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NYS Presents FY 2023 Budget, Benefiting From Unexpected Surplus

By:
Chris Gaetano
Published Date:
Jan 18, 2022
Budget Director Robert F. Mujica Jr.,
New York State Budget Director Robert F. Mujica Jr.

On Jan. 18, New York Gov. Kathy Hochul presented her proposed Fiscal Year 2023 budget, a $216 billion spending plan that, as elaborated upon later by Budget Director Robert F. Mujica Jr., benefitted from a projected shortfall turning into an unexpected surplus. 

Hochul said that, last year at this time, there was a projected $17 billion deficit, which caused the administration to think in terms of cutting costs. As the state enters 2022, however, that projected deficit has instead become a $6 billion surplus. Mujica, the budget director, said that this reversal was due to unexpected windfalls over the past year. 

"We're in a strong position now, as a result of strong tax receipts, a very strong stock market, and federal aid from the pandemic, all of which were unanticipated," Mujica said. "There are still risks but we start off well positioned from a budget perspective," he added later,

Mujica said that the administration has proposed several uses for this surplus. They include $2.2 billion for property tax relief; $2 billion for further pandemic mitigation measures (the precise nature of which will be determined through conversation with the New York State Legislature); $1 billion to help update and modernize the health care infrastructure; $1 billion in bonuses for frontline health care workers; and $350 million in pandemic relief for businesses, especially for those in industries especially affected by the pandemic, such as the travel industry. 

Mujica pointed out that none of these are ongoing commitments that the state will need to maintain; the funds are generally devoted to one-shot programs that won't raise expenses over the long run. This has helped create a budget that, for the first time in the state's history, has zero outyear gaps. 

The budget is about 1.6 percent bigger than last year's, in terms of total operating funds (3.1 percent if federal aid is counted as well). Mujica said that most of that growth would come in two places: education and Medicaid. School aid would grow by 7.1 percent; Medicaid spending, meanwhile, would see a 10.3 percent increase, according to page 45 of the budget book

He added that the state is also committing to growing reserves to 15 percent of state operating fund spending by Fiscal Year 2025, noting that unexpected events such as 9/11, the global financial crisis and the pandemic have all caught New York unaware before. The best way, he said to avoid a repeat performance is to have adequate reserves to meet unexpected challenges. 

The governor and Mujica also briefly touched on various tax cuts contained in the budget plan. The book itself goes into a little more detail. New tax actions in the proposal include: 

*A Homeowner Tax Rebate Credit. The proposed rebate program would provide low- and middle-income homeowners, as well as senior homeowners, with a rebate in the fall of 2022 to offset property taxes at a one-time state cost of $2.2 billion.

* Middle-Class Tax Credit Acceleration. The budget would accelerate the phase-in of the middle-class tax cut, which began in 2018 and was scheduled to fully phase in over eight years by 2025. The lower tax rates will now be fully phased in by 2023 which decreases tax receipts by $162 million in FY 2023.

* Small Business Tax Relief Credit. The budget would provide recurring tax relief to businesses through a revision to the income exclusion and expands the benefit to include pass-through entities with less than $1.5 million in New York-sourced gross income.

* Small Business Tax Relief Credit for COVID-19 Expenses. A new, one-time, capped refundable tax relief program  would provide relief to businesses for eligible capital expenses.

* NYC Musical and Theatrical Tax Credit Extension. The initial application deadline would be extended to June 30, 2023, and the cap  would be doubled from $100 million to $200 million to provide one-time aid to eligible productions and revitalize tourism in New York City.

* Other tax actions would include extending existing tax credits, including credits for low income housing, clean energy, youth employment and hiring veterans. There would also be new tax credits to farmers to support and sustain food production. Other new tax actions include the imposition of sales tax on vacation rentals, as well as certain enforcement initiatives and reform

"The bottom line," said Hochul, "is we'll make smart investments to make sure we not only recover from this pandemic but emerge from it stronger than ever before. We'll do it by taking a fiscally responsible approach because we know the federal funds will eventually run out, which is why we're not banking on them in the future, not creating recurring expenses or new programs we can't pay for... What we have achieved with this blueprint I'm putting out today is a plan that is both socially responsible and fiscally prudent," she said. 

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