New York state faces a cumulative three-year state budget gap of $34.3 billion through fiscal year 2029, state Comptroller Tom DiNapoli said in a report on Friday.
DiNapoli said when accounting for the recent federal actions and cuts, the gaps as a share of spending reach levels not seen since the Great Recession.
According to the comptroller, the $34.3 billion gap is up $7 billion since the January release of Gov. Kathy Hochul’s executive budget for FY 2026 and can be attributed to downward revisions to the economic forecast and projected revenues, as well as increases in projected spending.
“The Financial Plan paints a challenging picture for the state that will only grow more problematic with the incoming federal cuts from the reconciliation bill signed by the President,” DiNapoli said in a statement. “This is likely just the beginning; the relationship between the federal government and the states is being restructured, and state governments will be facing drastic reductions in federal aid that could force difficult decisions about state revenue and spending priorities. There is an urgent need to formulate a fiscal response to the federal reconciliation bill and support New York’s safety net.”
The report said the economic forecast published with the financial plan was revised downwards from the projections made with the consensus forecast report on March 1. Job gains both nationally and statewide slowed through May. Average monthly employment growth in New York was 4,600 jobs, down from 19,100 for the same period last year. For the current fiscal year, the Division of the Budget is projecting a weaker New York economy with both wage and personal income growth forecasted to decelerate from their previous fiscal year levels.
The tax law passed by Congress and signed into law by President Donald Trump in July implements deep cuts to federal funding and changes to eligibility for safety net programs, the comptroller’s report said, which will have major impacts on the financial plan and on New Yorkers, particularly on health care and nutritional assistance.
Higher spending growth in school aid and Medicaid has driven overall spending growth in New York, the report said. In addition to being the largest areas of spending, they have also grown the fastest.
DiNapoli recommended implementing efficiencies by streamlining operations and improving internal controls; finding savings across all state operations and local assistance programs; balancing savings with minimizing disruptions to the most essential services; and keeping tax rates competitive at a time when New Yorkers are facing growing affordability challenges.