New York state begins the new year with the biggest budget deficit since the Great Recession, estimated at $5 billion to $6 billion.
Much of the gap is caused by higher costs for Medicaid, the health care insurance program for low-income people. Factors include higher reimbursements to hospitals, nursing homes and other health care agencies for labor costs that have increased as the state’s minimum wage has risen. Union workers also have received pay hikes in recent contracts.
Also, more New Yorkers now have health insurance through Medicaid under the Affordable Care Act, also known as Obamacare.
The state has been struggling with the rising costs in the program for some time now.
In late March, Gov. Andrew Cuomo’s budget officials delayed one of the state’s monthly Medicaid payments to providers, worth $1.7 billion, for three days. That allowed the payment to count in the new fiscal year that began in April – and on paper, at least, that lessened the gap for the previous fiscal year.
Since then, the deficit gap has grown to between $3 billion and $4 billion, according to a report by the governor’s budget office. The report recommends again delaying this fiscal year’s final $2 billion Medicaid payment, and it raises the possibility of closing the rest of the gap by across-the-board cuts to health care providers.
Cuomo has not yet committed to a specific plan to fill the gap, saying that will have to wait until his budget presentation later in January.
“We will do a budget presentation in the coming weeks,” Cuomo said Dec. 3 in Buffalo.
The governor said the gap could be as high as $5 billion.
“It’s nothing we haven’t addressed before,” Cuomo said. “But it is serious.”
Legislative leaders, who will have a say in the final state budget plan, are not on board with health care cuts and might be considering other options.
Assembly Speaker Carl Heastie said his Democratic members will look at raising revenues, including perhaps new taxes on the wealthy.
“For us in the Assembly, we would always rather raise revenue than cut,” Heastie said. “We think that New York has some very generous people, and I’m saying that facetiously, that we would always like to call on them to do more, in that regard.”
Michael Kink with Strong Economy for All, which is funded by unions and advocacy groups for the homeless and lower-income New Yorkers, said the state has plenty of wealth that can be tapped to help close the deficit.
“There has been an explosion of wealth and income at the very top,” said Kink, who added that the new taxes would “not touch any working people at all.”
Senate Leader Andrea Stewart-Cousins said state cuts to Medicaid spending could trigger even deeper reductions because state aid is linked to federal and local money for the program.
But during a meeting with her Democratic members in December, Stewart-Cousins said she did not think raising taxes should be the first plan of action.
“Our first fallback isn’t, ‘Let’s raise taxes,’ ” said Stewart-Cousins, who added her Democratic members approved a permanent 2% property tax cap earlier this year. “We know how the burden of taxes, certainily on middle-class and low-income New Yorkers, is very difficult.”
A temporary income tax surcharge on millionaires has been in existence since 2010, and in 2019, it was extended for five more years.
Cuomo has in the past resisted additional taxes on the wealthy, saying he feared rich people would leave the state.