Now that Governor Kathy Hochul has delivered her State of the State message with all its ambitious proposals, it’s time to figure out how much they would cost taxpayers. She’ll have to do that in her proposed state budget, which is due by the end of the month. But the spending plan is being forged at a time of economic uncertainty.
Among Hochul’s plans for the 2023 session is a program that aims to build 800,000 more housing units in the next decade, and jump-starting the failing mental health system with an infusion of a billion dollars.
“I’m proud to announce we will be investing more than $1 billion and making critical policy changes to finally and fully meet the mental health needs of our state,” Hochul said as lawmakers cheered. “It’s about time, let’s do this together.”
Hochul also intends to keep her pledge to increase spending on schools by 13%, or $2.7 billion. The money would fully fund foundation aid for schools by the next school year, fulfilling a court order issued over a decade ago. And she proposes expanding some Medicaid programs for preventive health and for people with disabilities.
Andrew Rein heads the Citizens Budget Commission, a nearly century-old budget watchdog group. He says while the governor’s goals are laudable, he has concerns about the price tag.
“There are some good proposals here, a long menu of proposals,” Rein said. “But of course, we have to wait until the executive budget to get the bill.”
He says there are some positive signs that show the governor is watching the bottom line. Her housing plan, which relies on construction largely financed by real estate developers, does not come with a large cost to the state, and could help bring back middle- and working-class people to the state.
The governor is also pledging not to increase taxes this year, despite calls from some in the left of the Democratic Party to do so. She says that would just make problems worse if there’s an economic downturn, which many experts believe will occur.
“A majority of economists are predicting a recession,” Hochul said. “And it’s one of the reasons it’s clear to me, why we will not be raising income taxes this year.”
Rein says Hochul is wise to resist raising taxes. He’d like to see her go one step further and not renew a temporary income tax surcharge on the wealthy when it sunsets in two years. He says that could help prevent wealthier people from leaving the state and attract other higher-income people to live in New York.
“We need to keep our wealthy people , because they pay disproportionate taxes that fund schools and transportation and all that,” Rein said. “They also often are business leaders and job creators.”
Rein says preventing taxes from rising could help slow the state’s outmigration of people to other states.
New York state’s finances are in relatively good shape going into 2023, thanks to recent federal COVID relief packages and better-than-expected tax and other revenue collections.
Spending, though, grew 12% over the previous years, a big jump compared to budgets in the last decade.
If that spending continues at the current rate, a “fiscal cliff” is looming. If nothing is done, the state would face a $6 billion gap by 2027.
Hochul spoke about her concerns for the future last December.
“I have to anticipate worst case scenarios with respect to the economy,” Hochul said on December 15th. “And that’s why we’ll approach our budgeting with that framework.”
The governor already plans to increase the state’s rainy-day fund to $20 billion in the next two years.
But the Citizens Budget Commission, and other fiscal experts, say more than twice that amount is needed to offset the effects of a potential recession.
