FILE - NY Albany, Empire State Plaza, capitol, statehouse

Empire State Plaza and the New York State capitol complex in Albany.

(The Center Square) – Higher-than-anticipated tax revenue and an infusion of federal dollars have shored up New York state’s budget woes for the immediate future, but a local policy organization is throwing cold water on the upbeat projections.

The Empire Center, a nonprofit think tank, is calling on state officials to consider long-term budget priorities, particularly once funds from the American Rescue Plan are no longer an income source.

New York state received $12.7 billion in March through the American Rescue Plan and has been enjoying a resurgence in robust tax revenue receipts, most recently with an unanticipated $4 billion allotment in May.

The Legislature and Gov. Andrew Cuomo have also adopted new policy decisions that bring new income streams into the budget, such as tax hikes impacting high income earners. The maneuver is expected to bring $2.75 billion in new revenue into the state budget.

But Peter Warren, director of research with the Empire Center, said he is concerned increased spending will ultimately bring New York state back into familiar territory – budget deficits – because of policies on the expense side of the ledger.

The unexpected cascade of new dollars, juxtaposed from a dire fiscal portrait Cuomo portrayed in January for this year’s budget proposal, has already resulted in increased spending in multiple areas of the state budget, including education.

Representatives within Cuomo’s budget office have since reported financial planning indicates the state’s upcoming budget cycles, stretching into 2023, are expected to be in the black.

In a recent blog post, Warren, however, said he has concerns about the state’s financial picture for fiscal 2024 and beyond.

“Looks are deceiving here,” Warren said. “Extending the budget window … reveals large, yawning budget gaps growing from nearly $8 billion in 2026 to nearly $20 billion by the end of the decade.”

Based on the current course, Warren said the expiration of two income streams will “send the budget deep into the red.” The federal stimulus funds sunset in 2026 and the state’s temporary personal income tax hike is set to end the following year.

In his post, Warren is calling on lawmakers and Cuomo’s administration to examine spending priorities now, rather than later.

“The outlook assumes that overall spending from all sources by the state in 2025 will be lower – in absolute terms, not inflation-adjusted terms – than it is in the current year,” Warren said.

He added, “For that to happen, New York would need to avoid backfilling expiring federal aid with state funds or extending its own ‘temporary’ new initiatives. That’s a major test of fiscal restraint for a state with little demonstrated capacity.”

Some officials within Albany have been sharing similar concerns as 2021 has progressed. State Comptroller Thomas DiNapoli, or instance, has been issuing routine reports within his office on New York’s fiscal shape as the pandemic’s grip loosens.

In his latest report on the enacted budget, DiNapoli points out the financial positives that have occurred in recent months, but is cautioning against outsized spending.

“While the financial plan outlook is markedly improved, significant underlying risks will require discipline and careful management to avoid a return to large budget gaps,” DiNapoli said.

He also cautions state officials to exercise caution, should unanticipated circumstances arise in the foreseeable future.

“A resurgence of COVID-19 or a delayed economic recovery would threaten revenue and spending forecasts,” DiNapoli said. “Policy decisions to extend recovery initiatives beyond currently expected time frames could result in spending commitments that outstrip available resources.”