New York Gov. Kathy Hochul said she’s told her Cabinet they might have to be careful about state spending next year, as inflation continues to rise and Wall Street drops.
Hochul held her first meeting with top advisers and state agency heads since the legislative session ended. She said she told them that while the state budget appears balanced through the end of the fiscal year, they will have to have more modest spending goals for next year and prepare for a possible recession.
“We talked about moderating expectations,” Hochul said.
Just a few short months ago, New York was flush with cash from federal pandemic relief packages. But Hochul said the cost of everything has gone up, and Wall Street — which provides 18% of the state’s total revenues — has gone down. She said those trends are likely to continue for a while.
“What we are very intentional about was not creating outyear gaps or creating a scenario where we couldn’t afford to pay for what we committed to this year,” the governor said.
She said she does not have plans to reimpose a hiring freeze at this time. She said there are 15,000 positions in state government that are vacant and need to be filled.
The governor’s comments come as State Comptroller Tom DiNapoli issued a new report on the over $8 billion that the state owes the federal government in loans that paid for unemployment insurance benefits to New Yorkers during the height of the pandemic.
The state’s debt is second only to California, and New York is one of only seven states that still owes the federal government money. The comptroller warned that if New York doesn’t make a substantial payment soon, interest costs will mount.
That could impede the state’s “employment recovery amid growing economic uncertainty,” DiNapoli said, which would increase tax bills for the state’s businesses that will have to help pay off the debt.
Hochul’s budget director, Robert Mujica, said businesses in the state have always had to shoulder a portion of any unemployment insurance debts to the federal government, and he does not expect that to change.
“These were tougher challenges than we’ve ever seen before, so the size of it is more significant,” Mujica said. “It will be stretched out over many years.”
Business groups, including Upstate United, say the state received billions of dollars in pandemic relief grants and should not be passing costs down to local companies.
“Millions of families who are already being squeezed by historic inflation rates will ultimately pick up the tab for New York’s remaining $8.1 billion debt to Washington,” the group’s Justin Wilcox said in a statement.
Mujica left the door open to using state funds to pay back some of the debt in the future if there are revenues available.
Hochul said there are some steps that state government is taking to help New Yorkers struggling with higher costs. She said the state’s share of the gasoline taxes have been suspended until 2023. So far, though, that has not resulted in lower costs at the pump.