Chapter 1: What is the main topic discussed in this episode?
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All investing is subject to risk. Vanguard Marketing Corporation Distributor. Bloomberg Audio Studios. Podcasts. Radio. News. Federal funding cuts from President Trump's one big beautiful bill are worsening New York State's finances. According to our next guest, the state's deficit jumps to $34 billion over three years.
Now, as a share of total spending, that would be the biggest since the global financial crisis. I'm pleased to welcome back Thomas DiNapoli, Comptroller of the State of New York, to Bloomberg headquarters. So a $34 billion shortfall gets your attention, and that's assuming that New York State's revenues and expenses are coming in as expected.
How does revenue and expenses look so far this fiscal year as compared to projections? Well, actually, this year it's looking a little better, at least as far as the first quarter, looking at the July numbers. So we're coming in higher than projected. So that's good news. Really, for the coming year, and our fiscal year started April 1st, it looks like the current year budget will hold together.
The most immediate impact of the federal changes, about $750 million hit as far as health care in this year's budget. When you look at the first quarter numbers, we were up about $580 million. So assuming the economy holds up, we should be able to manage it. The problem is those out-year budget gaps. As you point out, $34 billion in the out-years.
And that $34 billion does not include the full impact of the restructuring of the federal-state relationship, which is going to have an ongoing negative impact as far as federal receipts that we've depended on for many years, particularly on health care. So it doesn't reflect that. At what point do you get clarity on that? Well, I think we're all still trying to analyze the fine print.
I mean, I think for next year, certainly on health care alone, you're talking about at least $3 billion hit for next year. So that could make that gap even larger than we have already, talking about over a $7 billion gap, at least for the next year. But that cumulative $34 billion is really of great concern. What it really means is we need to start planning now
so that we can avoid the kinds of changes, either in terms of cuts or revenue impact, that could hurt New Yorkers. Let me just stick on the health care system for a bit here, because there are different estimates for how much the One Big Beautiful Bill will affect New York State. And Governor Kathy Hochul had said that it would cost the New York health care system about $13 billion a year.
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Chapter 2: What are the financial challenges facing New York State?
The changes as far as some of the energy programs, some of what we had been expecting for infrastructure, dealing with climate change, you accumulate all of that. I mean, you could be talking about tens of billions of dollars in terms of long-term cuts. I wish we had taken a few more steps to building contingencies in this year's budget.
We do have some reserves, but we're not going to be able to backstop all of the shortfall that we're anticipating. So Governor Hochul has said that she will not approve any tax hikes in the coming year. But with a $34 billion budget hole over three years, does the state need to raise taxes in coming years? That's going to be the negotiation between the legislature and the governor.
I mean, obviously, we do have a concern in New York about taxpayer migration. That has been an issue. We don't want to lose our taxpayers. We depend very much on the revenues coming out of Wall Street. So we hope, despite all of the uncertainty, I think Wall Street still seems to be doing okay. We get tremendous tax revenue from Wall Street, so we hope those markets will stay strong.
So I think what you're going to see for next year as we start the budget process, it'll kick off in November. Certainly when the legislature and the governor reconvene in January, they're going to have, I think, a much tougher negotiation on the budget on spending questions, on revenue questions. And I hope we don't resort to more debt as a way to solve some of these issues. Right.
Well, I mean, this also opens a door for a lot of other voices here. And I'm thinking here of the New York City mayoral candidate, Zohran Mamdani. He won a broad swath of support on his proposal to raise taxes on the rich. And given these kinds of $34 billion shortfall headlines, do you support that proposal, Mamdani's proposal?
Well, one of the things being controlled is I don't have a vote in any of this. What I do say is that the budget has to be balanced. So either you're going to, if we have a shortfall, you have to either cut programs or you're going to have to raise revenue, whether that's income taxes or other kinds of taxes. I'm hoping we also start to be a little smarter about how we spend our money.
Because there are ways to save money without hurting services, without hurting people. I always say just look at our controller audits on the Medicaid program as one way to save significant amounts of money. But keep in mind for New York City, the state legislation, the governor would have to approve any tax hike as far as income taxes.
So that proposal will be part of the broader negotiation, assuming that proposal comes up again.
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Chapter 3: How is New York State's budget performing this fiscal year?
We'll see what happens in the mayoral election this year. All right. Thomas DiNapoli, thank you so much for joining us. He is the comptroller of the state of New York, warning about this $34 billion shortfall over the next three years. Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow. And I'm Nathan Hager.
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