September 21, 2023

Good afternoon,

Last month we wrote about what was likely to be included the Division of the Budget’s annual Call Letter to the state agency commissioners.   The official ‘call letter’ came out yesterday, 9/20 and DoB is ordering state agencies to freeze spending in most cases for the coming fiscal year amid ballooning budget deficits.

The annual “call letter” to agency commissioners usually asks them to find efficiencies and trim costs, but next year’s budget gap is problematic and the worst since the recession in 2009. The letter Wednesday from budget director Blake Washington to commissioners notes many of the fiscal challenges facing the state, such as “softening economic activity, a reduction in state tax receipts and a humanitarian crisis” that hints at the influx of more than 100,000 migrants to the state since 2022.

“As a consequence, our revenue forecasts have been revised downward, resulting in multi-year budget gaps,” Washington wrote. The budget gap for the coming fiscal year that starts April 1 jumped in state projections last spring from $5.1 billion to $9.1 billion. In two years, the gap has grown from $8.6 billion to $13.4 billion, the state’s financial plan showed. The bulging budget woes will likely mean sharp cuts in spending that has soared in recent years due to higher-than-expected revenue coming out of the pandemic and Covid-19 relief aid from the federal government.

Washington said Gov. Kathy Hochul is committed to not raising taxes or relying on one-shot budget moves to close the gaps. As a result, the state’s nearly two dozen agencies need to develop budget requests that “should not exceed the total FY 2024 Enacted Budget agency funding levels, excluding one-time investments.” He also ordered agencies to look to tighten their belts through “effectiveness and efficiency,” as well as eliminating any “unnecessary duplication or overlaps.” Agency budget requests are due by Oct. 11. Hochul will release her budget in January, and the state Legislature needs to approve it by March 31 for an on-time spending plan. “Acknowledging our fiscal constraints while ensuring fundamental public services and programs are preserved is the task ahead,” Washington wrote.

“The road to a balanced budget might seem daunting, but I am confident that through sound decision-making, strategic investments, and fiscal discipline, we can continue to show the compassion, care, and leadership that New York is known for.”