Governor Hochul Orders State Agencies to Freeze Spending

On September 20th, the State Budget Division sent their annual “call letter” to state agency commissioners, which usually asks them to find efficiencies and cut costs. However, because the budget deficit for the upcoming year is projected to be around $9 billion, the letter state’s that agency budgets “should not exceed the total FY 2024 Enacted Budget agency funding levels.” In the letter, Budget Director Blake Washington writes that, “changing economic winds pose a challenge to New York’s financial position. Extraordinary amounts of post-pandemic Federal fiscal stimulus have ended. The Federal Reserve tightened its monetary policy, and the robust tax collections fueled by market activity and prior year tax increases have subsided.”

The Division of Budget is projecting budget deficits over the next three years totaling $36 billion. Specifically, they project a deficit of $9.1 billion next year, $13.9 billion the following year, and $13.4 billion the third year. The projections are $15 billion higher than previous projections. State law requires the State budget to be balanced, and while New York’s reserve funds are up to $19.5 billion, Budget Director Washington says Governor Kathy Hochul does not want to balance the budget by relying on reserve funds or by raising taxes.

“Acknowledging our fiscal constraints while ensuring fundamental public services and programs are preserved is the task ahead,” Washington writes in the letter. “The road to a balanced budget might seem daunting, but I am confident that through sound decision-making, strategic investments and fiscal discipline, we can continue to show the compassion, care, and leadership that New York is known for.”

State agency budget requests were due October 11th, and Governor Hochul will present her Executive Budget Proposal in January.