The state’s top financial manager warned Friday that the governor’s budget is vulnerable to potential federal cuts from the Trump administration and said it is “fair” for the state Legislature to decide if some of Gov. Kathy Hochul’s affordability proposals are the best use of state resources.
The analysis from State Comptroller Tom DiNapoli comes as a growing number of state lawmakers are voicing opposition to one of Hochul’s flashiest “affordability agenda” proposals: inflation rebate checks of up to $500 for qualifying individuals that is being funded by a $3 billion surplus.
“Three billion dollars is a lot of money, and there's certainly other things you could do with that money, either in terms of funding some of the programs that are being proposed, or using something to pay down debt could be another approach,” DiNapoli told the New York Public News Network in his first interview since putting out the report. “I do think it is fair for the Legislature, as part of that negotiation with the governor, to really debate whether or not that makes the most sense.”
That question of funding allocation remains a critical question for the state as President Donald Trump has promised to slash spending and target initiatives coming out of progressive states such as New York. While the state does have rainy day reserves for emergencies, DiNapoli said that given the uncertainty from Washington, Hochul’s budget proposal could have better prepared for potential funding cuts.
“Could there have been the opportunity here to have built another kind of contingency? I don't have a number to give you, because there's a lot of uncertainty here, but I would have thought it might have been a smarter strategy to have another kind of reserve built in to try to buffer some of what we think may be coming out of Washington,” DiNapoli said.
About 40% of the state budget is supported by the federal government, and any changes to that would affect the state’s most expensive budget item, Medicaid, along with other programs, with the dwindling of pandemic-era funds.
“Not only is that money virtually spent down now, but we could be seeing less federal money, whether that's on nutrition programs, Medicaid and health care programs, public transit,” he said. “The rhetoric that we're hearing out of Washington certainly raises the concern that there will be an impact. How severe it will be, can't quantify, because we don't know what the plans are going to be.”
DiNapoli also said the budget lacks longer-term planning to rein in a ballooning cumulative out-year budget gap that currently stands at $27 billion. Meanwhile, state funding projections for the fiscal year are expected to total $252 billion, up 3.6% from the past year.
“Spending from State sources has strongly increased in recent years and is projected to rise at a rate that outpaces revenues,” DiNapoli wrote in his budget outlook.
The state, DiNapoli wrote, is relying on temporary fixes in the form of pandemic-era personal income tax increases on high earners that won’t be enough to bring the state’s budget into balance in the coming years.
“The concern that I have is, how do we ensure that our decisions on spending and tax policy are sustainable over the long term?” DiNapoli said. “It's very clear right now, we haven't identified the revenues to match the spending, not for the coming year, but for the out-years.”
