New York has a 2024 Fiscal Year Budget! It comes to $229 billion, a $7 billion increase over last year. After scouring numerous articles to learn more, the main things I walked away with are that there will be a minimum wage increase; no new personal income taxes; no gas hookups in future construction; judges will have a little more flexibility; a handful of inactive charter schools will be reactivated; more people will be eligible for childcare support; the cigarette tax will go up $1; and there are some changes to the MTA. However, it felt like for $229 billion something was missing, so I decided to take a closer look.
I started with New York’s five-year financial plan. The Executive Summary reviews the state’s economic strength pre-COVID, briefly mentions the pause that occurred on many levels during COVID, and then notes that “States finances, however, have fared better than expected.”
From FY 2020 to FY 2021 – the acute phase of COVID, tax collections declined .6%. By the following FY (2022), tax collections grew by 27% (“equal to about seven years of typical tax receipts growth compressed into a single year”). This year, tax collections are expected to increase by almost $115 billion or almost 10%. There will be a General Fund surplus of $8.7 billion.
The summary notes, “The surplus is used to strengthen the State’s capacity to weather the economic downturn on the horizon.” Some of that money is going into reserves for the future. Some of it is prepaying Retirement Health Trust Fund benefits. Some is for debt recapitalization. The balance is for “prepaying expenses and managing budget gaps.”
So, we will end the FY with a cushion of about $19.5 billion and will have prepaid over $10 billion in future debt service costs from 2024 to 2027. Tax receipts are still coming in strong, but there’s an expected “mild national recession” in 2023.
Financial challenges are expected in 2024 to 2027. Wage growth is expected to slow, decreasing from 3.3% and 4.3% in the May 2022 forecast to 2.8% in FY 2023 and 2.3% in FY 2024. Bonus income will take a big hit, declining 27% in FY 2024 from FY 2022. General Fund tax receipts before the actions in the recently approved budget are reduced by $2.1 billion in FY 2024; $7.4 billion in FY 2025; $7.8 billion in 2026 and $5.2 billion in 2027. Still, it sounds like we’ll be in a good position to “weather the storm.”
Moving onto the Financial Plan Overview, it says the budget addresses three of the most pressing issues facing the state at the start of 2023. Can you guess what they are? Basing my guesses on the Governor’s playbook and media coverage of the budget, I was way off base. The three most pressing issues: the Metropolitan Transportation Authority’s solvency; the State’s health care system; and caring for asylum seekers coming to the State. I’m pretty sure I would’ve noticed those if they had been part of any of the media stories I scoured.
The overview goes on to state there’s a “comprehensive financial plan to put the MTA on stable financial footing”; “substantial new capital and operating aid for healthcare” and a commission looking at how to improve quality while reducing costs; and “extraordinary funding to local governments that are providing services and assisting with the resettlement process for asylum seekers.” There’s also funding for State of the State priorities like mental health, housing, public safety, and SUNY. The overview ends talking about significant projected budget gaps for 2025, 2026 and 2027 due to reduced tax receipts and without using any reserves.
I’m still stuck on what some could perceive to be mixed messages. So, I went to the Executive Budget Highlights and decided to do some math. Based on investments from largest to smallest, here’s where the spending priorities appear to be:
- Students and schools: $34.5 billion
- Public transportation: $450 million plus $17.7 billion (Note: These numbers do not include $400 million in operating efficiencies expected from the MTA; generate an additional $800 million by increasing the top rate of the Payroll Mobility Tax; and increase NYC’s share of funding to $500 million; share in licensing fees and annual revenue from three possible casinos)
- Childcare: $7.6 billion over four years plus $418.8 million in targeted investments
- Climate crisis: $5.5 billion plus 2022 Environmental Bond Act spending of $1.5 billion
- Healthcare: $2.34 billion
- Assistance to asylum seekers: $1.1 billion
- Mental health care: $1 billion multi-year plan
- Gun violence & public safety: $787.9 million
- Economy: $610 million
- Housing: $378.8 million
Then I turned to the 2024 Budget Executive Briefing. Page 15 defines three key initiatives as mental health, affordable housing, and public safety. Okay, I had heard those being among priorities. Then I turned to page 31 talking about ongoing infrastructure investments and see that there’s a $52.1 billion capital program for the MTA from 2020 to 2024. I think that may mean that public transportation bumps students and schools from the #1 spot above.
I decide to go back to where I started, skimming the five-year plan and slow down when I come to the section on local assistance, which indicates two-thirds of state spending goes toward local programs (see pages 46 and 47) where the priorities again appear to be education, healthcare, mental health, transportation, and social services.
So, I hoped my article helped clarify things. Just kidding – it looks like you have your hands full. If you need some extra time to get your arms around the budget and what it means to your municipality, RBT CPAs is here to help. Let our accounting, audit, tax, and financial advisory service professionals assist you so you can focus on other priorities. To find out what we can do for you, give us a call.