Gov. Hochul to present a budget for a state, for once, flush with cash

ALBANY — When Gov. Kathy Hochul presents a fiscal plan Tuesday for the year, New York will be beginning its state budget season in an almost-unheard-of condition:

It is flush, its coffers overflowing and the budget balanced for several years to come.

This is unusual for a state where, typically, minutes after lawmakers approved a state budget, they already are speculating about next year’s deficit.

How did this happen? The short answer is simple: the federal government provided an unprecedented amount of pandemic aid and the state’s economy has bounced back better and faster than lawmakers predicted a year ago.

"The fiscal outlook is vastly better than last year and we’ve never seen a four-year financial plan that is balanced. So this is unprecedented," said Andrew Rein, president of the Citizens Budget Commission, a Manhattan-based group and longtime monitor of the state’s finances.

The situation will give Hochul, a Democrat who took over as governor when Andrew M. Cuomo resigned in August, a chance to expand programs, boost education and offer tax relief — in a statewide election year. In her State of the State speech on Jan. 5, she outlined a broad agenda, headlined by a proposal to expand the health care workforce.

All 213 state legislative seats also are up for election in November, a factor that almost always boosts spending.

The question is, analysts say, how big will lawmakers go?

"Political fortune is smiling on Kathy Hochul with the historical surplus and any lack of an out-year budget gap," said Peter Warren, director of research for the Empire Center, a fiscally conservative, Albany-based think tank.

"The budget represents a big opportunity" for the governor, Warren continued. "But she’s got a free -spending Legislature, going into an election year, with a lot of ambition for how to spend state money."

A report issued last week by state Comptroller Thomas P. DiNapoli said state tax receipts have rolled in $12.9 billion higher for the last nine months than projected. By April 1, the end of New York’s fiscal year, the surplus could be even larger.

"The state’s economy and finances continue their recovery," DiNapoli said. "But there is continuing uncertainty about the impact of the ongoing COVID-19 surge, economic risks and the need for continuing financial support for those still struggling to find their footing … I urge the (governor) and the Legislature to proceed with caution."

Fiscal watchdogs, such as the CBC and the Empire Center, are saying the state can help many who were hurt financially by the pandemic but also should boost fiscal reserves, such as the state’s "Rainy Day Fund," because the federal help will soon dry up.

Hochul, in her State of the State address, signaled she wants to expand or create more than 100 different programs, according to the Empire Center’s tally.

She proposed investing $10 billion in an effort to grow the health care workforce by 20% over the next five years. The money would be spread out for pay raises, bonuses and capital expansions.

She also proposed $100 million in tax relief for small businesses, a new property-tax rebate for lower- and middle-income households, and a $1 billion investment in infrastructure for electric vehicles. She also proposed finishing the "third track" expansion of the Long Island Rail Road this year.

Historically, a governor’s budget proposal has set a base line for negotiations, with lawmakers typically pushing the totals higher. This year, legislators already are seeking bigger expansions of child care, education and housing assistance than Hochul has indicated she’d propose. So whatever numbers the governor unveils Tuesday, expect them to grow when a final budget is adopted around April 1.

"For legislators, it’s not a question for most of them of whether to spend it," Warren said, "but what to spend it on."