ALBANY, NY | — In response to the State Division of the Budget directive to State agencies ordering a spending freeze at current levels next year, Fiscal Policy Institute Executive Director Nathan Gusdorf released the following statement:
“As we emerge from the Covid recession and a prolonged period of high inflation, the State should address potential fiscal shortfalls next year through the use of reserves and — as needed — targeted tax increases, rather than freezing agency spending. Public services should keep pace with the growth of the state economy, in particular during a time of economic uncertainty. Conversely, freezing State spending would undermine the State’s ongoing economic recovery.
“With robust reserves of $19.5 billion and improving tax receipts over the past four months, the State is well-positioned to manage the coming year’s budget gap. While the use of reserves is preferable to tax increases, the size of the budget gap may require complementary revenue action. Any potential tax increases should focus on increasing the overall progressivity of the State’s tax structure.”
- New York is well-positioned to weather an economic downturn due to its robust $19.5 billion in fiscal reserves — 15.6 percent of State operating funds spending.
- The New York State Comptroller’s August cash basis report shows that State tax receipts continue to stabilize for the fourth month in a row after a shortfall in April.
- While past crisis-era budget gaps were projected after an economic shock, the currently-projected gaps appear to reflect an expected downturn. If and when a recession might materialize, however, is far from clear.