A look into New York's largest budget deficit since the Great Recession of the 2000's

New York State is facing the largest budget deficit since the Great Recession of the late 2000s. The previous $10 billion deficit was mainly a result of the worldwide financial meltdown caused by the subprime mortgage crisis in the United States. The current $6 billion budget gap, which is expected to jump to roughly $8.5 billion by 2023, is in part the result of growing Medicaid costs. Of the $6 billion deficit, $2.9 billion of it is from the New York State Medicaid budget, a number which will grow by another billion dollars by 2023. (1) Most expect potentially drastic cuts to Medicaid spending on the horizon to help curb the deficit.

New York’s $70 billion Medicaid program is the 2nd largest Medicaid budget of any state in the country, just shy of California’s. More than 6 million people, nearly a third of the state population, are on Medicaid in New York. (1) One specific area of the NYS Medicaid budget responsible for the growth is the managed long term care program which has been growing at a rate of about 13% per year, costing the state $8 billion this past year. (1) Increased enrollment is especially costly when you consider that New York’s cost per person enrolled in Medicaid is 50% higher than the national average. (2) "Thanks to Medicaid over-spending, New York’s state budget gaps have blown up to their highest levels since the Great Recession," wrote E.J. McMahon, founder of the Empire Center for Public Policy, a fiscally conservative think tank in Albany. (1)

Facing this monumental budget challenge, the most likely course of action is to make budget cuts. Budget spokesperson Freeman Klopott confirmed that the $1.8 billion in cuts would take place in the current fiscal year. (5) The expected cuts however will not all be aimed at the Medicaid budget. According to Andrew Rein, president of the Citizens Budget Commission, "developing and implementing a plan to solve the entire budget problem need not be done entirely within the Medicaid program,” he said in a statement. "Other portions of the budget also should be considered, including mistargeted school aid and unproductive economic development programs." (1)

Other contributors

Along with Medicaid spending, the public school system is the other biggest spending item in the state’s budget. This year, school aid rose by $1 billion in New York to a total of $27.9 billion. School lobbying groups are pushing for a $2 billion increase in aid for the 2020-21 year, and New York’s school spending is by far the most per capita in the country. (1) New York’s school spending is also roughly 90% above the national average. (3)

Governor Andrew Cuomo faced a $10 billion budget shortfall in his first year in 2011 and in that year his administration cut school aid by $1.3 billion and cut health care costs and overall spending by 10%. (1)

2020 Expectations

Governor Cuomo’s administration has not always been completely transparent with regards to their budget plans and implementing cuts, according to some within the state government. “We won’t know for certain until they do them," he told POLITICO, referring to the spending cuts. "They likely will present the budget and then, in a briefing during that process, say, ‘By the way, on Dec. 27 we did X or Y for payments.' That would be par for the course for this administration.” (5) Assembly Health Chairman Richard Gottfried added that “no one outside of Gov. Andrew Cuomo’s office really knows” what the savings plan will entail. (5) Regardless of the information being communicated from the Governor’s administration, Chairman Gottfried said he expects “to see some pretty nasty health care cuts” when Cuomo rolls out his new budget.

Benefits of such a high budget

The benefit of New York investing so much into its Medicaid program is that it leads the nation in providing its residents with healthcare. New York State’s uninsured rate of 4.7% is the lowest ever recorded according to the Centers for Disease Control and Prevention’s National Health Interview Survey. (4) New York State has reduced the number of uninsured people by 1.2 million since 2010 under the Cuomo Administration. (4) “This historically low uninsured rate affirms that New York continues to lead the nation in prioritizing affordable, quality coverage, despite aggressive efforts to harm access at the federal level,” said NY State of Health Executive Director, Donna Frescatore. “With over 4.7 million NY State of Health enrollees and counting, we will continue to work to get more New Yorkers covered.” (4).

Resources:

[if !supportLists]1. [endif]Spector, Joseph. “New York Faces Its Largest Budget Crisis in a Decade. This Is the Reason Why.” Rochester Democrat and Chronicle, New York State Team, 27 Nov. 2019, www.democratandchronicle.com/story/news/politics/albany/2019/11/25/new-york-faces-its-largest-budget-crisis-decade-why/4274198002/.

[if !supportLists]2. [endif]Wang, Vivian. “New York Progressives Meet Immovable Object: A $6 Billion Budget Gap.” The New York Times, The New York Times, 20 Dec. 2019, www.nytimes.com/2019/12/20/nyregion/democrats-progressive-ny-budget.html.

[if !supportLists]3. [endif]Spector, Joseph. “New York's School Spending Is Now 90% above the National Average.” Rochester Democrat and Chronicle, Democrat and Chronicle, 21 May 2018, www.democratandchronicle.com/story/news/politics/albany/2018/05/21/new-yorks-school-spending-now-90-above-national-average/629304002/.

[if !supportLists]4. [endif]“Press Release: Bucking National Trends, New York's Uninsured Rate Continues to Decline, Reaching a Historic Low of 4.7 Percent.” NY State of Health, 15 May 2019, info.nystateofhealth.ny.gov/news/press-release-bucking-national-trends-new-york%E2%80%99s-uninsured-rate-continues-decline.

[if !supportLists]5. [endif]Young, Shannon. “Health Care Industry Lawmakers Seek Details on Plan for Medicaid Shortfall.” POLITICO Pro, 2 Dec. 2019, subscriber.politicopro.com/states/new-york/city-hall/story/2019/12/02/health-care-industry-lawmakers-seek-details-on-plan-for-medicaid-shortfall-1229930.

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