State budget director warns NY will have to cut services if federal funding dries up

The state’s budget director says that if federal cuts to vital services come to pass in Congress’ final budget plan, the state can’t simply raise more money and will have to make its own cuts. Nearly $91 billion of Gov. Kathy Hochul’s $252 billion executive budget proposal comes from the federal government.

As Hochul has said, a special session would be likely if budget figures needed to be reworked to respond to cuts. State budget negotiations are on pace to extend through at least Thursday as topline policy matters muddy the waters, but on the fiscal side of the budget book, state Budget Director Blake Washington told reporters that while there are some unknowns, the contingency plan is pretty straightforward.

"There's no bottom to some of these. We don't have the ability on the state side to backfill,” Washington said Monday. “The only way you can really backfill on the state side is to cut services for other things, and you sort of modify spending across the platform. And so you have got to make sure they’re sustained."

Otherwise, he said, it could be a case of “call your congressman.”

Some maintain that the specter of federal cuts could be partially alleviated by increasing income taxes on the wealthy in an effort to raise state revenue. Morris Pearl, chair of the board of Patriotic Millionaires, an organization focused on fiscal equality, thinks New York is approaching the issue all wrong. 

“I think that what New York State should be doing is having those of us who are the most wealthy, the most able to pay taxes, pay some taxes beyond what we're actually paying, and I think that would be a step in the right direction,” Pearl told City & State. 

But even raising income taxes – which Hochul has said she is not willing to consider – would not raise enough money to compensate for all of the federal funding that the state receives. Lawmakers from the state to federal level have pointed out that backfilling $90 billion is simply not an option. In order to protect New York’s overall stability, Washington’s approach, and that of the state government, may be the only path that makes sense. 

Andrew Rein, executive director of the Citizens Budget Commission, said that the state should have already been preparing for cuts to federal programs like Medicaid and social services like SNAP and even the Metropolitan Transportation Authority. “It is all over the place that there are vulnerabilities,” he said.

According to Rein, the state cannot simply treat this as a one-year issue, but must recognize it as something that will impact the state’s coffers for years, undoing the cautiously optimistic projections given when Hochul’s budget was first released. “Those cuts are going to be recurring,” Rein said. “What the state's going to have to do is find what is the glide path to what might be the new normal of federal funding.”