On November 4, the New York State Division of the Budget (DOB) issued their mid-year update to the State Fiscal Year (SFY) 2023 enacted budget and financial plan. The mid-year report covers the first half of SFY 2023, from April 1, 2022, to September 30, 2022. Consistent with the DOB’s first-quarter update released in August, the state’s finances are reported to generally have been in a good position as they headed into the second half of the fiscal year. The report attributes its positive forecast in part to higher-than-anticipated General Fund receipts as well as lower-than-expected expenditures. The decline in state spending was attributed to the additional funding provided through the Enhanced Federal Medical Assistance Percentage (i.e., temporary increases in federal funding to support the state’s Medicaid program), which was extended through the final quarter of the current State Fiscal Year (January–March 2023).
The DOB-projected budget gaps for SFYs 2024 through 2027 have also been revised downward in anticipation of additional revenue related to the business tax and to mobile sport wagering receipts. The DOB analysis takes a balanced view of the state’s personal income tax revenues in the immediate future, noting a $1.5 billion increase in collections with respect to earlier estimates in the DOB first-quarter update. By contrast, recent reporting from the Office of the State Comptroller portrays less optimistic projections on income tax collections for the state, citing an estimated 7% decrease in collections between SFY 2023 and SFY 2024. The DOB predicts a General Fund budget gap of $148 million in SFY 2023–24 and budget gaps of almost $3.5 billion in SFY 2024–25, $3.3 billion in SFY 2025–26 and $5.9 billion in SFY 2026–27. The report does, however, caution that any number of factors may negatively affect the state’s current financial position, including the ongoing risk of a broader national economic recession and highlights the Hochul Administration’s ongoing effort to mitigate those risks through investments in the state’s “rainy day” reserves, which totaled $9 billion at the end of SFY 2023 and are planned to reach $19.5 billion by SFY 2025.
The divergent views from the DOB and the Office of the State Comptroller on the state’s mid- and longer-term financial forecasts are not atypical but will remain a point of interest for the state and for stakeholders as New York approaches its SFY 2024 budget cycle in January 2023. The Manatt team will continue to monitor fiscal developments in Albany, and we are available to answer any questions.