Financial Plan Analysis of FY 2026 Enacted Budget
June 16, 2025 |
State expects severe fiscal and economic consequences from federal policy
ALBANY, NY | Following the New York State Division of the Budget’s release of the financial plan for the fiscal year 2026 enacted budget, Nathan Gusdorf, Director of the Fiscal Policy Institute, released the following statement, along with accompanying analysis by Andrew Perry, FPI’s Director of Fiscal Research:
On Friday, June 13, New York State’s Division of the Budget (DOB) released its financial plan for this year’s enacted State budget. The financial plan forecasts a national economic slowdown over the next four years as well as dramatic federal budget cuts. These forecasts indicate that the State will likely need to implement tax increases to manage the fallout from federal economic and fiscal policy.
DOB expects that the current presidential administration’s tariff and immigration policies will trigger a national economic slowdown and a condition of “stagflation” in which low rates of economic growth accompany relatively high rates of inflation. FPI previously wrote about the risk that New York State’s economy is headed into such conditions. This economic slowdown is expected to result in a significant decline in tax receipts – an average decline of $4 billion per year over the next four years, relative to previous expectations.
The fiscal risks of declining tax receipts are compounded by the likelihood that the State will lose substantial federal funding. DOB estimates that the spending cuts included in the “One Big Beautiful Bill Act” – the federal budget legislation that passed the U.S. House on May 22nd – will cost New York State an average of $5.2 billion per year over the next four years.
Despite these gloomy forecasts, the State’s current fiscal position is surprisingly strong. The State ended fiscal year 2026 with a $10.6 billion general fund surplus, driven by end-of-year receipts coming in $6 billion above its January projections. The end of year surplus was partly spent to pay down the State’s $7 billion unemployment insurance (UI) trust fund debt, ending a six-year freeze of the benefit level.
Even after paying down the UI trust debt, however, the State still holds record fiscal reserves – $31.7 billion at the end of fiscal year 2025 – providing a buffer against fiscal downturns.
The State’s expectations may be far too pessimistic. But if they turn out to be accurate, a strong tax base and record reserves will enable the State to manage spending in the coming years while minimizing cuts to services – though it will likely implement tax increases to do so.
Financial Plan Analysis of FY 2026 Enacted Budget
June 16, 2025 |
State expects severe fiscal and economic consequences from federal policy
ALBANY, NY | Following the New York State Division of the Budget’s release of the financial plan for the fiscal year 2026 enacted budget, Nathan Gusdorf, Director of the Fiscal Policy Institute, released the following statement, along with accompanying analysis by Andrew Perry, FPI’s Director of Fiscal Research:
On Friday, June 13, New York State’s Division of the Budget (DOB) released its financial plan for this year’s enacted State budget. The financial plan forecasts a national economic slowdown over the next four years as well as dramatic federal budget cuts. These forecasts indicate that the State will likely need to implement tax increases to manage the fallout from federal economic and fiscal policy.
DOB expects that the current presidential administration’s tariff and immigration policies will trigger a national economic slowdown and a condition of “stagflation” in which low rates of economic growth accompany relatively high rates of inflation. FPI previously wrote about the risk that New York State’s economy is headed into such conditions. This economic slowdown is expected to result in a significant decline in tax receipts – an average decline of $4 billion per year over the next four years, relative to previous expectations.
The fiscal risks of declining tax receipts are compounded by the likelihood that the State will lose substantial federal funding. DOB estimates that the spending cuts included in the “One Big Beautiful Bill Act” – the federal budget legislation that passed the U.S. House on May 22nd – will cost New York State an average of $5.2 billion per year over the next four years.
Despite these gloomy forecasts, the State’s current fiscal position is surprisingly strong. The State ended fiscal year 2026 with a $10.6 billion general fund surplus, driven by end-of-year receipts coming in $6 billion above its January projections. The end of year surplus was partly spent to pay down the State’s $7 billion unemployment insurance (UI) trust fund debt, ending a six-year freeze of the benefit level.
Even after paying down the UI trust debt, however, the State still holds record fiscal reserves – $31.7 billion at the end of fiscal year 2025 – providing a buffer against fiscal downturns.
The State’s expectations may be far too pessimistic. But if they turn out to be accurate, a strong tax base and record reserves will enable the State to manage spending in the coming years while minimizing cuts to services – though it will likely implement tax increases to do so.