(The Center Square) — New York state government spending is skyrocketing, according to a fiscal watchdog group, which is calling on Gov. Kathy Hochul and lawmakers to cap annual expenditures and brace for federal funding cuts.
The report by the nonpartisan Citizens Budget Commission said Hochul’s fiscal year 2026 budget calls for increasing state spending by 10.9% or $15.5 billion, which is nearly five times greater than the pre-pandemic level of 2.2% and adds up to the largest jump in spending in recent history.
“As federal COVID aid, ‘temporary’ tax increases, and a strong economy swelled its coffers, the State continued to increase spending that is unsustainable,” Patrick Orecki, the group’s state policy director, wrote in the report. “While currently masked by a short-term influx of cash, this spendthrift behavior is cracking the State’s fiscal foundation and makes responding to potential federal cuts even more difficult.”
Hochul’s budget adds significant new spending across the board and extends the “temporary” personal income tax increase. However, it lacks savings proposals in Medicaid and school aid “that make up more than half of the state budget” and a plan to fund the Metropolitan Transportation Authority capital program, among other potential cost reductions.
The watchdog’s report projects that between fiscal years 2025 and 2029, state spending will grow by 5.1% annually on average, increasing $31.6 billion over the four-year period.
State spending is projected to grow by $65.7 billion over the eight years between fiscal years 2021 and 2029, about 3.5 times the total growth of $18.7 billion in the prior eight years, according to the report.
“Furthermore, New Yorkers can expect the Legislature to include additional taxes and spending increases in their upcoming one-house budget counter proposals,” Orecki wrote.
Hochul’s preliminary $252 billion budget calls for tax cuts, expanded child credits and record spending on programs amid better-than-expected revenues. The spending plan calls for tapping surplus revenue to distribute $3 billion in “inflation rebate” checks for taxpayers, low- and middle-income tax cuts and an expanded child tax credit, among other proposals.
Hochul also wants to extend a millionaires’ tax, which raises the tax rates for earners between $5 million and $25 million and those making over $25 million. It currently sunsets in 2027.
The commission urged lawmakers to cap spending growth and look for savings while preparing for the potential impact of congressional budget cuts that could impact the amount of funding that states get from the federal government.
“Keeping annual spending growth to 2.7 percent starting next fiscal year would close projected budget gaps, allow temporary tax increases to sunset, eliminate the structural imbalance, and still be faster than projected inflation,” Orecki wrote. “Furthermore, this increase would be on top of the extraordinarily rapid spending growth of the past five years.”
