New York State Comptroller Thomas P. DiNapoli is cautioning lawmakers that Gov. Kathy Hochul’s proposed $260 billion Executive Budget for State Fiscal Year 2027 relies on strong but potentially temporary economic conditions, while long-term structural gaps continue to widen.
In a report released in February, DiNapoli’s office outlined how higher-than-expected tax collections — particularly from Wall Street bonuses — have helped generate a projected $2.4 billion General Fund surplus in the current fiscal year and a $3.5 billion surplus in FY 2027. However, those gains mask deeper fiscal challenges ahead.
Spending growth outpaces revenue projections
While revenues have rebounded, spending is projected to grow much faster over the next several years. According to the comptroller’s analysis, General Fund disbursements are expected to increase 18.5% over the financial plan period, compared to 9.8% growth in receipts.
As a result, the state faces cumulative projected General Fund budget gaps of $27.5 billion between FY 2028 and FY 2030 — including $6 billion in FY 2028, $9 billion in FY 2029 and $12.5 billion in FY 2030.
DiNapoli urged policymakers to approach negotiations cautiously, warning that economic volatility and shifting federal policies could further strain the state’s finances.
Federal changes create health care uncertainty
A major driver of fiscal uncertainty stems from federal policy changes affecting health care programs.
Federal receipts are projected to decline by $10.6 billion (10.9%) in FY 2027, largely due to reduced support for the state’s Essential Plan. Spending on the Essential Plan is expected to fall by $10.8 billion (77.1%) as federal funding diminishes.
At the same time, Medicaid costs continue to rise. Total State-share Medicaid spending across all agencies is projected to increase 9.8% in FY 2027, reaching $48.3 billion, and is expected to climb to $57 billion by FY 2030.
The report notes that while the Medicaid Global Cap is intended to limit spending growth, significant categories of Medicaid spending are excluded from the cap. Projections show potential breaches of nearly $3 billion annually beginning in FY 2028.
Reserves decline relative to spending
New York’s principal reserves — including statutory rainy day funds and informal reserves — are projected to total $14.6 billion in FY 2026.
Although statutory reserves are at historic highs in dollar terms, they are declining as a percentage of spending. Principal reserves equal 9.8% of State Operating Funds spending in FY 2026 and are projected to drop to 8.1% by FY 2030 — well below the 15% benchmark previously set by the Executive.
The comptroller’s office estimates that billions in additional deposits would be required to restore reserves to that level.
School aid and child care see significant increases
The Executive Budget proposes $39.3 billion in School Aid for the 2026–27 school year, an increase of $1.6 billion. Foundation Aid would rise 3%, with nearly three-quarters of the increase directed to high-need school districts.
Child care funding would also expand substantially. The Child Care Assistance Program would receive $3.1 billion in total funding, including $2.2 billion in state funds — a nearly 56% increase over FY 2026 levels.
While these investments aim to address affordability and workforce participation, they also add recurring spending commitments during a period of projected structural deficits.
Economic outlook shows slower growth ahead
The Division of the Budget forecasts slower economic growth in the coming years. Real GDP growth is projected at 1.9% in 2026, and employment gains are expected to moderate. Inflation is forecast to remain above the Federal Reserve’s 2% target for much of the financial plan period.
Because New York relies heavily on personal income tax collections — particularly from high earners in the financial sector — any downturn in Wall Street performance could significantly affect revenue projections.
Oversight concerns raised
DiNapoli also expressed concern over proposed provisions in the Executive Budget that would limit the comptroller’s oversight of certain state contracts. His office estimates that at least $4 billion could be exempted from review and competitive bidding requirements.
He warned that reducing oversight could diminish transparency and weaken protections for taxpayers.
A balancing act for lawmakers
The comptroller’s analysis underscores a central challenge facing state leaders: how to sustain investments in education, health care and child care while maintaining long-term fiscal stability amid economic uncertainty and declining federal support.
As budget negotiations move forward, the report urges caution and highlights the importance of preparing for potential economic or federal funding disruptions.
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