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No 'what if' plans for federal cuts as state budget comes due

ALBANY – To listen to top state officials, Washington is poised to hammer the finances of New York State government.

Notwithstanding President Trump’s decision to halt the vote to replace the Affordable Care Act, which had billions of dollars at stake for New York, other proposals in the Washington pipeline would reduce federal money for public education, and cut block grants for neighborhood investments, environmental protection, affordable housing and programs to help poor people pay their energy bills.

Yet, with the state budget coming together this week, the governor and state legislators are not making any “what if” plans to cope with whatever federal cuts may come.

Instead, the mantra across party lines is: we’ll deal with it later when the dust settles.

“The Assembly will stand ready to come back and deal with whatever happens,’’ Assembly Speaker Carl Heastie said Friday.

It is not as if warning signals haven’t been made.

“The budget proposal comes at a time of significant risk involving the federal budget,’’ State comptroller Thomas DiNapoli warned in February. He noted that one-third of the total state budget – which is in excess of $160 billion – comes from Washington.

But no one in Albany or Washington knows for certain what changes might come to an assortment of federally funded programs affecting New York.

“It’s like playing basketball in the dark. You can’t see the ball,’’ said Sen. Kemp Hannon, a Nassau County Republican and chairman of the Senate health committee, which has been trying to ponder various federal health care proposals and their impact on New York.

“If you don’t know the immediate financial future, it is very hard to do an intelligent budget,’’ Gov. Andrew Cuomo said last week.

Cuomo wanted lawmakers to give him new and stronger powers to alter the course of state spending if things turn sour during the year, but lawmakers say they won’t give him that level of discretion.

The timing is especially challenging for New York State. Most states commence their fiscal years on July 1, according to the National Conference of State Legislatures. New York, at April 1, is the nation’s earliest among the states.

If big changes in federal aid come down from Washington, it would require one of two options, or a combination: reductions in spending or tax increases.

There are two other key factors for state officials not wanting to leap to fiscal conclusions just yet.

One is that – given the different fiscal years of New York and the federal government and the time it might take for some cuts to be implemented – any major impact won’t take effect until the state’s fiscal year starts in the spring of 2019.

Second, New York is flush with cash. The Cuomo administration projects to have $5.9 billion in cash reserves in the new fiscal year, according to the governor’s budget division. Some of that money is traditional “rainy day fund” pots. And Cuomo already earmarked a sizeable chunk of that money for various spending initiatives.

Some lawmakers think that making plans now would send the wrong signal to Washington.

“If we start doing this in public, Washington would say, ‘Oh, they can adjust.’ And we’re not ready,’’ said Hannon, the Long Island senator.

And Heastie noted the impracticalities of setting aside funds to deal with whatever Washington might bring the state’s way.

“You can’t budget around things you don’t know exactly what’s going to happen because what if you put together a ‘what if’ fund and it’s not enough?” the Bronx Democratic lawmaker said last week.

But one longtime budget watcher said lawmakers have little interest in reserve accounts because it is the governor, not the Legislature, who must deal with day-to-day budget management.

“The only person who really ever cares is a governor,” said E.J. McMahon of the Empire Center for Public Policy. “The Legislature, institutionally or temperamentally, doesn’t care about financial stability. They consider it the governor’s problem.’’

McMahon said state officials should be taking into account federal funding cuts, even if they aren’t actually hitting the state until next year.

“There are two ways to deal with this: build up reserves or stop making new spending commitments,’’ he said, citing unknown costs associated with providing free tuition to some public college students.

McMahon also said Albany faces another financial threat: the economy.

The state’s financial floor has collapsed twice in the past 15 years because of economic meltdowns, and the current economic growth, he said, is getting old and weak.

“Put aside all the hysteria,’’ McMahon said of federal budget impacts on Albany, “and what they should be concerned about is the risk to their revenue forecast.’’

A sharply lower-than-expected flow of revenues from tax receipts – the backbone of the state’s budget – “is more likely to draw the Legislature back in the middle of the year than Washington,’’ McMahon said.

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