At the end of July, New York state”™s reported cash balance of $41.72 billion was suggestive that despite the pandemic and domestic as well as international uncertainties, the state budget is benefiting from a recovering economy enough for New Yorkers to feel fiscally comfortable.
A new quarterly budget report suggested there even was comfort to be taken from the amount of money the state would have to help deal with unexpected shortfalls. The state”™s so-called rainy day reserves are expected to have nearly $4.1 billion socked away in them by the end of the next fiscal year.
Total spending in all governmental funds for the state is expected to reach $209.56 billion in fiscal year (FY) 2022, an increase of 12.3% from FY 2021. That includes $80.85 billion in federal operating aid and $15.98 billion in state and federal funds for capital projects.
In what appeared to be a reflection of economic comfort, Gov. Kathy Hochul on Sept. 16 announced the suspension of the hiring freeze former Gov. Andrew M. Cuomo had put into effect for new state workers through the end of the fiscal year.
Before the pandemic set in, the state had approximately 118,000 full-time workers on the payroll in its executive agencies. During the pandemic, with the hiring freeze, from March 2020 to August 2021 the number of employees shrank by 10,500 to 107,500.
In order to bring a new person onboard during the freeze, a state agency had to obtain a waiver from the Division of the Budget. The suspension of the hiring freeze means that agencies will be permitted to hire new people as they deem necessary and restore employment levels to where they had been.
“As we continue to combat the pandemic, we must keep New York moving forward and that includes building our workforce to ensure we can support New Yorkers at the highest level,” Hochul said. But she added, “However, we must continue to act responsibly and prudently with the state”™s finances.”
In the newly released quarterly update to the state”™s financial plan for FY 2022, Hochul and Robert F. Mujica Jr., the state”™s budget director and a hold-over from the Cuomo administration, report that things are expected to remain in balance for both 2022 and 2023. In FY 2024, however, a budget gap of $247 million is forecast along with a rise to $1.2 billion for FY 2025. Actually, that”™s positive news since the original forecast had been for a $1.4 billion budget gap in FY 2024 increasing to $2 billion in FY 2025.
General funds receipts are forecast to be $89.3 billion in FY 2022, which is $2.1 billion more than was projected when the budget was drafted. General fund disbursements, including transfers to other funds, are expected to total $90.1 billion, an increase of $1.1 billion over what originally had been in the budget.
“A snapshot taken today would show state finances in a strong position: balanced operations and relatively small outyear (the year beyond a current fiscal year) budget gaps, stronger than expected tax collections, relatively high liquidity and affordable debt levels,” the update states. “Missing from the picture but of great concern are the risks and uncertainties created by the pandemic.”
New York estimates that its tax revenues for FY 2022 will jump by $10.9 billion from what was collected in FY 2021 and reach a total of $79.9 billion. Business tax receipts are estimated to increase about 8.8% from where they had been in FY 2021, reaching nearly $7 billion, an increase of $566 million from FY 2021. The increase is primarily attributable to increased business income and capital base rates.
The state is increasing its fiscal reserves because of what it sees as possible uncertainties for the future.
The update explains: “First, the migration of taxpayers and the expansion of telework present real but hard to quantify risks to the state”™s tax base, as well as to New York City and the Metropolitan Transportation Authority (which operates the city”™s bus and subway system as well as Metro-North and the Long Island Rail Roads).
“Second, time-limited resources that have improved the state”™s operating position and liquidity, most notably federal recovery aid, will be expended by the end of FY 2025. Lastly, Covid variants and extreme weather events have the potential to disrupt the strength and pace of the state’s economic recovery.”
The state”™s update warns that important revenue sources, including personal income, consumption and business tax collections, still may be adversely affected by Covid-changing activities and behaviors, including commuting patterns, remote working and education, business activity, social gatherings, tourism, public transportation and aviation.
