Given the state of uncertainty resulting from the Coronavirus Disease 2019 (COVID-19) pandemic, the recently enacted 2020-21 New York State Budget (Budget) grants two separate, but extraordinary, powers to the state’s Budget Director to maintain a balanced budget for the 2020-2021 fiscal year.
First, the new law authorizes the Budget Director to withhold all or some of the appropriated amounts in the Aid to Localities Budget if “in his or her sole discretion” such action is necessary to respond to the direct and indirect economic, financial and social effects of the COVID-19 pandemic. In making that determination, the Budget Director must consider whether other means are available to accomplish those same purposes and the impact of the withholding on the affected aid recipients. Such withholding requires notice to the president pro tempore of the Senate and the speaker of the Assembly, but does not require legislative approval.
Second, the Budget Director is empowered to adjust or reduce any general fund and/or state special revenue fund appropriation made in the Aid to Localities Budget, as well as other related cash disbursements necessary to maintain a balanced budget should an imbalance occur during any of three measurement periods: 1) April 1-30; 2) May 1-June 30; and 3) July 1-Dec. 31.
The Budget will be deemed unbalanced if during any measurement period:
- Actual state operating funds tax receipts are less than 99% of estimated state operating funds tax receipts; and/or
- Actual state operating funds disbursements are more than 101% of estimated state operating funds disbursements.
In short, unless the state’s projected revenue and expenditures in the recently adopted Budget are 100% accurate, the Budget Director has discretion to cut appropriations enacted in the Budget throughout the calendar year.
While the Budget Director is granted this unprecedented new authority, the legislature is not completely without power to intervene with regard to this second new power. The law provides that prior to any adjustments or reductions, the Budget Director must provide written notice to the chairs of the Senate Finance Committee and the Assembly Ways and Means Committee. Thereafter, the legislature has 10 days to prepare its own plan, which may be adopted by concurrent resolution passed by both houses. The Division of the Budget is required to then implement the legislative plan. Otherwise, the reductions will go into effect automatically.
The Budget Director also is empowered to restore funding cuts if he or she finds that a) actual state operating funds tax receipts, through Feb. 28, 2021, are not less than 98% of estimated state operating funds tax receipts through Feb. 28, 2021; or b) the federal government provides aid that the Budget Director deems sufficient to reduce or eliminate the imbalance and does not adversely impact the budget gap in fiscal year 2021-2022, provided certain other requirements are met.
Finally, the following types of appropriations are exempt from adjustment:
(a) public assistance payments for families and individuals and payments for eligible aged, blind and disabled persons related to supplemental social security;
(b) any reductions that would violate federal law;
(c) payments of debt service and related expenses for which the state is constitutionally obligated to pay or contractually obligated to pay, subject to an appropriation, including where the state has a contingent contractual obligation; and
(d) payments the state is obligated to make pursuant to court orders or judgments.
These are extraordinary times with the state facing unprecedented fiscal uncertainty. It is unknown whether the Budget Director’s power to make monthly adjustments may be used to obviate the need for the use of the quarterly reduction, so that the legislature could effectively be cut out of the process. However, while the Budget Director can only recommend cuts, not new revenue, the legislature can incorporate new revenues in its own plan, should it choose to exercise this option. How this will play out, and whether the legislature will utilize its powers to develop its own spending cut plan remain to be seen.
For more information and updates on the developing COVID-19 situation, visit GT’s Health Emergency Preparedness Task Force: Coronavirus Disease 2019.