Governor Hochul Announces Updated State Budget Fiscal Plan Reflecting Changes to National Economic Outlook

Governor Kathy Hochul today announced the release of the first quarterly update to the fiscal year 2023 enacted budget fiscal plan. changing economic outlook, an example of the Hochul administration’s continued fiscal discipline.

“Like the rest of the country, New York State faces substantial headwinds with a changing national economy, and our latest update to the Enacted Budget Fiscal Plan reflects that,” Governor Hochul said. “While the plan incorporates future budget variances, our commitment to fiscal discipline and planning for a rainy day remains and reserve fund deposits and balances will remain at the high levels we have forecast.”

The Plan update reflects clear signs of economic distress in the national economy, which is spilling over into the state economy. Real gross domestic product (GDP) declined at an annual rate of 0.9% in the second quarter of calendar year 2022, following a 1.6% decline in the first quarter. Consumer prices through June 2022 rose 9.1% over 12 months, the largest increase since the 12 months ending in November 1981. The performance of the financial sector, which is an important source of tax revenue in New York State, continued to weaken in response to unfavorable economic conditions. The data. Through the end of July, all major equity indices are down more than 10%, with the NASDAQ index down more than 23% and the S&P 500 down 15.1%, since the start of calendar year 2022.

Beginning in fiscal year 2024, annual personal income tax (PIT) estimates have been significantly reduced from the enacted budget due to a weaker economic outlook for the United States and the state. The estimated payment component of IRP, which includes capital gains activity, is reduced by $3.1 billion in fiscal year 2024, by $5.1 billion in fiscal year 2025, $5.7 billion in fiscal year 2026, and $8.4 billion in fiscal year 2027. The reduction is partially offset by a decrease of $1 billion. annual increase in the withholding component of PIT, reflecting growth from a higher expected base in fiscal year 2023.

The updated financial plan reflects an additional General Fund surplus of $2.3 billion in fiscal year 2023 and a variance of $310 million in fiscal year 2024, after the expected use of the fiscal year 2023 surplus in fiscal year 2024. Budget variances in external years are estimated at $3.6 billion in fiscal year 2025, $3.5 billion in fiscal year 2024. fiscal year 2026 and $6.2 billion in fiscal year 2027. Budget variances are almost exclusively attributed to reductions in tax revenue forecasts.

The state has continued to bolster reserve funds that act as a buffer against sudden service cuts or tax increases during economic downturns. At the end of fiscal year 2022, the state’s core reserves totaled nearly $9 billion. Over the next three years, additional deposits of $10.4 billion will bring reserves to $19.4 billion, or 15% of state operating fund spending, the budget target set by the governor Hochul in October 2021. FY2025 reserves exceed projected budget variances by approximately $6 billion.

The updated Plan is available on the Budget Division website.