Last week, the Hochul Administration issued an edict that state agencies develop plans for a no-growth state budget for the next fiscal year. That order is typical: State agencies’ proposed budgets have been more or less frozen for years. Yet, the announcement by the Division of the Budget – the agency responsible for developing the governor’s executive budget – is an often overlooked first step in Albany’s annual budget “dance.”
The development of the governor’s budget plan goes on for months, with agencies’ budgets subject to review by the Division of the Budget, hearings on the plan, and then presentation to the Legislature in mid-January. The budget is supposed to be finalized by April 1st. The current state spending plan budgeted nearly $240 billion.
The budget fight over next year’s plan will likely be intense. The budget forecast for the next three years predicts a cumulative three-year budget gap of $13.9 billion, with projected deficits of $2.3 billion next year, $4.3 billion the year after, and ballooning to $7.3 billion the year after that. Of course, these are all projections and are a relatively small percentage of the nearly one-quarter trillion-dollar state budget.
But the challenges will not end by addressing the potential revenue shortfalls.
Next year’s budget will face a myriad of other challenges. One is how will the state deal with the governor’s “pause” of New York City’s congestion pricing plan? The plan – which sets tolls for driving into parts of New York City – was supposed to go into effect at the end of June. The governor – citing concerns over costs – derailed the plan. She is expected to propose reducing the size of the congestion pricing tolls, but that will result in shortfalls in revenues that will have to be addressed in the state budget.
Another big item is education funding. Every year, how the state provides financial assistance to local school districts is a key component of the state’s final budget plan. The state’s assistance is allocated to districts based on a formula, known as Foundation Aid.
The current budget includes a measure calling for the Rockefeller Institute of Government, a public policy think tank housed at the State University of New York, to assess the state’s Foundation Aid education funding formula and discuss potential modifications to how the formula works. Any proposed changes to the existing system will undoubtedly cause a ruckus in this year’s budget debate.
Another issue will be how the state funds higher education.
Last year’s budget made significant changes to the state’s Tuition Assistance Program (TAP) and made college financial assistance available to many more students. TAP is New York’s largest need-based college financial aid grant program. The aid is based on income – the less you make, the more aid you are eligible for. TAP is available to students in the State University of New York (SUNY), the City University of New York (CUNY), and the independent sector. Aid is available for students attending full-time, part-time and in non-degree programs.
In the current year’s budget agreement, for the first time in decades the state increased the income eligibility to $125,000 and increased the size of the minimum award from $500 to $1,000 – essentially updating those amounts to cover the loss in purchasing power due to inflation.
Unfortunately, the budget did not do enough to reverse the erosion of state assistance that has contributed to the decline of too many New York colleges and programs. Despite the improvements to TAP, the state budget does not include an increase in the amount of the maximum award for the neediest students. The maximum TAP award still does not cover the full tuition costs of students attending SUNY and CUNY.
The budget contained, essentially, flatline funding for SUNY and CUNY. Moreover, despite a growing financial crisis in the independent sector of higher education, the budget made a major cut in funding to the program providing state assistance to independent colleges and universities (Bundy Aid).
The failures in that budget plan will be a big debate in the budget for the upcoming fiscal year. Not only are New York’s colleges and universities important to educating the future civic and community leaders of tomorrow, they are important economic engines today. Cuts to higher education, for both the public and independent sectors, harm the state’s economic vitality. For example, CUNY graduates stay to work in New York at higher rates and studies have shown that for every $1 invested in SUNY, the economy reaps $8 in benefits. College should be affordable for all, providing access to one of the greatest economic equalizers for those who seek it.
Of course, the necessary increases in the TAP program run headlong into the constraints of the budget shortfalls, as well as the likely spending hikes needed for mass transit for New York City, changes in education funding, and the rest of the state agencies’ spending. Yet, even with those pressures, investing in higher education – both in terms of affordability for students as well as assistance for the institutions themselves – will result in heightened economic activity and a more educated citizenry.
How the governor views the importance of those goals and balances funding priorities will soon be made clear in her January budget plan. At that point the budget dance will be front-and-center.