Although New York State is experiencing historic fiscal health, funding uncertainties loom large in the state's budget negotiations this year. state budget director Blake G. Washington told a Citizens Budget Commission luncheon.
Washington discussed the factors pressuring the budget, how the state may handle the MTA's budget gap, and bracing for federal funding cuts, in a conversation with CBC President Andrew Rein.
New York Gov. Kathy Hochul's proposed budget was $252 billion, more than $100 billion more than 10 years ago. Antonio Weiss, co-chair of the CBC's budget committee, said when introducing Washington.
The executive budget is in balance, Rein said, but it sets up an $11 billion budget gap in 2029. The budget includes a $3 billion tax rebate and the extension of some tax cuts, but also extends a hike on the personal income tax.
Washington, in response, touted the state's recent fiscal wins. The Hochul administration has utilized pay-as-you-go spending more than any administration in New York's history, Washington said, and touts the lowest debt-to-income ratio since the 1960s.
The tax hike, Washington said, was necessary to fund the state's growing expenses. He singled out Medicaid and school aid, which comprise 60% of the increase in the budget this year.
Rein also questioned the utility of the tax rebate and cuts to the child tax credit. The spending package will be spread across so many New York families that they won't feel much lasting impact, he argued.
"That's $4 billion spread very thinly, which might help a family for a week or a month, but is it spread too thin to be game changers?" Rein asked. "If we had [used the $3 billion for] pay-as-you-go capital, what's that, $200 million savings for the next 30 years? The challenge is we gave people $300 for the next 30 days."
Washington said the rebate was motivated by concerns around the cost of living. Taxpayers constantly press the governor about affordability, he said.
"Everywhere she goes, every conversation she has, every room she's in, every time she walks around the city of Albany, the city of New York, the same common refrain is that ordinary consumers are getting crushed," Washington said. Taxpayers want to feel like the government is paying attention to them, he added.
Washington also discussed the uncertainty around New York's federal aid. $87 billion of New York's budget comes from the federal government, Rein noted. Those funds have already been threatened. New York's public universities have lost grants, Washington said.
When the Trump administration released a memo freezing federal aid, the state was waiting for a $5 billion Medicaid payment, Washington said.
"[While this is] going on, I have a meeting with the governor, I'm going to tell her all about this and just about the uncertainty," Washington said. "And 15 minutes before the meeting with the governor, we get this letter that says, 'Forget about it.'"
The administration is waiting to see what funds might be cut in the next federal budget, and is preparing to plead their case, Washington said. He's most apprehensive about Medicaid and maintaining the tax-exempt status on municipal bonds.
Although the state has $20 billion in reserves, that would be completely inadequate in the face of widespread federal cuts, Washington said. "We can't backfill these cuts."
The biggest question in budget negotiations is likely to be the Metropolitan Transportation Authority's 2025-2029 capital plan.
Late last year,
Washington said the federal government ought to contribute more to the plan, but the
