ALBANY – Amid both a pandemic and an economic crisis, the state Legislature approved a $177 billion budget overnight Thursday with special provisions allowing Gov. Andrew M. Cuomo’s administration to readjust the spending plan during the fiscal year.
The financial plan was passed late Thursday, about a day and a half past the Legislature’s Tuesday night deadline – a “timely” spending plan in the eyes of most Albany politicos. Despite a looming recession and billions of dollars in anticipated revenue shortfall related to the coronavirus pandemic, legislators agreed to a budget that kept education aid at last year’s levels and targeted Medicaid overspending.
The financial plan assumes state leaders will need to revisit the budget three times this year to adjust spending as needed, depending on the state’s financial health. The first period ends April 30; the second on June 30; and the third on Dec. 31. Cuts could be made if tax receipts are less than 99 percent of what had been projected or if the state overspends by at least 1 percent.
“This is not the budget we had hoped to pass at the beginning of session, or even the budget we had envisioned just a month ago,” Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers, said as she stood on the floor of a largely vacant Senate chamber on Thursday. “Our state’s financial situation has been thrust into a true economic crisis due to the coronavirus pandemic.”
The budget, a package of nine bills, was approved over three days largely along party lines, as Republicans took issue with packing policy items in the budget and the provisions authorizing Cuomo’s administration to cut spending throughout the year. Bill language grants the Legislature a 10-day period to pass a concurrent resolution addressing periodic budget shortfalls, but if lawmakers miss that deadline, the Division of the Budget would implement changes.
“Who knows what this governor is going to do in the three events he has to reduce funding in a whole bunch of areas?” state Sen. James Tedisco, R-Glenville, said. “I think the Legislature should be ashamed of itself, relinquishing its power.”
The coronavirus pandemic had crushed New York’s financial health, costing the state an estimated $10 billion to $15 billion in revenue. Those numbers added to an already-difficult budget year, in which officials faced a $6.1 billion budget gap mostly attributable to Medicaid overspending.
But a historic $2.2 trillion federal relief package has largely enabled the state to plan for spending levels similar to that of years past. The state will also take out $8 billion in short-term loans to make up for lost revenue between April and July, as both the federal and state governments moved back tax filing deadlines, delaying payments to New York until the summer. Fiscal policy experts estimate the borrowing could reach $11 billion.
Although the state kept total school aid in line with last year’s, with a slight increase of nearly $100 million for total aid to school districts at $27.4 billion, New York saves about $1.2 billion by using federal aid to alleviate costs, said E.J. McMahon, founder and research director of Empire Center for Public Policy, a fiscally conservative think tank based in Albany.
Bob Lowry, deputy director for the New York State Council of School Superintendents, said given the “grim” outlook for the state, the “budget for education exceeds our expectations.” But the freeze on Foundation Aid will fall hardest on poor districts that rely heavily on state aid.
“The possibility of mid-year reductions in aid is worrisome,” Lowry said. “Every school superintendent we have heard from would favor starting with realistic aid estimates, even if low, rather than face having to make mid-year cuts to school budgets. No one wants to contemplate laying off teachers and reconfiguring classes part way through the school year if state aid comes up short.”
McMahon cautioned the deep hole the state finds itself in amid the pandemic will require painful cuts and stretch on for years.
“The whole budget pretends they’re going to spend as much as they did last year, and that whatever they lost in taxes the feds will make up,” he said. “They have to be aware that isn’t going to happen.”
While education is flat now, New York will move forward with cuts and changes to its Medicaid program, through recommendations the state received from the second iteration of the Medicaid Redesign Team. Among the panel’s suggestions are nearly $400 million in cuts to hospitals, $715 million in reductions to the state’s long-term care programs, and $71 million in reductions through changes to pharmaceutical practices.
When those adjustments will take effect, however, can be changed, state Budget Director Robert Mujica told reporters during a news conference at the Capitol on Thursday. The legislation allows the governor to delay implementation until up to 90 days after the end of the state’s emergency declaration in response to the novel coronavirus.
The piecemeal strategy to Medicaid changes will ensure New York can access an estimated $6 billion in emergency federal funds — with the caveat that states not alter their Medicaid programs. The final plan dropped a Cuomo proposal to shift some Medicaid costs to localities.
In turn, the state will withhold $50 million annually of sales tax receipts from counties and $200 million from New York City to hold in a Distressed Providers Assistance Account, said David Friedfel, director of state studies for the Citizens Budget Commission.
Notably, the budget did not include tax increases, even as some progressive Democrats downstate pushed the governor to tax the rich to help the state deal with its projected budget shortfall.