Now that New York State’s financial plan has shown considerable improvement, it should boost its rainy-day fund reserves, Comptroller Thomas DiNapoli said.
In his review of the state’s fiscal 2022 plan, he also called for a restoration of prudent debt policies.
DiNapoli cited a “remarkable improvement” in the state’s coffers, with cumulative four-year budget gaps down to $3.4 billion from $38.7 billion projected four months ago.
New funding sources, including $15.2 billion in federal assistance and $17.3 billion from tax and other policy actions, fueled the reduction, according to DiNapoli.
“The financial plan’s anticipated deposits to reserves would bring the new total to $3.3 billion — significantly lower than the $6.4 billion that is statutorily authorized,” DiNapoli said.
“If collections remain above forecast and are not needed to cover unanticipated expenses, these additional revenues should be used to bolster the rainy-day fund reserves.”
The all-funds budget that Gov. Andrew Cuomo signed totaled $208.9 billion, the state’s largest ever and 12% above the previous year.
“The state’s economic and fiscal outlook have improved,” DiNapoli said. “It is essential that additional resources are used for critical infrastructure projects to reduce debt issued and to bolster reserve funds beyond planned levels to help us to weather the next crisis or recession.”
DiNapoli also called for “prudently and transparently” using federal aid, spreading it out over the life of the financial plan to limit the risk of a “funding cliff” and avoiding use to support recurring spending.
“In addition, transparent and timely detailed reporting of the use and administration of federal funds is necessary,” he said.
For the second straight year, new debt issuances were excluded from the provisions of the Debt Reform Act of 2000.
“With the state’s financial condition stabilized, policymakers should restore prudent debt policies, including the establishment of updated and binding limits on state debt,” DiNapoli said.
In addition, issuers should replace some planned debt transaction with more “pay-as-you-go” funding to reduce long-term debt service obligations, including limiting debt uses to capital projects related to state assets.
“In the near term, if state tax receipts continue to surpass forecasts, a portion of the additional revenue could be used for this purpose,” DiNapoli said.
He also urged monitoring of personal income tax collections and taxpayer behavior.
The high reliance on high-income earners, combined with volatility of capital gains and the possibility of taxpayer migration creates a risk that should be carefully monitored to ensure appropriate and timely responses to any shortfalls in PIT receipts,” he said.
S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency rate the state’s general obligation bonds AA-plus. Moody’s Investors Service rates them Aa2.