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NY Gov. Hochul tells cabinet to moderate spending amidst economic uncertainty

New York Govenror Kathy Hochul.jpg
Karen DeWitt
New York Governor Kathy Hochul

New York Governor Kathy Hochul says she has warned her cabinet to be careful about state spending next year, as inflation continues to rise and Wall Street drops.

On Friday, Hochul held her first meeting with top advisors and state agency heads since the legislative session ended. She says she told them that, while the state budget appears balanced through the end of the fiscal year, they will need to have more modest spending goals for next year, and prepare for a possible recession.

“We talked about moderating expectations,” Hochul said.

Just a few shorts months ago, New York was flush with cash from federal COVID-19 relief packages, but Hochul says the cost of everything has gone up — and Wall Street, which provides 18 percent of the state’s total revenues, has gone down. And those trends are likely to continue for a while.

“What we are very intentional about was not creating out-year gaps, or creating a scenario where we couldn’t afford to pay for what we committed to this year,” the governor said.

She says she does not have plans to reimpose a hiring freeze at this time. She says there are 15,000 positions in state government that are vacant and need to be filled.

The governor’s comments came as the State Comptroller, Tom DiNapoli, issued a new report on the over $8 billion that the state owes the federal government in loans that paid for unemployment insurance benefits to New Yorkers during the height of the pandemic. The state’s debt is second only to California, and New York is one of only seven states that still owes the federal government money. The comptroller warns that if New York doesn’t make a substantial payment soon, interest costs will mount, and could impede the state’s “employment recovery amid growing economic uncertainty”. DiNapoli says tax bills will rise for the state’s businesses, who will have to help pay off the debt.

Hochul’s budget director, Robert Mujica, says businesses in the state have always had to shoulder a portion of any unemployment insurance debts to the federal government, and he does not expect that to change.

“These were probably tougher challenges than we’ve ever seen before, so the size of it is more significant,” said Mujica. “It will be stretched out over many years.”

Business groups, including Upstate United, say the state received billions of dollars in COVID relief grants, and should not be passing costs down to local companies.

“Millions of families who are already being squeezed by historic inflation rates will ultimately pick up the tab for New York's remaining $8.1 billion debt to Washington,” said the group's Justin Wilcox in a statement.

Mujica left the door open to using state monies to pay back some of the debt in the future, if there are revenues available.

Hochul says there are some steps state government is taking to help New Yorkers struggling with higher costs. She says the state’s share of the gasoline taxes have been suspended until 2023. So far, though, that has not resulted in lower costs at the pump.

Karen DeWitt is Capitol Bureau chief for New York State Public Radio, a network of public radio stations in New York state. She has covered state government and politics for the network since 1990.