ALBANY – With the novel coronavirus pounding everything from retirement accounts to airline routes and trade shows and tourism, Gov. Andrew M. Cuomo has asked the state’s chief fiscal watchdog to prepare a risk analysis of tax revenue projections the governor and legislative leaders agreed to only late last month.
“As you know, the world has changed in just the past few days and weeks," Cuomo wrote Tuesday to State Comptroller Thomas DiNapoli, who monitors the state’s finances and serves as the sole trustee of one of the largest public pension systems in the nation.
The Democratic governor told the Democratic comptroller that he is most concerned with revenue forecasts for the fiscal year that starts April 1.
“The revenue projections are the underlying premise of the state’s entire budget. If the revenue forecast is wrong, then everything that follows is incorrect," Cuomo wrote DiNapoli.
The review of the state's revenue situation comes as the number of confirmed cases in the state grew overnight by 31, bringing the total to 173 cases.
In a rare move, Cuomo ordered a containment area – one mile in circumference – in part of New Rochelle, a city of nearly 80,000 people in Westchester County, where more than 60% of the state's virus cases have been discovered. The National Guard is also being ordered to the scene to distribute food and disinfect buildings in the area, where facilities that hold large numbers of people, such as schools and religious institutions, will be closed for two weeks.
Cuomo and legislative leaders in late February agreed on a revenue projection that envisions $700 million more in tax receipts over two years than what Cuomo had estimated in January.
Some legislators are looking at the extra tax revenues as sources to increase spending on a number of programs either facing cuts or slower rates of increases. An outside panel is looking at ways to shave $2.5 billion from Medicaid, the insurance program that is facing a $4 billion deficit in the coming year.
The Buffalo News on Monday reported pressure among lawmakers to use in the budget any additional revenues that are found on a variety of spending priorities, including education, health care and programs for homeless people. But fiscal watchdogs based with non-government groups are urging the state to drive big increases to various rainy day pots to better prepare for the uncertainty of the economic effects of the spreading coronavirus threat.
New York is disproportionately affected by the performance of certain sectors, as well as a relatively large reliance on wealthy people paying certain kinds of taxes. For instance, about one-fifth of state tax revenues are derived from the financial sector, which includes big tax receipts from Wall Street executives’ annual bonuses.
The virus is being felt by financial, tourism, transportation, retail, restaurant and other sectors.
Cuomo said he believes the current fiscal year, which ends March 31, has revenue projections that “may be largely secure." In part, that’s because Wall Street pay bonuses came in larger than projected when Cuomo presented his 2020 budget plan in January.
Cuomo has not always listened to the advice of DiNapoli, whose many fiscal warnings have included alarms that the state’s reserve accounts are inadequate to prepare for emergencies that might hit the state’s budget.
In an interview, DiNapoli said it is a “fair assumption” that he will be taking the opportunity to again remind Cuomo and lawmakers that New York’s rainy day funds are too low and “that we were not as prepared as we should be for significant events” that could harm the state’s finances.
Having larger reserves helps to “forestall the kinds of spending cuts or revenue increases that people would not want to see” if the economy is hit by a sustained stall. He said the situation is being hit not only by the coronavirus uncertainty but also the oil price war between Saudi Arabia and Russia.
“Much of the impact has yet to be seen," DiNapoli said. The other key question: how long will the economic uncertainty last?
“Will this trigger a recession? I hope not. I don’t think so. But the possibility, not the probability, of a recession is certainly much higher than it was a week and a half ago."
Cuomo asked DiNapoli to finish his review within seven days.
Story topics: Covid-19