ALBANY — The state’s financial watchdog says New York needs to squirrel away a few million dollars for a rainy day.
A report issued Friday by Comptroller Thomas DiNapoli recommends the state set aside more funds for its backup reserves within five years to offset the negative effects of a potential economic downturn.
“The time to prepare for serious fiscal problems is before they arrive,” DiNapoli said. “The need for a cushion to fall back on is especially urgent today amid signs of a slowing economy. As the financial capital of the world, New York is particularly sensitive to economic downturns, which can put a significant strain on our budget.”
While the economy is currently booming, the state budget office has projected a budget shortfall estimated at $6.1 billion next year driven in part by ballooning Medicaid costs. And DiNapoli cautioned against using reserves to cover the costs.
“The state should identify realistic solutions to both its current-year Medicaid imbalance and its structural budgetary gaps as fully and early as possible,” the report states.
Lawmakers and Gov. Cuomo this year added $250 million to the state’s reserves. And another $428 million will be put away this spring, boosting the rainy day fund to a total of $2.5 billion.
That’s not bad, but it’s less than half of the $5.9 billion max that can be set aside under state law, DiNapoli said.
The comptroller noted in the report that it was only a decade ago when the recession of 2009 forced policymakers to cut state spending, raise taxes and “take other detrimental budgetary actions in part because the state lacked adequate rainy day funds.”
DiNapoli suggests the state fill the coffers as soon as possible and figure out ways to raise the cap in the coming years. He also believes the budget office should be required to develop a multi-year plan that would raise New York’s rainy day reserves “to a level that would significantly mitigate the state’s next severe fiscal challenge.”
A monthly deposit system and an annual review of the funds could help avoid any future fiscal calamity, the report says.
When asked about the suggestions, Cuomo budget spokesman Freeman Klopott touted the governor’s fiscal responsibility and said the additional funds approved this year will help the state weather any monetary uncertainty.
“For nine consecutive years, this administration has capped state spending growth at 2%, creating flexibility in the budget that has made lowering taxes for every New Yorker possible while closing billions of dollars in budget gaps,” he said. “That fiscal constraint, combined with the creation in this year’s budget of a reserve account for economic uncertainty with nearly $900 million deposited that brings total reserves available to more than $5 billion, has the State well positioned for economic turbulence.”