On the last Friday of February, state officials met in Albany for their annual ritual: adopting an economic and tax-receipt forecast to use for budget negotiationsthe following month.
But the pols and finance geeks who assembled for this subdued and uncommonly apolitical event were missing a key piece of information.
They had no idea the United States was hours away from war — and with it, oddly enough, a rare opportunity to make Albany a little less dysfunctional.
The last four weeks have seen the destruction of Iran’s ability to threaten its neighbors and the near-closure of the Strait of Hormuz.
Global financial markets are in turmoil.
Fuel prices have surged — along with the risk of inflation.
Yet that February forecast, known as the economic and revenue consensus, has somehow survived.
That means Gov. Kathy Hochul and state lawmakers are, by all public accounts, counting on economic growth that might not materialize — and planning to spend money that might not come in.
The state’s April 1 budget deadline has come and gone.
State government remains open because lawmakers passed a short-term spending measure, giving Hochul and legislative Democrats another week to work out a deal.
They’re haggling not over the budget itself but over unrelated topics, such as Hochul’s efforts to chip away at New York’s onerous environmental-review process and its indefensibly high auto-insurance costs.
And they seem to be ignoring the looming problem: Where is the money in the budget coming from?
Outside of federal cash linked to Medicaid, most of New York’s receipts come from its highly progressive personal income tax.
State spending has grown about twice as quickly as inflation over the past eight years, thanks to a significant tax hike enacted in 2021 followed by stronger-than-expected tax revenues.
But as my colleague E.J. McMahon warned this year, the state’s tax increases on high earners over the past two decades made it more reliant than ever on volatile receipts from the finance sector.
It’s increasingly unclear how things will look at the state, national or global level later this year — and officials should be proceeding with extreme caution.
Instead of grinding ahead, Hochul and lawmakers could work out an intermediate-term deal that essentially extends the just-ended fiscal year to June 30, while settling how much state aid will flow to localities and schools now doing their own budgets.
Albany could also give New York City relief from the state’s unfunded “class-size” mandate, which will crush the city’s budget, due by June 30.
Then they could require new revenue estimates later this month, when the fog of war will hopefully have lifted.
The calendar shift would bring a huge added benefit.
New York is the only state that starts its fiscal year in April, a practice dating back to 1943 for a peculiar mix of long-outdated reasons.
Fiscal years for 46 of the other 49 states (and New York City) begin July 1, meaning their state governments — unlike New York’s — don’t come to a grinding halt at the end of every March, when legislative leaders are negotiating behind closed doors.
Bringing the Empire State in line with its neighbors would, come January, provide a reset to Albany’s dysfunctional process.
Here, the budget is treated as the best mechanism for forcing policy changes as part of a grand bargain over all things governmental, not just spending.
That means far less collaboration — and, more important, far less persuasion rooted in evidence.
See, for instance, how the public-employee unions are trying to slash their retirement age to 55 at a cost of over $100 billion — without any justification, and while concealing the cost from taxpayers — by cramming it into the annual budget deal.
New York’s governors have more leverage than most in the budget process.
That was given to them by design, to make a single man or woman accountable for the state’s spending plan.
But in response, legislators have stomped their feet and retreated from their duties of crafting laws and overseeing agencies.
In some ways, that decay is Albany’s worst sickness.
Subject-matter expertise among legislators is rarer than ever and barely valued.
State senators and Assembly members routinely skip their committee meetings, then justify their truancy because the committees do little work of significance by historical standards.
New York lawmakers put more effort into performatively cutting ribbons than cutting waste and red tape.
Some lawmakers use public hearings as opportunities to show off for their supporters, gracelessly confronting perceived villains like Mayor Zohran Mamdani or MTA head Janno Lieber in pursuit of Facebook clicks.
Without the April 1 deadline, the governor and lawmakers could next year draw neater lines between spending and policymaking, and wrap up the legislative session well ahead of June’s party primaries.
This certainly isn’t the only reform New York’s budget process needs (cost estimates for spending proposals would be nice), and it wouldn’t guarantee high-quality legislative results.
But it would remove a big excuse for why New York doesn’t get that now.
Ken Girardin is a fellow at the Manhattan Institute.
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