New York State Comptroller Tom DiNapoli encouraged vigilance over the state’s spending as it slowly emerges from the coronavirus pandemic, saying in a report released this week that it must work toward sustainable spending as federal relief expires.
The comptroller notes that the state’s projected stability over five years is in part a product of the current fiscal climate, and has diverged from plans in previous eras that involved deep cuts to Medicaid and school spending to plug deficits.
“While [the state budget department] forecasts that the General Fund is balanced through SFY 2026-27, the Financial Plan identifies a number of risks that could negatively impact actual results, including climate change, the COVID-19 pandemic, and federal policy and funding changes,” the report from DiNapoli reads.
The state passed a $220.5 billion budget in April that included significant investments in sectors long hampered by financial uncertainty, such as education. Schools are seeing a boost in spending under a multi-year pledge to fully fund the Foundation Aid formula, paired with a windfall of relief funds from Washington.
Similarly, child care — an industry long beset with financial troubles and rampant closures that have left families in a lurch —received a pledge of $7 billion from the state over four years, more than half of which will go to New York City.
But DiNapoli said general fund spending may run the risk of exceeding current projections. As an example, the report cites projections for Medicaid enrollment, which the plan estimates will peak at 7.7 million in the 2022-2023 fiscal year and fall to near pre-pandemic levels the year after, at a projection of 6.1 million enrollees.
“If Medicaid enrollment declines at a slower rate than projected or fails to decline as much as projected, the State will incur significant additional costs,” the report reads.
DiNapoli’s report comes at a time of economic anxiety across the country, fostered by surging gas prices and skyrocketing rents in major cities including New York. To help states address this, multiple relief packages were rolled out by the federal government — but the one-time injections in spending have constraints.
Over the longer term, the elevated level of General Fund spending may be difficult to sustain as temporary resources are depleted or expire
“Over the longer term, the elevated level of General Fund spending may be difficult to sustain as temporary resources are depleted or expire,” the report reads.
DiNapoli posits there is a “risk” involved in relying on pandemic-era recovery initiatives such as the Emergency Rental Assistance Program — a non-recurring form of state spending aimed to help low and mid-income tenants and landlords with rent.
“There is also a risk that pandemic recovery initiatives such as the ERAP and health care bonus payments, currently expected to be non-recurring, will be continued,” the report reads. Bonuses for healthcare workers, who have been drained by the demands of the pandemic, were enacted for the current fiscal year, and “as the pandemic continues to exert pressures on health care workers and facilities, there may be calls to reauthorize or continue the program,” the report reads.
DiNapoli’s office cites a variety of pitfalls the state should look out for, including, “continuing supply chain disruptions, high levels of inflation, and uncertainty due to the conflict in Ukraine."
He said those issues have depressed a statewide jobs recovery: “Only 79 percent of jobs lost during the pandemic have been recovered [in New York] as compared to 96 percent nationally.”
The comptroller recommended vigilance, above all, encouraging the state to shore up its rainy day fund on or ahead of schedule. He pushed for more transparency on relief fund spending and for quick disbursement of assistance to vulnerable communities.
“The SFY 2022-23 Enacted Budget Financial Plan represents a multi-year plan to emerge from the COVID-19 pandemic while providing funding for critical sectors of the State’s future, including education, health care, housing and human services,” the report reads. “Against a backdrop of uncertainty, this plan will be challenging to execute, and will require careful and continuous attention.”