New York State is in a strong fiscal position based on the mid-year update to the state’s Financial Plan. Governor Kathy Hochul said the state’s economic growth is beating expectations with revenues projected to be an additional $4 billion higher than prior projections for the current year. As a result of the strength in receipts, the plan is balanced in every year through Fiscal Year 2025.
$3.3 billion will be placed in reserves this year with additional deposits in each subsequent year adding nearly $12 billion by the end of 2025. This will raise the total in reserves to $18.9 billion, or 15% of projected state spending. The Center for Budget and Policy Priorities recommends a minimum of 15% to mitigate service reductions and employee layoffs during periods of slow or declining growth.
Additionally, $3.4 billion has been designated to reduce the State’s debt burden and its borrowing for capital projects through 2025.
Hochul said there are reasons to be cautious as economic activity slowed in the third quarter of the year, missing projections for Gross Domestic Product growth by 25% as it grew by 2% rather than an excepted 2.5%. Inflation, the high levels of unemployment in New York City, the question of workers returning to their offices and the threat of COVID-19 variants are all risks to sustained economic growth.
The State Financial Plan, which projects revenue and spending over a four-year period, projects all funds spending for 2022 at $210.5 billion, a nearly $1 billion increase from the First Quarterly Update to the Financial Plan driven mainly by health care, which continues to experience pandemic-related enrollment and other cost pressures. In the current year, the newly recognized revenue will fund $3.3 billion added to principal reserves and the remainder supports additional costs.
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