscally responsible approach that should be supported.
Recommendations related to State Budget Reserves
The State should use one-time financial settlements to provide long-term benefits such as pay-as-you-go capital investments, accelerated debt payments, or enhanced reserves.
The proposal to allocate $215 million to reserves is appropriate.
Key Data
$2.5 billion
— The amount of one-time financial settlements the State currently has available.
$590 million
— The amount proposed to be dedicated to capital housing projects.
$215 million
— The amount proposed to be allocated to reserves.
The state should increase its rainy day fund deposits and revise rules to allow for larger reserves and easier access during economic downturns. Specifically, the plan proposes raising the maximum allowable reserves from 3 percent to 8 percent of disbursements and increasing the annual contribution limit to 1 percent.
Recommendations related to State Budget Reserves
The state should make a $315 million deposit to rainy day funds.
The state should increase the allowable annual contribution to rainy day funds from 0.3 percent to 1.0 percent of general fund disbursements.
The state should increase the maximum allowable rainy day reserves from 3 percent to 8 percent of disbursements.
The state should reduce the number of consecutive months of economic downturn required to allow a withdrawal from rainy day funds from five to three.
Key Data
$315 million
— Deposit to rainy day funds proposed in the Executive Budget.
0.3 percent
— Previous allowable annual contribution to rainy day funds as a percentage of general fund disbursements.
1.0 percent
— New allowable annual contribution to rainy day funds as a percentage of general fund disbursements.
3 percent
— Previous maximum allowable rainy day reserves as a percentage of disbursements.
8 percent
— New maximum allowable rainy day reserves as a percentage of disbursements.
5
— Number of consecutive months of economic downturn previously required to allow a withdrawal from rainy day funds.
The fiscal year 2016 Executive Budget includes sensible enhancements to rainy day funds, such as increasing the maximum allowable reserves from 3 percent to 8 percent of disbursements and raising the annual contribution limit to 1 percent. These measures, alongside a $315 million deposit, aim to bolster the state's financial resilience against future economic downturns.
Recommendations related to State Budget Reserves
The State should increase the allowable annual contribution to rainy day funds from 0.3 percent of general fund disbursements to 1 percent to strengthen the State’s ability to withstand adverse economic conditions.
The State should increase the maximum allowable reserves from 3 percent to 8 percent of disbursements to better prepare for future economic downturns.
The State should allow access to rainy day funds after three consecutive months of economic downturn instead of five months to improve the flexibility and responsiveness of reserve usage.
Key Data
$315 million
— Proposed deposit to rainy day funds for future economic downturns.
$850 million
— Amount set aside for a possible settlement of a rate dispute with the federal government over Medicaid payments.
8 percent
— Proposed maximum allowable reserves as a percentage of disbursements.
1 percent
— Proposed allowable annual contribution to rainy day funds as a percentage of general fund disbursements.
0.3 percent
— Current allowable annual contribution to rainy day funds as a percentage of general fund disbursements.
3 percent
— Current maximum allowable reserves as a percentage of disbursements.
New York's $5 billion windfall from bank settlements should be prioritized for long-term fiscal health, such as paying down debt, shoring up the Rainy Day Fund, and funding pension obligations, rather than recurring expenses. Investments should focus on documented infrastructure needs and economic competitiveness while avoiding opaque allocation practices and temporary spending commitments.
Recommendations related to State Budget Reserves
The State Legislature should reject any proposal with recurring costs that continue after the windfall has been depleted.
New York should prioritize proposals to permanently reduce the cost of providing services or prepare the State for future challenges, such as boosting savings and reducing long-term liabilities.
State leaders should shore up the Rainy Day Fund and fully fund the State’s pension funds to improve long-term fiscal health.
Priority should be given to projects that address documented needs and will increase the state’s economic competitiveness.
State leaders should extend design-build procurement authority to reduce the time to complete construction and lower project costs.
Key Data
$5 billion
— The amount of the windfall from bank settlements available for state use.
almost one-third
— The portion of the state’s sewage systems that have been beyond their useful life for more than 10 years.
almost 40 percent
— The amount of the state’s pavement that is in fair or poor condition.
$138 billion
— The total of the State’s annual budget.
27 percent
— The reduction in project costs found by the Department of Transportation when using design-build procurement.
New York is set to receive over $4 billion in legal settlements, which provides an opportunity to strengthen the state's fiscal position by paying down debt, addressing long-term liabilities, and bolstering the Rainy-Day Reserve Fund. Rather than funding short-term expenses, these funds should be utilized to ensure long-term financial stability and avoid future service cuts or tax hikes.
Recommendations related to State Budget Reserves
The state should increase the Rainy-Day Reserve Fund to help prevent drastic service cuts and tax hikes during economic downturns.
The state should reduce long-term debt to lower debt service costs and benefit taxpayers.
The state should reduce other long-term liabilities, such as unfunded pension obligations and other-post-employment-benefit (OPEB) liabilities.
The state should increase pay-as-you-go capital investments to avoid borrowing and debt service.
The state should make one-time investments that provide multiyear benefits, such as information-technology systems or revolving-loan funds.
Key Data
$4 billion
— Amount in settlements from large financial institutions that New York state will soon receive.
$52.2 billion
— Total amount of New York state's long-term debt.
$2.2 billion
— Current amount in New York's rainy-day and other reserve funds.
$3.3 billion
— Amount in rainy-day and other reserve funds at the end of fiscal 2005-06.
$350 million
— Amount currently in the Rainy Day Reserve Fund, which is restricted for use during economic downturns.
$66.5 billion
— New York's estimated OPEB liability.
New York's fiscal strategy should prioritize using unanticipated revenue for non-recurring investments like debt reduction and rainy day fund deposits rather than expanding operating expenses. Furthermore, the state must ensure that excess reserves from the State Insurance Fund are utilized exclusively for one-time capital investments and debt retirement, rather than covering recurring costs.
Recommendations related to State Budget Reserves
If unanticipated resources materialize in the 2013-14 fiscal year, they should be treated as non-recurring and used prudently for investments, such as debt reduction and/or rainy day fund deposits, to help improve the State’s long-term financial standing.
The Legislature should require that all of the State Insurance Fund reserves be used prudently for purposes such as capital investment and debt retirement.
Key Data
$2 billion
— Amount of excess reserves resulting from accounting changes at the State Insurance Fund.
$750 million
— Amount of State Insurance Fund reserves the budget would use in fiscal year 2013-14 for one-time expenses.
$500 million
— Portion of State Insurance Fund reserves allocated for capital projects.
$250
— Portion of State Insurance Fund reserves allocated for debt retirement.
New York State's 2012-13 budget includes a permanent authorization for deposits into the rainy day fund, with a contribution of approximately $170 million for the current year. This follows a $100 million contribution from the previous fiscal year, marking the second consecutive year of deposits into the state's reserve.
Key Data
$170 million
— The estimated deposit to the rainy day fund for the current year.
0.3 percent
— The percentage of current-year general fund disbursements authorized for permanent deposit into the rainy day fund.
$100 million
— The contribution authorized for the rainy day fund at the end of fiscal year 2011-12.
New York State should avoid using reported mid-year surpluses for new spending or tax cuts, as these figures are often misleading and volatile. Instead, any unexpected revenue should be prioritized to address existing fiscal gimmicks, labor savings targets, and projected budget gaps for the upcoming year.
Recommendations related to State Budget Reserves
The Governor and the Legislature should view any unexpected revenues as a temporary blessing and keep the lid on the piggy bank sealed shut.
New York should reduce reliance on existing fiscal gimmicks, particularly ones that add to long-term costs, before committing to any new spending or tax reductions.
Any surprise surplus should be used in ways that help lower the gap, such as paying down debt or reversing deferrals, rather than in ways that make the gap grow.
The state must finalize the remaining 84 percent of the $450 million target for savings from labor through concessions, agency consolidations, or layoffs.
Key Data
$799 million
— Tax collections for the first quarter of the fiscal year came in higher than original projections.
$1.2 billion
— Disbursements for the first quarter of the fiscal year came in below projections.
$351 million
— Tax receipts came in short for the month of July.
$377 million
— Amount of savings from labor that the Governor and unions still need to finalize.
$2 billion
— Amount of undesirable fiscal gimmicks in the current-year budget.
$2.4 billion
— Projected budget gap for the next fiscal year.
New York State's rainy day funds have proven ineffective due to structural limitations, including restrictive repayment rules and inadequate deposit mandates. To improve fiscal stability, the state should implement clearer, more consistent rules for deposits, withdrawals, and repayment that are tied to economic indicators rather than arbitrary timeframes.
Recommendations related to State Budget Reserves
New York should mandate prudent uses of surplus funds, including rainy day fund deposits.
The state should raise the cap on the size of the rainy day funds to reflect likely needs in times of recession.
Policymakers should set uniform conditions for withdrawal from both funds, with those conditions based on declining economic indicators.
The state should set uniform repayment rules for both funds, with those rules allowing adequate time for economic and fiscal recovery before payments must begin.
Surplus funds should be defined from both an accounting perspective and in terms of unusually rapid revenue growth to identify funds subject to mandatory deposit rules.
Key Data
$10 billion
— The budget gap for the fiscal year beginning April 1, 2011.
20.3 percent
— The decline in New York State’s total tax collections from the first quarter of fiscal year 2008‐09 to the first quarter of fiscal year 2010‐11.
$1.2 billion
— The negative general fund cash balance that would have occurred in May 2009 without the use of the Tax Stabilization Reserve Fund and the Rainy Day Reserve Fund.
$1.03 billion
— The total balance of the Tax Stabilization Reserve Fund from fiscal years 1946 to 2011.
$2.3 billion
— The amount the State had in various other reserve funds at the beginning of fiscal year 2007.
$37 million
— The general fund cash balance at the end of May 2009.
New York faces a significant budget gap driven by a shrinking tax base and rising spending, necessitating a shift away from temporary revenue measures and one-shot fixes like prior year reserves. Sustainable fiscal health requires aligning long-term spending growth with actual revenue growth rather than relying on recurring tax increases or non-recurring financial maneuvers.
Recommendations related to State Budget Reserves
It is now time to allow temporary revenue measures to phase out and to begin to restructure spending commitments.
Spending growth must be more closely aligned with long-term revenue growth in order to avoid a perpetual reliance on one-shot revenues and tax increases.
Key Data
$11.7 billion
— Revenues attributable to actions taken since the start of fiscal year 2008-09.
$7.8 billion
— Recurring cuts proposed by the Governor.
$9.5 billion
— Budget gap addressed in the Governor’s plan.
$8.5 billion
— Reduction in base tax collections in the current fiscal year due to the recession.
$25.8 billion
— Projected increase in state spending by fiscal year 2013-14 without new action.
$1.1 billion
— Non-recurring revenues ('one-shots') used in the current fiscal year, including prior year reserves.
New York should consider alternatives to a rigid state spending cap, such as strengthening balanced budget requirements, adopting accrual-based accounting, and expanding the state's rainy day fund to ensure fiscal stability. Rather than relying on formulaic caps that can lead to unintended consequences like shifting costs to local governments, the state should focus on more comprehensive fiscal management tools.
Recommendations related to State Budget Reserves
Establish a more rigorous and comprehensive balanced budget requirement.
Move the executive and legislative budgets from a cash basis to an accrual system in accordance with generally accepted accounting principles.
Enhance the allowable size of the state’s rainy day fund and require that funds are dispersed only in an emergency.
Impose a new constitutional debt limit to rein in state borrowing.
Provide more timely and meaningful fiscal information to legislators and to the public.
Key Data
$3.2 billion
— Colorado sent rebate checks to taxpayers totaling $3.2 billion between fiscal year 1996-97 and fiscal year 2000-01.
$1.1 billion
— Connecticut borrowed $1.1 billion at the end of last year for an unexpected deficit.
$1.1 billion
— Cuomo predicts that this proposal would generate a $1.1 billion surplus in fiscal year 2011-2012.
$380 million
— The fiscal year 2005 budget exceeded the limit by $380 million, forcing lawmakers to declare an emergency to account for extra spending.
$235 million
— In fiscal year 2004, lawmakers added appropriations and prepaid expenses totaling $235 million in order to raise the spending cap for the following year.
$17 billion
— The Governor argues that his spending cap would have curbed state spending by nearly $17 billion in State fiscal year 2007-08 had it been in place starting in 2002-03.
New York State's current budgetary process relies on an outdated General Fund focus that obscures the true financial picture, necessitating a shift toward broader 'State Operating Funds' and accrual-based accounting. Additionally, the state's current 5 percent rainy day reserve limit is likely inadequate given the state's high dependency on volatile personal income tax revenues.
Recommendations related to State Budget Reserves
The state should broaden the basis for reporting and budget reform to encompass all of the activities of state government, specifically using 'State Operating Funds'.
The state's capital budget should be separated from its annual operating budget plan to better cover the activities of public authorities and state agencies.
More detailed GAAP reporting requirements should be adopted to ensure that postponed commitments and revenue shortfalls are easily identified.
A simpler, more transparent budget format that tracks cash disbursements should be developed to clarify the relationship between executive budget disbursements and enacted appropriations.
The state should implement systematic performance measurement and reporting to improve government accountability and align with practices in other states.
Key Data
3 percent
— The maximum authorized size of the new 'Rainy Day' fund relative to General Fund spending.
5 percent
— The total rainy day reserve limit, which is likely inadequate for New York's revenue volatility.
$175 million
— The amount deposited into the new 'Rainy Day' fund in the fiscal year 2007-2008 budget.
$121.6 billion
— The total All Funds cash amount for the previous year.
$13.5 billion
— The deficit the state ran on a GAAP basis last year.
$1.9 billion
— The positive year-end balance reported by the state's cash report last year.
New York State's reliance on small, inadequately funded rainy day reserves leaves the state vulnerable during economic downturns, as current statutory caps limit the size of these funds to a small percentage of general fund spending. To improve fiscal stability, the state should combine existing reserve funds, eliminate arbitrary caps, and mandate contributions during periods of economic prosperity.
Recommendations related to State Budget Reserves
The SRDF and the TSRF should be combined and be subject to the constitutional constraint on the TSRF.
The statutory rules for the combined fund should eliminate the cap, leaving the maximum size of the fund to political leaders’ discretion.
The rules should also establish criteria for mandatory contributions; the conditions should relate to growth in tax revenues and/or in the state’s economic base.
It should be required, rather than discretionary, to contribute to the fund in times of prosperity.
Key Data
$1,031 million
— TSRF fund balance reached this amount by fiscal year 2006-07.
$317 million
— TSRF fund balance at the end of fiscal year 1996-97.
$175 million
— Appropriation to the new Statutory Rainy Day Reserve in the fiscal year 2007-08 budget.
$1,611 million
— The 3 percent cap of the new Statutory Rainy Day Reserve.
New York State's current rainy day fund is limited to 2 percent of General Fund revenues, a cap that should be raised to 5 percent to improve fiscal stability. While a proposed constitutional amendment seeks to increase reserves, it includes counterproductive contingency budget provisions and fails to mandate necessary debt reform, requiring a more comprehensive legislative approach.
Recommendations related to State Budget Reserves
The Legislature should abandon the proposed constitutional amendment regarding the rainy day fund and work to design a new amendment that delivers true budget reform.
The Legislature should increase the usefulness of the existing rainy day fund by amending State Finance Law to raise its permissible limit from 2 percent to 5 percent of General Fund revenues.
Key Data
3 percent
— The limit of the rainy day fund proposed in the constitutional amendment, which is insufficient for effective reserves.
2 percent
— The current permissible limit of the existing rainy day fund under State Finance Law.
5 percent
— The proposed permissible limit for the rainy day fund that the Legislature should adopt to increase its usefulness.
New York's current rainy day fund is restricted to 2 percent of General Fund revenues, a limit that should be increased to at least 5 percent to better manage the state's reliance on volatile personal income. The state should reject proposed constitutional amendments that would only raise this limit to 3 percent and instead pursue more robust fiscal reforms.
Recommendations related to State Budget Reserves
The Legislature should increase the usefulness of the rainy day fund by increasing its permissible limit.
New York should have a rainy day fund of at least 5 percent of revenues to account for the state's heavy reliance on volatile personal income components.
The Legislature should abandon the proposed constitutional amendment that would only increase the rainy day fund to 3 percent and instead design a new amendment that delivers true budget reform.
Key Data
2 percent
— New York’s current rainy day fund is limited to 2 percent of General Fund revenues.
5 percent
— New York should have a rainy day fund of at least 5 percent of revenues given its heavy reliance on volatile personal income components.
3 percent
— The proposed constitutional amendment would increase the allowable rainy day fund to a limit of just 3 percent of General Fund revenues.
New York State faces significant fiscal instability characterized by recurring budget gaps, a lack of transparency in the budget process, and an inadequate "rainy day" fund. To address these issues, the state should implement structural reforms such as adopting generally accepted accounting principles, establishing a multi-year financial plan, and creating a non-partisan legislative budget office.
Recommendations related to State Budget Reserves
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
$4.2 billion
— Accumulated surplus held by the state by fiscal year 2000-01.
$3.7 billion
— Amount of reserves used by the state in fiscal year 2001-02.
$9.3 billion
— The budget gap faced by the state in fiscal year 2003-04.
$5 billion
— Estimated budget gap for fiscal year 2004-05.
$8 billion
— Estimated budget gap for fiscal year 2005-06.
44
— Number of states that maintain rainy day funds larger than New York's.
New York State faces a severe fiscal crisis with multi-billion dollar deficits, necessitating a multi-year plan to align expenditures with recurring revenues rather than relying on short-term borrowing. The state should implement structural reforms, including adopting Generally Accepted Accounting Principles for budgeting and bringing off-budget accounts into the main budget, to ensure long-term fiscal stability.
Recommendations related to State Budget Reserves
The State should 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.
The State should 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 make budget decisions in a more accountable and transparent budget process.
Key Data
$4.4 billion
— The deficit incurred by New York State in the fiscal year that ended March 31, 2002.
$9.3 billion
— The gap to be closed in the fiscal year 2003-04 budget.
$11 billion
— The projected fiscal gap in fiscal year 2005-06 due to baseline spending increases.
$1.3 billion
— The proposed reduction in school aid in the fiscal year 2003-04 Executive Budget.
$100 million
— The potential annual savings from expanding programs that substitute drug treatment for prison sentences.
$130 million
— The potential annual savings from modernizing the judiciary system.
New York State ranks in the bottom tier for fiscal policy, carrying the highest state and local tax and debt burden among its competitors while holding only the tenth-largest year-end financial reserves relative to its tax base. Although the state managed to more than double its year-end reserves over the past five years, it still lags behind four other states in this metric.
Recommendations related to State Budget Reserves
New York would have to cut its state and local tax burden by about one-third in order to be in the top tier.
New York would have to cut its debt burden by about one-half in order to be in the top tier.
Key Data
0.29%
— New York's year-end reserves as a percent of personal income and capital gains.
139%
— New York's 4-year change in year-end reserves as a percent of personal income and capital gains.
10th
— New York's rank among competitor states in the relative size of its year-end financial reserves.
12.8%
— New York's state and local taxes as a percent of personal income and capital gains.
19.4%
— New York's state and local debt as a percent of personal income and capital gains.
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