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State budget, workforce take massive hits

Push is about to come to shove for New York state’s budget.

A mid-year financial plan update released late last week by Robert Mujica, state budget director, shows the New York is officially looking at budget gaps of $8.7 billion in the 2022 fiscal year, $9.7 billion in the 2023 fiscal year and $9.4 billion in the 2024 fiscal year.

The projected budget gap for 2022 has increased by $370 million since Mujica’s first quarter update due mainly to health care enrollment and assumed expiration of the Federal Medical Assistance Percentage program on Dec. 31, 2020.

State revenues have decreased 15% this year when they were projected to increase 7% before the pandemic.

That equals a $14.9 billion decrease in revenues from February projections. Tax receipts alone are projected to decrease 15.3%, totaling $63 billion through 2024.

Local aid reductions continuing for the next three years are included in the budget gap projections, which Mujica wrote means the state Legislature will have to approve the continuation of the Reduction Authority or specific gap-closing actions, or both, in future years.

At the same time, Mujica has sent a two-page letter to state agency heads asking them to submit budget proposals for the coming year reducing spending in their departments by at least 5% and to limit new funding for capital projects. Those requests are due by Nov. 13.

“With this budget, New York state will chart a course forward, regardless of what action — or lack thereof — the federal government ultimately takes,” Mujica wrote.

Both Mujica’s letter to state agency heads and the mid-year financial plan update take aim at the federal government’s lack of agreement on a COVID-19 stimulus bill. Mitch McConnell, Senate majority leader, said Wednesday that Congress should approve a new coronavirus relief package before the end of the year, though it’s hard to tell when that legislation may be approved or potentially signed into law if it is approved.

While House Speaker Nancy Pelosi had reportedly agreed to a stimulus package that included $300 billion in state and local aid — which would have brought New York between $10 and $15 billion — Senate Republicans were against any new state and local aid on top of the CARES Act’s $150 billion state and local coronavirus relief fund and $31 billion in education aid, according to a recent Politico report.

New York state has been withholding 20% of most local aid payments since June as part of legislation approved with the state budget while also reviewing all planned payments for local aid, agency operations and capital projects. Through the end of September 2020, the state Division of Budget estimates that $2.4 billion in local aid payments were not made as budgeted.

“All or a portion of these budgeted payments may not be made during fiscal year 2021, depending on the size and timing of new federal aid, if any,” Mujica wrote.

ANOTHER DISCOURAGING SIGN

New York’s residents, too, are struggling through the pandemic.

Since reaching a high of 15.7% in April, Chautauqua County’s unemployment rate has dropped to 6.2% through September.

The news isn’t all good, though. The county’s labor force, which had reached an eight-month high of 55,500 workers in April, has dwindled to 51,900 as of September. Unemployment hasn’t dropped because people are finding jobs. Quite the contrary, the unemployment rate has dropped because fewer people are trying to find jobs in the midst of the COVID-19 pandemic.

“On closer inspection, it’s even worse. Assuming the number holds up in re-estimates, New York’s September labor force decline of 362,889 residents was the largest monthly drop on record in the state — exceeding even the decline in April, when most New Yorkers couldn’t seek work,” E.J. McMahon of the Empire Center for New York State Policy wrote in a recent blog post. “Excluding the pandemic period, the September change in New York’s estimated labor force was by far the largest decline on record– easily exceeding dropoffs in job seekers during severe recessions and months affected by severe weather– dating back to the start of the current statewide statistical series in 1976.”

Chautauqua County is far from alone, though. Statewide, New York’s unemployment rate dropped to 9.7% in September, marking the first time the rate has been below 10% since the beginning of the COVID-19 pandemic. The 2.8 percentage point improvement in the unemployment rate was the second largest among all states following only New Jersey’s 4.4 percentage point decline, according to state Comptroller Thomas DiNapoli.

“Unfortunately, a deeper dive into the Bureau of Labor Statistics data reveals troubling context: New York state’s workforce declined by nearly 363,000 last month, a 2.3% percentage point drop from August (based on preliminary figures), while the number of individuals officially considered unemployed declined by 302,000,” DiNapoli wrote in a recent report. “In short, the unemployment rate went down in large part because of the decline in New Yorkers counted as working or seeking employment. Such a decrease in the size of the workforce may indicate that individuals have ceased searching for a job actively.”

From March 1 through Oct. 23, the state Comptroller’s Office has approved payments for nearly $52.5 billion in unemployment benefits and related lost wages assistance supplements to workers in New York.

“The employment statistics for September could be revised in future reports,” McMahon wrote. “However, combined with slowing growth in the number of private payroll jobs based in the state, the data suggest a worrisome weakening in New York’s recovery.

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