Recovery from COVID-19 Downturn in NY Will Take Longer than ‘Great Recession’
John Jordan | April 2020
ALBANY—The New York State Division of the Budget released a report on Saturday that estimates a $13.3-billion shortfall, or 14%, in revenue from the Fiscal Year 2021 Executive Budget Forecast released in January. The report estimates a $61-billion state revenue decline through Fiscal Year 2024 as a direct consequence of the COVID-19 pandemic.
The 463-page “2021 Enacted State Budget Financial Plan” also included an assessment by Boston Consulting Group of the Novel Coronavirus pandemic’s impact on the New York State economy.
The report notes, “The BCG analysis indicates a downturn that is deeper—and a recovery that takes longer—than the “Great Recession” and the recession that followed the terrorist attacks of September 11, 2001.”
In the absence of federal assistance, initial budget control actions outlined in the financial plan will reduce spending by $10.1 billion from the Executive Budget. This represents a $7.3-billion reduction in state spending from FY 2020 levels.
The report states that as a result of the COVID-19 pandemic, New York State’s economy will lose $243 billion over the course of the full recovery, the equivalent of 14% of the state’s Gross Domestic Product.
“Above all, our efforts to stop the spread of the virus are working to save lives, and now we are also addressing the economic realities the pandemic is causing as we move New York forward and build back better than before,” said Robert Mujica, New York State Budget Director. “Unlike the federal government`, New York State must balance its budget and in the absence of federal assistance, we will have to make deep cuts which could impact a broad range of services. New York reflects 8% of U.S. GDP, and without federal support our ability to help lead the nation to economic recovery will be weakened.”
The $10.1 billion in spending reductions from the levels proposed in the Executive Budget include an $8.2 billion reduction in “aid-to-localities,” a spending category that includes funding for health care, K-12 schools, and higher education as well as support for local governments, public transit systems, and the state’s not-for-profit partners who deliver critical services to the most vulnerable New Yorkers. State agency operations will be reduced by 10%, along with other savings, the Division of Budget stated.