October 29, 2021

GOVERNOR HOCHUL ANNOUNCES ON-TIME RELEASE OF UPDATED FINANCIAL PLAN SHOWING STRENGTHENING FISCAL POSITION WITH RISK AHEAD

$4 Billion in Revenue Above Expectations Projected for the Current Fiscal Year

Governor Directs Nearly $12 Billion to Principal Reserves Over Four Years, Ultimately Raising Reserves to 15% of State Spending and Setting Aside $3.4 Billion to Reduce State Debt

Balanced Budget in Every Year through FY 2025

Risk Remains as COVID-19 Variants Threaten Economic Recovery

New York State Governor Kathy Hochul today announced the on-time release of the mid-year update to the New York State Financial Plan, which shows the state in a strong fiscal position as economic growth beats expectations with revenues projected to be an additional $4 billion higher than prior projections for the current year, Fiscal Year (FY) 2022. As a result of the strength in receipts, the plan is balanced in every year through FY 2025.

At the Governor’s direction, this year $3.3 billion will be placed in reserves. Additional deposits in each subsequent year will add nearly $12 billion by the end of FY 2025, raising 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 is designated to reduce the State’s debt burden and its borrowing for capital projects through FY 2025.

“Our state’s fiscal picture has strengthened significantly from the dire straits we faced last year, but with Delta and other variants of COVID-19 still posing a threat to our economic recovery, we must be cautious,” Governor Hochul said. “In the face of this uncertainty, I am growing state reserves so that in the event of an economic downturn we will have the resources to continue supporting New Yorkers while at the same time keep New York moving forward.”

There are reasons to be cautious as economic activity slowed in the third quarter of the year, missing projections for Gross Domestic Product (GDP) 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 FY 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.