Gov. Kathy Hochul\u2019s administration is telling agencies to hold the line on spending, a sign of a tough budget cycle as the Democratic governor runs for reelection.<\/p>\n
The warning came in a Thursday letter from Budget Director Blake Washington. The state already faces a projected deficit of more than $10 billion \u2014 with the prospect of wider gaps caused by federal cuts and funding freezes. The governor will present a budget in January.<\/p>\n
\u201cUnfortunately, federal assistance crucial for programs supporting New York\u2019s most vulnerable have been curtailed, foisting new costs upon New York state,\u201d Washington wrote. \u201cDue to imprudent federal policies, economic headwinds remain as labor markets are cooling and inflation remains elevated.\u201d<\/p>\n
Washington said in an interview last week that he is cautiously optimistic about the state\u2019s economic outlook. But he acknowledged that the federal government is a big wild card. More than $90 billion of the state\u2019s $254 billion in spending comes from federal funds.<\/p>\n
Most of it is for the Medicaid program, which provides health insurance to low-income and disabled people. The massive tax and spending bill signed by President Donald Trump this summer will knock 1.5 million people off their state-backed health insurance and reduce hospital funding by an estimated $8 billion, according to Hochul\u2019s administration. Washington estimates a $3 billion hit to the state\u2019s Medicaid program<\/a> in the coming fiscal year.<\/p>\n The budget has an April 1 deadline, but Hochul has let budget talks fritter beyond that for the last several years, using the time as leverage for unrelated policy items. The spending plan adopted in May<\/a> this year included a ban on students using cellphones at schools<\/a> as well as changes sought by prosecutors<\/a> to pretrial evidence-sharing laws.<\/p>\n What the current budget didn\u2019t do was take a tough line on spending, said Andrew Rein, president of the Citizens Budget Commission, a fiscal watchdog group. Rein\u2019s group said the budget adopted in May increased operating spending by 12% \u2014 something that\u2019s increasingly unaffordable.<\/p>\n \u201cYou should start now doing some of the stuff that the state should have been doing all along, in terms of restructuring its Medicaid program and making sure it targets education aid to those most needy,\u201d Rein said.<\/p>\n Progressive groups say raising income taxes is the answer. Erica Vladimer, communications coordinator for the Invest in Our New York campaign, said taxing rich people is extremely popular in public opinion polls.<\/p>\n \u201cGovernor Hochul would do well to listen to the people she represents,\u201d Vladimer said. \u201cNew Yorkers will stand behind her when she finally adjusts our tax system so it\u2019s more equitable and we can bring in more revenue.\u201d<\/p>\n Vladimer\u2019s group said in a statement that holding spending flat would essentially amount to a reduction in services. Washington, in his letter, said state agencies have \u201can obligation to do more with less.\u201d He also asked agencies to look for ways to reduce the regulatory burden on people and businesses.<\/p>\n