ALBANY — A Wall Street credit rating agency on Wednesday issued a warning about the state’s $6.1 billion budget deficit, a day after the Assembly speaker said he will seek more taxes to address the growing shortfall.
The “credit negative” from Moody’s Investors Service doesn’t mean a downgrade to the state’s credit rating, which affects how much it costs the state to borrow money.
But the designation “is indicative of the impact of a distinct event or development as one of many credit factors affecting the issuer,” Moody's said in a report. The credit rating agency continues to give New York a high “Aa1/stable outlook.”
Moody’s said the state’s Medicaid spending is outstripping other states as well as New York’s own projections.
The Moody’s report is based on the Cuomo administration’s midyear fiscal report released a week ago that projected a $6.1 billion deficit caused in part by a $4 billion increase in Medicaid spending. Medicaid provides health care for millions of low-income New Yorkers.
“New York now projects increased Medicaid costs will lead to its current budget gap doubling to nearly $10 billion by the end of its financial plan period in fiscal 2023,” Moody’s said. “This represents more than 11 percent of projected state general fund receipts.”
“It’s nothing we haven’t addressed before, but it is serious,” Cuomo told reporters Tuesday. He estimated the deficit is “about $5 billion.”
“It’s basically caused by the Medicaid shortfall, which is caused by the reduction in payments from the federal government,” Cuomo said.
“The federal government has cut back on its Medicaid reimbursement, labor costs have gone up — that’s driving a deficit — and it’s going to have to be addressed in this budget and we’re coming up with a number of alternatives to do that,” Cuomo said.
Moody’s blamed the rising deficit on actions by the Cuomo administration and the legislature.
David Jacobson, vice president of communications at Moody’s Public Finance Group, said the minimum wage increase to $15 an hour that is being phased in has boosted state spending for health care workers by $703 million in the current fiscal year.
Enrollment in long term care for older New Yorkers rose by 12 percent this fiscal year — more than twice the increase the Cuomo administration had projected, Jacobson said.
“This is really a spending issue,” said David Friedfel, director of state studies for the independent Citizens Budget Commission. “Revenues are coming in pretty much as expected.”
Cuomo’s budget proposal to the Legislature is scheduled for delivery in January. Last month, Cuomo said he would roll $2.2 billion in current Medicaid costs into future budgets. The current state budget is $175.5 billion.
“We are developing a plan to be introduced in January that will once again limit New York State’s Medicaid spending growth and continue high quality care for 6 million New Yorkers,” administration budget spokesman Freeman Klopett said in response to the Moody's report.
On Tuesday, Assembly Speaker Carl Heastie (D-Bronx) said Assembly members planned to consider higher taxes rather than spending cuts in education and other areas next year.
“For us in the Assembly, we always believe in raising revenue,” Heastie told reporters.
“This is going to be a tough budget year," he said. "We have a big problem in terms of the Medicaid budget, but as far as we’re concerned in the Assembly we always want to make sure we are providing adequate health care to the people in the State of New York.”
The Times Union of Albany on Wednesday reported the state is considering expanding the state bottle-deposit law to cover liquor and wine bottles. Cuomo’s budget office wouldn’t comment.