With the ink barely dry on Gov. Kathy Hochul’s budgetary fiscal plan, newly released data reveals there are already flaws in her tax revenue assumptions.
A report made public by State Comptroller Tom DiNapoli in mid-May disclosed that tax receipts in April were $4 billion less than the governor’s budget division had projected.
Total personal income tax collections came in at $7.5 billion, not the expected $12 billion, while business taxes came in $300 million higher than anticipated—$1.5 billion vs. $1.2 billion.
“After the historic spike in tax receipts in April 2022 amid record-high capital gains” Ken Girardin of the Empire Center for Public Policy has written, “budget officials had expected PIT [personal income tax] receipts to fall by 17% from April 2022 to April 2023, but the actual drop appears to have been 49%.”
This means that budget deficits projected to be $5.1 billion in fiscal 2025 and $8.6 billion in fiscal 2026 are too low and will have to be significantly revised.
And growing operating deficits mean reserve funds will be consumed to balance the governor’s bloated, record-breaking $230 billion budget.
There are additional problems with the governor’s fiscal plan that have been identified in the “Enacted Budget Report” released by Comptroller DiNapoli on May 18.
While the amount deposited in the statutory rainy-day reserve funds has grown to $6.2 billion, those balances as a percentage of general fund spending are well under the national median.
DiNapoli quotes a Pew Charitable Trust analysis that determined New York’s statutory rainy-day reserves would fund the state for only 25.2 days, while the national median for the 50 states is 44.5 days.
Also, the bulk of the state’s additional reserves, which are projected to grow to $19.5 billion, are described as “informal reserves” as opposed to statutory ones, which “are governed by statutory requirements, including terms and conditions for withdrawals and mandatory repayment provisions.”
In other words, the “informal reserves” are legal slush funds that can be tapped into at any time by the governor to fund favored projects and programs.
Then there is in the budget the continued reliance on “backdoor borrowing” to pay for $21 billion in capital spending.
“Back door borrowing” evades voter approval at the ballot box. The debt is issued by public authorities, “further adding to the states already high debt burden and utilizing limited remaining capacity under the state’s debt caps.”
Total state-supported bonded debt authorizations will increase to an astounding $222 billion during the 2023–2024 fiscal year.
In recent years tens of billions of dollars spent on various vendor contracts were approved by the governor’s office without any oversight from the comptroller’s office whose job it is to “validate that a contract’s costs are reasonable and its terms are favorable to the state and … ensure a level playing field for vendors.”
Readers may recall that in 2022, Gov. Hochul gave a $650 million no-bid COVID home test contract to Digital Gadgets Incorporated, whose owners and family members had written checks to the Hochul campaign treasury totaling $ 330,000.
Although Gov Hochul signed into law on Dec. 30, 2022, legislation to restore Comptroller DiNapoli’s “independent oversight to review certain SUNY, CUNY and Office of Government Services contracts,” the budget continues to authorize state spending without protections, such as competitive bidding and state comptroller review and approval of contracts before they become effective.
Such unsupervised spending this year will be about $5 billion. This includes “a $4.2 billion Office for People with Developmental Disabilities appropriation”—whatever that is.
Finally, the comptroller notes that the governor’s budget “continues to include problematic provisions with respect to accounting standards that have the potential to distort the appearances of reported receipts, distributions, and liabilities; and obscure the picture of true spending growth.”
Gov. Hochul’s budget contains inaccurate tax revenue projections, borrowing abuses, accounting gimmicks, no bid contracts and lax oversight.
So much for Hochul’s promise that she would have the most transparent and straight-shooting administration in the state’s history.