Hochul budget address

Gov. Kathy Hochul gives the governor’s annual budget address to announce the executive fiscal plan in the state Capitol on Tuesday.

ALBANY — Gov. Kathleen C. Hochul released the details of a balanced $216.3 billion financial plan for New York’s Fiscal Year 2022-23 on Tuesday, which include increased investments in education, health care and the state’s reserves, or rainy day, funds as New York’s economy continues to rebuild from the COVID-19 pandemic.

Hochul touted federal aid, an additional $5 billion in tax receipts and a bolstered stock market as the factors behind the state’s strong fiscal position, including a multi-billion-dollar surplus over the next several years.

The Executive Budget provides for annual balanced budget operations through FY 2027.

“This is a once-in-a-generation opportunity to make thoughtful, purpose-driven investments in our state and in our people that will pay dividends for decades,” Hochul said late Tuesday morning, delivering the annual budget address from the state Capitol. “And that’s exactly what my budget will do.”

State spending growth is estimated at 3.1%, just below inflation, in fiscal year 2023 and grows by an annual average of 3.6% thereafter through 2027, Budget Director Robert Mujica said.

“This will be the first time that the division of budget has published a financial plan in New York state with zero out-year gaps, so there will be zero out-year gaps in the plan period,” he said.

Hochul’s proposed budget includes $31.2 billion in education spending, a $2 billion increase, $10 billion to bolster the pandemic-ravaged health care industry, $1.4 billion for child care and $32.8 billion for infrastructure projects.

Proposals also include accelerated tax cuts for middle-class earners and $2.2 billion in property tax relief.

“This is a moment of a great possibility, a once-in-a-generation chance to reconsider what is possible for our state,” Hochul said. “And this really is the beginning of New York’s next great comeback. I declared a New Era for New York, and it continues today.”

Officials estimate 3.1% in state spending growth in the next fiscal year, just below inflation, and to grow by an annual average of 3.6% thereafter through 2027.

School Aid is driving the outyear growth at an average of 5.3% and 5.5% increase in Medicaid offset by slower growth in other local aid programs and agency operations, according to the governor’s office Tuesday.

Hochul recommended a record $31.2 billion in school aid for academic year 2023 — an increase of $2.1 billion, or 7.1%. The growth reflects a $1.6 billion, or 8.1%, increase in Foundation Aid, including a 3% minimum annual increase to fully funded districts that would not receive a Foundation Aid increase under current law, according to the governor’s office.

This time last year, the Budget Division projected a $17 billion deficit through the same time period on the heels of the economic fallout from the COVID-19 pandemic.

The state will make investments in its reserve fund each year until New York has at least 15% of its operating spending funds, or $118.8 billion, for its rainy day account. The state is projected to have a surplus of $6.4 billion in 2023, $5.3 billion in 2024 and $5.5 billion in 2025.

“As I learned working on 14 balanced municipal budgets — which was much smaller numbers, but with the same philosophy — you have to prepare for the rainy days, even when there’s not a cloud in the sky,” Hochul said. “Because the rain, or, where I come from, the snow, eventually does fall. So, we’re prepared for the downturns as well.”

The executive plan includes $95.5 billion in the general fund and a Capital Budget of $18.6 billion.

The governor also proposed $2.2 billion for property tax relief, $2 billion for pandemic recovery initiatives, $1 billion to enlarge the DOT capital plan, $1 billion for health care transformation, $1.2 billion for up to $3,000 bonuses for health care/frontline workers, a $1 billion plan called Operation POP to Pave Our Potholes and $350 million for pandemic relief for businesses and theater/musical arts.

The $7 billion-plus in new spending are not expected to permanently elevate state expenditures with investments deployed over several years, Mujica said.

“As the federal funds fall off, we still have no out-year gaps,” he said. “...and we spread out the federal funds over multiple years to avoid the fiscal cliff.”

With the governor’s budget released, negotiations will begin with the state Legislature as they work on approving a budget for the 2023 fiscal year, which deadlines April 1.

Hochul, seeking a full term in office after replacing disgraced former governor Andrew Cuomo in August, will enter negotiations with broad leeway thanks to the state’s surplus and money still coming in from federal pandemic aid packages.

Questions remain about where the 2022 surplus will be spent. An additional $2 billion fund will be negotiated with the Legislature for specific relief and recovery program.

Citizens Budget Commission President Andrew S. Rein was pleased with a proposed balanced fiscal plan, but said it could be risky for the state to rely on strong tax receipts coupled with unallocated federal aid and overall spending in the plan should be considered the ceiling for negotiation, and not the floor.

“It is unprecedented excellent news that the financial plan is balanced through the whole financial plan period, and prudent choices were made to fund some non-recurring relief, recovery and capital programs,” Rein said. “But New York’s competitiveness, stability and recovery would be better served by taking steps to restrain recurring spending to ensure state programs are targeted and managed for results, and to start to roll back last year’s tax increases that made New York’s combined business and top personal income tax rates the highest in the nation.

“While resources are currently available, the State still should take steps to restrain recurring spending,” Rein added. “The state needs to ensure Medicaid spending growth is affordable. Medicaid is projected to grow significantly and run up against the Medicaid Global Cap. ... These funds should be used to catalyze changes in Medicaid and the health system overall but should not increase recurring spending without offsetting savings elsewhere.”

Tribune News Service contributed to this report.

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