May 27, 2020. The Fiscal Policy Institute today warned state legislators and the governor that New York’s financial and social woes will only worsen if they attempt to return to an austerity budget model. The pandemic’s public health crisis and subsequent economic downturn deepened an existing budget shortfall and with the deficit projected to be at least $13 billion, the state faces an extraordinary fiscal challenge. There is no simple solution to this crisis which will require bold innovation from our state leadership. 

Read the Policy Paper: Minimizing Risks While Maximizing Our State’s Potential

Statement from Ron Deutsch, Executive Director, Fiscal Policy Institute:  

“Austerity budgeting may seem sensible, but it would do more harm than good by setting our state further back. Hard times only become harder if our first response is to choke off revenue to hospitals, schools, small businesses, and fire teachers, nurses, aides – all the indispensable people and services that make our communities great. For the last ten years, our state has cut public services to the bone which did not help prepare us for a pandemic. Simply repeating the same fiscal plan will not get the state on solid financial footing, build in resiliency, or strengthen us to meet the next challenge.” 

New York State government must urgently address problems of immediate liquidity, pandemic recovery, and long-term revenue sustainability. Federal assistance is a necessity, but we cannot ignore smart state-level action to mitigate harm and raise the necessary revenue. FPI recommends three vital components of an effective post-COVID economic and fiscal recovery policy: 

  • Federal Assistance to States – further stimulus aide is necessary 
  • Borrowing from the New York Federal Reserve Bank’s Municipal Liquidity Facility (MLF) – short-term borrowing keeps revenue flowing, which keeps communities alive.  
  • Generating New Revenues from the Ultra-Rich – taking a small step to equalize tax rates for the wealthiest New Yorkers earning over $5 million a year is common sense. 

Statement from Jonas Shaende, Chief Economist, Fiscal Policy Institute: 

“The pandemic was an unprecedented public health and economic crisis, and there is no question that the federal government must assist states in recovery. However, the state can and must look to take any actions necessary for the good of the state and our people, and any attempt to misread state action as an excuse to forego federal aid would be a grievous injustice. It is important to remember that while New Yorkers bore the brunt of COVID-19 in lives lost and economic disruption, our state leads the nation in income disparity, and that is reflected in our tax code. There is no excuse for not taking already overdue steps toward equalizing our tax policy.” 

The New York State budget was in trouble even before COVID-19. Years of self-imposed austerity under an arbitrary 2% spending cap weakened the state agencies, programs, and institutions that we now need more than ever. Its past time to rethink how our state budget is crafted and why vital state tax reform is ignored year after year. The pandemic should be a wake-up call to leaders and all New Yorkers – we cant do more with less, and we cant sustain cuts aimed at the community members and programs that we rely on every day.  

The governor and state leaders must think beyond the continued use of the same austerity budget measures put in place year after year. We cannot afford to let short-term stopgaps and austerity determine our long-term economic trajectory. The Fiscal Policy Institute urges Governor Cuomo and state leaders to work together to craft a better path forward for all New Yorkers.  

Read the Policy Paper: Minimizing Risks While Maximizing Our State’s Potential 

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.