The mayor and city budget director Melanie Hartzog are requiring agency heads to cut spending under a program to eliminate the gap, or PEG. While the initial goal is $1.3 billion, that number will rise, he said Thursday.

"It's still not clear how large or how long the steep revenue declines associated with the current economic disruption will be, nor do we know how New York City and other local governments will address them," said Maria Doulis, vice president of the watchdog Citizens Budget Commission. "However, as Moody notes, New York City needs greater expense reductions than what's been announced to date to meet the revenue decline.

"The spending cuts should be larger and should be focused on improving efficiency and cost-effectiveness of government operations."

The first and biggest maneuver is a warning to local governments and school districts: This could all change at any time. The budget contains language requiring three reassessments of the state’s financial situation throughout the calendar year, and if at any point the estimates don’t match the numbers the state used to pass the spending plan, the budget office can delay or withhold local payouts.

It’s certainly not ideal, said Dave Friedfel of the Citizens Budget Commission, because local entities can’t be as dexterous making cuts later in the fiscal year.

“In the end, if those entities have to be cut part way through the year, that’s even harder to deal with, particularly for local governments or school districts who set their tax levies based on state aid,” he said.

Fiscal watchdogs, meanwhile, expressed concerns about the way borrowing is structured in the budget, fearing the state could pile debt upon debt.

The budget deal is set to include at least $8 billion in short-term borrowing to help the state bridge a three-month gap as the tax deadline was delayed to July 15, but that number could balloon to more than $10 billion.

“While it makes sense for the state to issue short-term debt to cover delayed tax payments due to the changing tax filing date, the budget approves debt of up to $11 billion that could be repaid by issuing more debt,” said David Friedfel of the Citizens Budget Commission. “If the state takes this approach, N.Y. taxpayers could end up paying for this year’s school aid to wealthy districts and state operations costs for the next 30 years.”

Arguing the new federal stimulus legislation failed to deliver what the state needs, Cuomo said, “The help we were waiting for from Washington never came.

Then he added: “We have to make drastic cuts to the budget like you have never seen.”

A watchdog group, Citizens Budget Commission, called on state leaders to hold off action on policy initiatives now stitched into the state budget and take them up later in the legislative session.

Among measures that should be delayed, the commission suggested, are those that would expand the governor’s powers and broaden prevailing wage requirements for publicly subsidized construction projects.

Andrew Rein, president of the Citizens Budget Commission, gave the measure a mixed review in his own press release.

“Lawmakers commendably refrained from enacting anticompetitive tax increases, reduced State’s spending on school aid, started to address the underlying structural problem in Medicaid, and benefited from enhanced federal aid,” Rein wrote. “However, State lawmakers established a new midyear modification process that allowed them to defer hard choices that this unprecedented economic disruption may require. While having such a process may be helpful given economic and future federal aid uncertainties, as designed it lacks sufficient transparency and accountability; this should be rectified in practice.”

And while Rein said the budget’s reliance on short-term borrowing is reasonable given the extension of the state’s income tax filing until July, the provision allowing Albany to convert that to long-term bonds would amount to borrowing to pay ordinary operating expenses “something which should only be done as a last resort.”

At the top of one key bill, stretching over 987 pages, is a key word: “Notwithstanding." It means that all the spending promises outlined for schools and others in that one bill won’t necessarily come true. That will become reality if – with historic new powers – Cuomo determines during the year that revenues won’t be enough to meet expenses. If that happens, he can unilaterally cut spending if “such action is necessary to respond to the direct and indirect economic, financial and social effects of the Covid-19," the bill states.

Fiscal watchers question the state’s approach, including an increase in school aid, if it might have to cut those spending ideas with little notice later this year.

“It strikes me that seems to be the remedy as opposed to adopting a budget that reflects the state’s current fiscal reality," said David Friedfel, director of state studies at the Citizens Budget Commission, a private watchdog group.

State Fiscal Relief

New York State will receive $7.543 billion through the Coronavirus Relief Fund. The Fund – available until December 21 – helps states mitigate massive budget shortfalls due to widespread joblessness, plummeting tax revenue, and an increase in human needs.

However, New York’s share is just five percent of the $150 billion available for all states, even as New York is reporting nearly half of all confirmed COVID-19 cases in the U.S. Already, New York State is forecasting $10 to $15 billion less than previously expected in tax revenue as a result of COVID-19 measures, and Citizens Budget Commission predicts up to a $20 billion shortfall in New York City revenue over the next three fiscal years. In other words, state fiscal relief is likely to be significantly insufficient. (It’s worth noting that Senator Schumer requested a much larger sum of $750 billion and has said he’s working on another relief package.)

The state will monitor the budget and be able to tweak spending during three periods: from April 1 to April 30, May 1 to June 30, and July 1 to Dec. 31.

Additional revenue, such as federal bailout money, could be used to avoid cuts, and the budget office must consider the potential impacts of withholding aid to schools and localities, according to the bill. The budget director also will have to give legislative leaders monthly reports on money withheld and expected to be withheld.



The budget for April already is projected to be unbalanced because the state extended its personal income and corporation tax filing deadlines to July 15 from April 15, said David Friedfel, director of state studies for the Citizens Budget Commission, a nonprofit fiscal watchdog group.

Mujica said the state plans to use some reserves and allow short-term, temporary borrowing to bridge the gap resulting from the tax filing date change.

Friedfel challenged the transparency and practicality of updating the spending plan periodically. “State budget balance should not depend from the outset on making mid-year cuts—such cuts should be a last resort if revenues fall short of current projections based on today’s circumstances,” he said.

As the city and state have increased spending on schools over the past three decades, New York City has increasingly shouldered more of the cost.

But cities, too, will face a financial hit to their own local revenues, which will affect how they can fill potential gaps for education spending. Cities could decide to shift money from other agencies over to schools, said Dave Friedfel, director for state studies at Citizens Budget Commission.

“If the city as a whole is short X amount, how does that translate down to the school district?” Friedfel said.

In a blog post, David Friedfel, with the Citizens Budget Commission, wrote:

“The need to focus on preparing New York State for an uncertain future should take precedence over policy proposals that can be revisited in the coming months.”

The Governor said that it’s unlikely a deal will be struck on legalizing marijuana in the budget. He did say reforms to bail reform have to get done.

Arguing the new federal stimulus legislation failed to deliver what the state needs, Cuomo said, “The help we were waiting for from Washington never came.

“We have to make drastic cuts to the budget like you have never seen,” he continued.

A watchdog group, Citizens Budget Commission, called on state leaders to hold off action on policy initiatives now stitched into the state budget and take them up later in the legislative session.

Among measures that should be delayed, the commission suggested, are those that would expand the governor’s powers and broaden prevailing wage requirements for publicly subsidized construction projects.

“They would be better off doing a bare bones budget, with minimal policy changes,” said David Friedfel, the commission’s director of state studies. “You’re not going to get a full and open debate right now because people are so distracted” by pandemic-related concerns.

No one can accurately estimate the amount of tax revenue that will be lost by the economic shutdown, with the governor’s best guess putting it has high as $15 billion over the next 15 months. City Comptroller Scott Stringer has suggested city revenues will fall short by $7 billion over a slightly longer time period. MTA Chair Pat Foye said its losses will a multiple of the $3-plus billion in aid that it receives the last week’s package. No one knows what the total bill for coronavirus spending will be.

“If revenue projections do end up falling $10 to $15 billion short, the extra federal Medicaid money, school aid, and funding for direct pandemic response will not counter the economic and associated revenue impacts of this pandemic,” said David Friedfel, director of state budget studies for the Citizens Budget Commission.