ALBANY — While sounding an alarm about widening budget gaps, a report released Thursday by the state Comptroller’s Office examining Gov. Kathy Hochul’s proposed budget warns that the state faces major challenges to provide affordable health care and equitable education aid while improving affordability in New York.
The report released by Comptroller Tom DiNapoli notes the state’s finances have stabilized since the COVID-19 pandemic and concerns about an impending national economic downturn have diminished as inflation has decreased. Still, the report found Hochul’s executive budget should do more to build on the state’s statutory rainy day reserves, which have rules for deposits, withdrawals and repayments, rather than relying on informal reserves that are under the governor’s discretionary control.
Since taking office, Hochul has touted her efforts to build up the state’s reserves. Speaking at the state Capitol last month, Hochul said, when she took office, the state’s reserve funds were only 4% of the budget.
“I felt that that left our state vulnerable. Having worked in municipal budgets for over a decade and a half, I knew it was important to at least have a 15% reserve,” Hochul said. “Now, we’ve worked hard with the legislature and our leaders to ensure that our past two budgets have achieved that goal, just landing a little bit over 15%.”
DiNapoli’s report confirms the state’s informal reserve fund total is $19.5 billion, or 15.1% of the state budget. The report notes, if the state continues to build up its informal reserves, clear criteria and guidelines should be established to define how the funds can be used.
“New York state has taken positive steps to stabilize its finances with higher reserves and lower projected budget gaps,” DiNapoli said in a release. “Still, the Executive and the Legislature face the difficult challenge of ensuring adequate funding for our schools, health care programs, and other critical needs while improving the state’s affordability.”
One of the major criticisms from state lawmakers of Hochul’s proposed budget is her proposal to revise how the state distributes its school aid and diminish “Hold Harmless,” a provision which ensures that districts don’t see a decrease in Foundation Aid funding compared to the previous year.
Thursday’s report finds the proposed changes would increase 336 districts’ Foundation Aid — average increase is $2,008,974 (4.5%) — while decreasing 337 districts’ Foundation Aid by a total of $375 million in the upcoming fiscal year — average decrease is $498,325 (-10.6%).
The state’s budget is due April 1 each year. While the proposed budget does include $207 million this year to offset the cuts for the 337 districts, that would still result in a $168 million reduction.
Fifty-six percent of school districts would gain total state aid.
DiNapoli also raised concerns about the executive budget’s proposals that he says will reduce transparency, competition and his office’s oversight.
“I’m also concerned this budget again advances provisions that would diminish my office’s oversight, including new proposals to restrict my office’s approval of certain state bond issuances. This independent oversight protects taxpayers from short-sighted decisions that can burden the state financially,” DiNapoli said in a release. “These proposals should be rejected.”
The audit notes at least $160 million in state spending was exempted from his office’s contract oversight and the state’s competitive procurement process, while an additional $1.4 billion in spending is proposed for distribution without a competitive procurement process.
The proposed budget also includes a measure that would restrict his office’s terms and conditions approval of some state bond issuances. DiNapoli in the report argues this oversight role protects taxpayers from short-sighted financing decisions that can burden taxpayers with debt that is risky and costly. He also rejected other proposals that he said would make it more difficult for his office to determine the state’s true debt burden and permit other unwise financing choices.