(The Center Square) — New York’s fiscal watchdogs warn the state is starting to see a slowdown in personal tax revenue collections as federal COVID-19 pandemic relief dries up.
A report by New York state Comptroller Tom DiNapoli pointed out that state tax collections in April totaled just over $10.9 billion, a $7.2 billion, or 39.9%, a decrease from last April, and $4.4 billion lower than initial budget projections. Much of the decline was in the state's personal income tax collections, the report noted.
The decline is noteworthy as April is generally the state’s biggest tax collection month, and it comes amid lingering concerns about a recession, according to the report.
DiNapoli said the $229 billion fiscal year 2024 budget signed by Gov. Kathy Hochul two weeks ago increases state spending by 4% year-over-year amid the projected drop in revenues and as federal pandemic aid is winding down.
"It also comes at a time when revenues appear to be softening, inflation persists, and the federal government has yet to reach a deal on the debt ceiling," he said. "The state has made progress in building up reserve funds, but policymakers need to carefully monitor the economy and work to put the state on a sustainable fiscal course."
DiNapoli said the budget also includes provisions that bypass the state's 2000 Debt Reform Act, which sets caps on debt levels and debt service spending. He cited $500 million in new spending on a rail infrastructure project between New Jersey and New York City that was structured as a federal loan to avoid triggering the state's spending cap.
The budget also authorizes $5 billion in new spending without protections such as competitive bidding and a review by the comptroller's office before they become effective, he said.
"The state’s continued reliance on “backdoor borrowing” and other practices that bypass statutory debt limits is concerning for the state’s long-term fiscal standing," DiNapoli said. "New Yorkers deserve greater transparency and accountability in state fiscal matters so taxpayers can be confident their hard-earned dollars are being used effectively."
The Empire Center, a fiscal think tank, said New York’s latest tax collection data indicate the just-passed state budget was "based on rosy assumptions about income tax receipts that are not materializing."
"This uncertainty around the state’s revenue picture should have given officials pause when they adopted the state budget earlier this month," Empire fellow Ken Giradin wrote in a blog post. "But Gov. Hochul and the Legislature showed nothing but caution: authorized FY24 spending exceeded then-forecast receipts by about $1 billion."
Giradin noted that much of the increased spending in the budget was for the state's Medicaid program, where previous governors and lawmakers "have struggled to bring runaway spending under control" absent fiscal restraint.
"The state’s share of the joint state-federal program is poised to rise 13%, and the actual costs could go higher," he noted.