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New York state officials are working to close an estimated $15 billion gap in the state’s budget due to costs associated with the pandemic.

COVID-19 related expenses, as well as losses in sales tax revenues during shutdowns, will cost the state about $39 billion over four years, including $11.5 billion in 2021 and $9.8 billion in 2022. Budget negotiations, which are set to last until the April 1 fiscal deadline, are contingent on how much federal aid is received and when.

“We can’t do it alone. Washington has to help us out,” said Lt. Gov. Kathy Hochul in a February webinar. “I’m feeling better about this than I was a little while back. This is a very good time for us.”

Gov. Andrew Cuomo’s budget proposal constructed two different plans depending on federal relief from the $1.9 trillion stimulus package.

The state could either receive its requested $15 billion in a “fair funding” scenario, or in the “worst case” scenario, receive $6 billion in aid from the federal government, according to the proposal. If the state only receives $6 billion, it would have to obtain an additional $9 billion by increasing taxes as well as cutting funding for schools, hospitals and social services.

Under Cuomo’s plan, the most heavily impacted sectors, including restaurants, arts and tourism, could receive assistance in their recoveries. Cuomo said the state would ban penalties and late fees for missed residential payments and expand moratoriums on evictions to include commercial properties, while offering $130 million in tax breaks to restaurants, arts and tourism.

Minchin Lewis, a Syracuse University adjunct professor of public administration and internal affairs, said that the overall strategy of the state’s budget plan depends on relief from the stimulus package.

“Without knowing what the stimulus package is going to be — it could be as high as $20 billion — it would be difficult to estimate what the impact could be,” said Lewis, a former city auditor.

In a Division of the Budget press conference Sunday, Cuomo said the difference between a forecasted $12.5 billion from the stimulus deal and the requested $15 billion leaves options on the table.

“As you know — because I’ve said it 150 times — we needed $15 billion in my opinion,” Cuomo said. “So we do have a gap there, and tax increases are on the table.”

The “worst case” would increase taxes for higher income residents to $1.5 billion, while freezing middle class cuts to save an additional $400 million, according to the proposal. These would not only make New York less competitive, but could also cause wealthier, more mobile residents to leave the state, Lewis said.

The state can also attempt to add new revenue by taxing sales on mobile sports betting and legalizing adult-use cannabis, per the proposal.
The “fair funding” option would repeal the $10,000 cap on state and local tax reductions, which costs residents $30 billion over three years and effectively increases taxes in central New York.

Lewis said that federal resources could cover this short-term economic crisis, but long-term spending would still be subject to how the economy changes in the future.

“It gets through the current crisis with a one-shot infusion of revenue from the stimulus package,” he said. “The gap gets kicked down the road. It’s not a long-term solution. New York state will still be stressed with spending that’s projected.”

Cuomo’s budget proposal will be negotiated alongside those of other legislative leaders, following procedure. Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie typically announce budget and spending plans mid-March.

The final New York state budget will be delivered at the end of the month.

“While we’re dealing with the pandemic, reeling financially, and hard-hit, we also realize we can’t stop life, ” said Hochul, who also chairs the Regional Economic Development Councils. “We have to keep moving forward because if you stay still you sink.”

Published on March 8, 2021 at 11:01 pm

Contact Ben: bmoleksi@syr.edu