The year 2021 began under the threat of a historic state budget shortfall of $15 billion. Compounded by municipal and county-level fiscal stress, it imperiled funding for public services and employees – a terrible risk as New York continued to experience the social, emotional, and fiscal impacts from the pandemic.
The governor’s proposed Executive Budget featured an “if-then” scenario that reflected a minimum level of $6 billion in federal aid and assumed a remaining $9 billion difference. At the same time, the governor requested $15 billion from Congress in hopes that the entire amount would arrive and eliminate the need for cutbacks or revenue raisers.
Knowing that the loss of state funds would harm individual New Yorkers, their families, communities, and the state, advocates and lawmakers urged raising state revenue, primarily through increased corporate taxes and increased personal tax rates for the highest brackets.
Now, New York State is slated to receive almost $24 billion in combined state and local fiscal relief under the American Rescue Plan. This is welcome news as our state looks to recover and rebuild while still during a pandemic. The federal funding will provide much-needed direct and indirect support to the state and New York City, forestall the need for painful cuts, help revive non-profits and small businesses – in short, support New Yorkers and boost the economy.
However, we cannot let this relief obscure the need for better long-term policy. Our state is likely to continue grappling with the same issues that led to a budget gap prior to the pandemic. The American Rescue Plan provides the opportunity for our state to really reckon with what is needed to build a strong foundation for our fiscal future.
“Our state budget must be rooted in reality and able to meet the continuing challenges of rising health care costs, address the wage gap, adequately fund public services including education, and meet the needs of all New Yorkers regardless of status,” said Jonas Shaende, Chief Economist for the Fiscal Policy Institute.
The Fiscal Policy Institute is a nonpartisan, nonprofit research and education organization committed to improving public policies and private practices to better the economic and social conditions of all.