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DiNapoli warns of tougher budget year; urges caution for downstate casino budgeting

New York Comptroller Thomas DiNapoli
Pat Bradley
New York Comptroller Thomas DiNapoli

This part of the year is typically a down time in the world of New York state government and politics, but in recent weeks Democratic state Comptroller Tom DiNapoli has issued warnings about state budget gaps, underwhelming casino revenue impacts, and the chances for the state to reach its clean energy goals. DiNapoli spoke with WAMC’s Ian Pickus.

The work of the state comptroller's office does not subside over the summer; we are year-round and always on top of it. So, thank you for mentioning that we're still issuing some very important reports.

Well, you were in the Assembly, which at the time was a part-time job. How do the two jobs compare?

Oh, that's an interesting question I'm often asked. I think part of it is when you're in the legislature, you're very focused on the session, the budget, and then end of session getting bills done, and then you go home to the district, and you really spend your time reconnecting with people in the community. So, there's a seasonality about it. There's kind of an intense period, particularly around budget, and the end of session, and then you kind of do your own schedule back in the district. Whereas the Comptroller’s job, it's not tied to the legislative session. A lot of people think we are somehow an extension of the legislative session, but we're not. Our work continues separate from session. So, even in terms of my personal schedule, I'm still up in Albany a couple of days a week, every week pretty much year-round.

So, I would say, it's definitely in terms of your body clock and your time management, less intense as the legislative schedule can be, but more consistently busy year-round. There are pluses and minuses with both, but I think the big challenge, and while I appreciate your mentioning those reports, my job is control is not a policy job, per se, like the legislative role is or the governor's role. So, besides the state operations that we do, like paying the bills and getting the payrolls done and the pension checks out, we try to inform the policy debates that go on in the legislature with the kind of reports that we put out, whether that's on budget issues, or tax revenue, or the renewables report that we just put out, or casino revenue. It's really meant to start to say, as you're looking at these issues, to the public and the legislature, have a more thoughtful analysis based on data. That's what we tried to put out there. So, it's a very different role but I think that having been in the legislature has been helpful to me in this role and hopefully, what I do in this job helps the legislature with what they struggle with.

Well, let's take those reports one at a time here. To begin with, you say that New York is facing a budget gap totaling more than $36 billion through 2027 and the state budget division forecast has changed a little bit. You have consistently called for transferring more money to the rainy-day funds. Why is that budget gap growing, as you see it?

It's for a couple of reasons. I mean, the most obvious one is that the economy is uncertain at this point. We have seen a reverse in recent months. You know, for a long time and when we've talked in the past, we kept reporting that tax revenue was coming in higher than projections. What happened shortly after the budget was completed and the tax collections were finalized after April 15th, we found the opposite: that revenue was coming in below projections. So, Division of Budget has taken down their revenue forecast, I think appropriately so. And some of that has to do with the fact that Wall Street financial services is not doing as well as they had been doing coming out of the COVID recession, if we could call it that. It's not that Wall Street isn't making money. It's just not making as much as they have been in recent years. And not that we're totally dependent on Wall Street because we're not, but certainly that’s over 20% of our revenue. So, when Wall Street is not as profitable, the bonus payments aren't as high. We’re affected by that. We also see a net migration of taxpayers at the higher end outside of New York, moving out of New York. It's not the stampede that some of the critics say but there has been a loss and we have to recognize that because we are so dependent on the personal income tax. And bottom line is, this economy is very uncertain. We still have many projections of a recession that hasn't happened yet. We keep waiting for it to kick in. Thankfully, it hasn't. But most of the forecasters still point to that at some point. Plus, there's obviously new spending as well. So, spending going up, revenue being more problematic, I think the division of budget was right to take down the revenue forecast. But we now are back in a position we haven't had for a few years, as you point out, outyear budget gaps $9 billion for next year, close to $14 billion the year after that. You accumulate it. As you mentioned, $36 billion or so. It's going to be a tougher budget cycle as we go into next year. There's no doubt about it.

To what extent do those outyear gaps influence thinking among the legislature and the governor? Last year's budget was a record number. This upcoming year, I assume all the people who were funded this year will want the same funding or more next year. Do people worry about 2027 when they're writing the budget for 2024?

They should, and too often they do not. I think that's a perspective that I have now been in this position for a number of years versus being in the legislature. When you’re in the legislature, your goal is to close down the budget for that year, and especially in an election year you want to go home and be able to tell everybody how much money you got for schools and environment and other programs. Going home and saying ‘I held the line on spending. I built up rainy-day reserves,’ that's not quite as popular, you know, especially in an election year. So, I think the tendency is, as you point out, to keep the spending and add to it. We don't do as good a job of being as efficient as possible. Our audits always point out opportunities to save money, not to harm programs, but just to spend money more wisely. But you know, I am hopeful that you will have instead of short-term thinking, you will have more long-term thinking because the reality is if you do not get those outyear gaps under control, you're going to have real problems down the road, and you're not going to be able to fulfill the expectations that you could keep the spending going. While it is very positive that the rainy-day reserves have been built up, both the statutory reserves, and what we call the informal reserves, to really record levels in recent times, those reserves should really be used when there is an emergency, you know, another pandemic, a severe recession, you can use some of it to plug a short-term budget hole. But the idea of the reserves is not to just keep dipping into them as an excuse not to have the fiscal discipline to do what any budget should do, which is to align recurring spending with recurring revenue, not just for the coming year, but on a long-term basis and we have not always done a good job of that in New York.

OK, speaking of the future, let's talk about clean energy now. In a recent report, you found that renewable generators in the state will need to produce an additional 200% more gigawatt hours to reach the goals by 2030 that are required under the Climate Leadership and Community Protection Act, which sounds like a difficult road to hoe. Are we in danger of falling short?

Well, we put this report out really to be a warning that we need to stay very focused on the task if we're going to meet those very ambitious goals that are in the CLCPA. I think we can achieve them, but we've really got to jumpstart our efforts and recognize that, you know, one of the challenges in the past has been inconsistent funding for these renewable projects. Certain projects started out in the planning process and then got canceled for various reasons. So, we've fallen behind and there has been, in many cases, that delay in the permitting process, obviously, with some of these projects as well. We know that there is often pushback at the local level. Everybody seems to like the goal of renewable and clean energy, and then when they hear there might be a pipeline or transmission line coming into their neighborhood, they have a different opinion on that. So, we if we want to meet those goals, we have to be clear about it. A positive is that, to help with the siting issues, we have set up, as you know, in the Department of State, an office of renewable energy siting, which is meant to expedite the process. So, I think the state has taken some positive steps, but 2030 is not that far away. The goals are ambitious. We really, really have to supercharge our efforts if we're going to meet those goals.

I want to ask you also about your recent report on the revenue from the four legalized casinos in New York state. To boil it down, you basically found that the small local towns that host the casinos, in this case, Nichols, Tyre and Thompson, got a huge boost from having a casino there. The city of Schenectady, which has Rivers Casino, and then counties surrounding the casinos, received a relative pittance and their total revenue from gaming tax, in some cases, was 1-3% or less than 1%. So, I know you've been critical at times about building revenue around gambling taxes and so on. Is New York's move to legalize casino gambling falling short on its promises?

Short answer is yes and as you point out, we've kind of raised that concern in the past. I said in previous discussions on this, it was not my place to say yes or no on casinos. The experience, I think, always has been that, if it's sold as this great revenue enhancer to local governments, the projections never come true. I think that's what we validated in this report, in terms of the direct revenue coming to the local governments. Part of why we did this report, as you know, downstate the big discussion now is the siting of three additional casinos. So again, whatever the final decisions are going to be, local governments need to not have an exaggerated expectation of what the revenue impact is going to be. So, we really put this out to be a warning mostly to the counties, as you're putting your budgets together, if you have a casino sited, do not over-project what you think the revenue is going to be.

So that's interesting. You had called for an appropriate revenue plan for the downstate casinos that are going to be coming in. New York City is obviously different than some of the upstate locations that got casinos in the first round of this. So, you don't see that having a huge impact on the local hosts for the next round?

Well, I think the point is the impact should not be overstated and keep in mind, there are proposals for Westchester and for Long Island as well. So, it won't just be New York City, although conventional wisdom is that there will be one sited in New York City. We don't know that for a fact, but probable. But you know, certainly for Long Island, for Westchester, it should be a warning based on what happened with the upstate casinos. Again, don't have inflated expectations as to what you think that gaming revenue is going to be.

OK, one more thing. How's the pension fund doing right now?

Well, we ended March 31st with a slight negative because, you know, last year we did have two down quarters because the markets went down. The good news is, we went into this more volatile time as a well-funded pension plan. So, we're still over 90% funded, which is the most important number and very few public pension plans in this country are as well funded as we are. What we see in, you know, the preliminary numbers since March 31st is that the fund is doing better. The stock market, as everybody knows, has started to bounce back. We're not totally reliant on the stock market. We do have a diversified portfolio. So, I always remind our retirees and our public workers in the Capital Region and beyond, we have a strong pension fund and we can weather the ups and downs. We're in good shape and no one needs to worry about their retirement security.

A lifelong resident of the Capital Region, Ian joined WAMC in late 2008 and became news director in 2013. He began working on Morning Edition and has produced The Capitol Connection, Congressional Corner, and several other WAMC programs. Ian can also be heard as the host of the WAMC News Podcast and on The Roundtable and various newscasts. Ian holds a BA in English and journalism and an MA in English, both from the University at Albany, where he has taught journalism since 2013.