Residents of New York are facing a dire fiscal situation as State Comptroller Thomas DiNapoli raises concerns about the worsening economic outlook. DiNapoli reveals a staggering cash shortfall of $36 billion over the next four years, driven by a weakening economy, declining tax revenue, and escalating spending. A recent report by DiNapoli highlights that the cumulative gap through 2027 has increased by $15.6 billion or about 75% in just three months leading up to the adoption of this year’s budget in late April. Had the Division of the Budget not rescheduled payments, the shortfall would have been an astonishing $50 billion. These are not ordinary budget gaps; they exceed expectations set over the past 15 years.
DiNapoli’s warning about the fiscal outlook is justified as the state faces enormous challenges. “The state’s fiscal outlook has changed considerably over the past year, and significant economic and fiscal risks could further damage the state’s finances,” cautions DiNapoli. Contrary to claims by the left-wing Fiscal Policy Institute’s Nathan Gusdorf, relying on the state’s $19.5 billion cash reserves will not be sufficient to address future budget gaps. The comptroller emphasizes that while New York has prudently increased its reserve funds, this cannot replace fiscal discipline or offset recurring budget gaps. To preserve the state’s economic competitiveness and protect critical programs that New Yorkers depend on, there must be a proactive approach from state leaders to align recurring revenues with recurring spending.
So how did the state reach this point? According to DiNapoli, it boils down to “Spending up, revenue down.” He points to sluggish income growth and market volatility on Wall Street amidst a cooling economy. Over the next four years, state expenditures are projected to increase by 17.8%, totaling nearly $22 billion, while revenues decline by over 10%. The lack of foresight from Gov. Kathy Hochul and the Democratic-controlled Legislature is evident as they significantly increased New York’s already excessive spending on education and Medicaid, despite the discontinuation of federal pandemic relief aid. Raising taxes is not a viable solution either. Albany already implemented a staggering $4.3 billion tax surcharge on wealthy individuals in 2021, in addition to an existing millionaire’s tax that should have expired years ago. Consequently, New York now bears the highest state and local tax burden in the nation, leading to an exodus of wealthy taxpayers who take their revenue elsewhere. DiNapoli himself acknowledges that the number of millionaires leaving the state in 2021 was nearly three times higher than in 2019, and further tax hikes would only exacerbate the decline in state income-tax collections.
It is a grim sign when a liberal Democrat like DiNapoli calls for spending restraint and warns against additional tax increases. DiNapoli deserves recognition for raising the alarm on these dangers. The sooner Albany heeds his advice and curbs spending, the less hardship New Yorkers will face in the future. However, time is rapidly running out.
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