ALBANY — The state’s budget director said Thursday that an analysis earlier this week that predicted the state would lose up to $7 billion in revenues because of the coronavirus is now at the “low end” of projected losses because of the tanking stock market, closed businesses and other major sources of tax revenue.
On Tuesday, state Comptroller Thomas DiNapoli estimated that the state could lose as much as $4 billion to $7 billion in revenues in the fiscal year beginning April 1 because of the coronavirus.
On Thursday, state budget director Robert Mujica said the fiscal outlook appeared worse.
“Based on the trajectory of where things are now, that number would be on the lower end of what we’re looking at,” he said, referring to the $7 billion estimate.
DiNapoli had noted his analysis was based on data as of Friday. On Friday, Wall Street had rallied from its worst day since the Black Monday crash in 1987. But Wall Street has been volatile again this week.
“Circumstances changed again, and continue to evolve on a daily basis,” said Freeman Klopett, spokesman for the state Division of Budget. “Every day that goes by, the longer the recovery will be.”
Wall Street losses hit state government hard several ways. The financial sector has historically accounted for up to 20% of income tax revenues. In addition, the state and the state pension fund have investments in the market and stock losses also reflect the near future of employment in the state, which affects business and income tax revenues.
Cuomo says the virus may linger in New York for six to nine months, further disrupting commerce and tax revenues, while driving up costs for emergency management, health care and unemployment benefits. On Thursday, the state Labor Department said its seen more than a 1,000% increase in unemployment claims in some areas of the state and on its website. Its website is getting 250,000 hits a day, a 400% increase from the norm.
Analysts outside government agree.
“The budget director is correct to focus on the downside risk,” said David Friedfel of the independent Citizens Budget Commission. “It would be much easier to add spending later if this economic and financial decline turns out to be more shallow than projected,” said Friedfel. “If the past is prologue, you’d see a shortfall of approximately $8.5 billion between actuals and projections …”
On Tuesday, Cuomo continued to try to strike a balance between hard, painful facts while giving a cause for optimism. He paraphrased President Franklin Delano Roosevelt from a speech during the Great Depression: “Things are going to get worse and worse before they get better and better and the American people deserve to hear it straight from the shoulder,” Cuomo said.