New York faces a variety of economic challenges in the three years since the onset of the COVID-19 pandemic, including ongoing inflation, more expensive borrowing due to higher interest rates and expiring federal aid, state Comptroller Tom DiNapoli on Thursday found in a report on the state budget released by his office.
The report from DiNapoli assessing the state plan proposed by Gov. Kathy Hochul this year found tax revenue estimates for a slower economy could be even worse than anticipated. And he warned the budget if adopted could strip his office of oversight powers.
But DiNapoli’s office also pointed to the use of what he called a loophole in the state’s debt laws to circumvent a debt cap in order to help pay for the long-sought Gateway Tunnel project.
“With economic risks and the impending loss of federal financial assistance ahead, now is the time for New York to carefully prepare for the short- and long-term,” DiNapoli said. “The budget proposals to increase state reserves and strengthen the state’s rainy-day reserves should be supported. At the same time, there are several concerning proposals that exempt approximately $12.8 billion from competitive bidding and oversight requirements, leaving too much in the dark. The budget also advances debt proposals that reinforce concerns about the affordability of debt levels and the transparency and accountability of current debt practices. I urge lawmakers to reject these proposals.”
State lawmakers and Hochul this month are negotiating a $227 billion spending plan that is expected to be passed by April 1, the start of the state’s fiscal year.
The budget is being negotiated against the backdrop of ongoing economic questions and a lower labor force participation in the state compared to three years ago.
DiNapoli warned budget gaps in the coming years — projected due to higher spending for schools and the Medicaid program, could be even bigger if the recession is more severe or longer than expected.
He also warned budget language could end oversight and competitive bidding for some contracts, including some of the state’s Managed Long Term Care plans.
DiNapoli is backing proposals in Hochul’s budget that would move more money into the state’s so-called rainy day fund in order to offset the loss of revenue if a recession hits. The Hochul proposal would increase the fund for “economic uncertainties” to $13.5 billion by the end of the fiscal year.