Outbreak Ravages N.Y. Budget; Governor Calls Aid Deal ‘Terrible’ for State By Luis Ferré-Sadurní and Jeffery C. Mays 8-10 minutes The pandemic is causing a statewide economic slowdown that could result in a loss of $15 billion in tax revenue. Sales tax revenue in New York is plummeting, with businesses like restaurants almost completely shut down. Sales tax revenue in New York is plummeting, with businesses like restaurants almost completely shut down.Credit...Jordan Gale for The New York Times Luis Ferré-SadurníJeffery C. Mays March 26, 2020Updated 6:02 p.m. ET The coronavirus felled the fixtures of New York’s economic engine: Broadway is dark, Times Square is deserted and Wall Street is in tumult. But as the pandemic forced restaurants, malls and hotels to close, and tens of thousands of workers to lose their paychecks, it also wreaked havoc on one inconspicuous victim: New York’s finances. The economic slowdown, however long it may last, is projected to cost New York State between $9 billion to $15 billion in lost tax revenue, with the worst-case scenario putting the state in financial straits not seen since the Great Recession a decade ago. The outbreak is expected to slash revenue from personal income taxes, sales taxes and business taxes — all of which typically account for almost half of state revenues — and may impact essential services like education, health care and transportation, according to the governor’s budget office. State and city officials had hoped that the federal government would soften the blow to people’s pockets and the government’s ledgers through a $2 trillion federal stimulus package that is expected to be enacted within days. But Gov. Andrew M. Cuomo complained on Wednesday that the deal was “terrible” for New York because he said that only $3.1 billion was earmarked to help the state with its budget gap, an amount that his office said was disproportionately low compared to the funds allotted to states with fewer coronavirus cases and smaller budgets. Hours later, Mayor Bill de Blasio characterized the bill as “immoral” because New York City would receive only $1 billion in direct aid despite having a third of the country’s virus cases. Still, Chuck Schumer, the Democratic Senate minority leader negotiating the final deal, noted New York would receive over $40 billion in unemployment insurance, grants for hospitals and much-needed funding for the Metropolitan Transportation Authority, whose ridership has plummeted. New York officials said the state is facing more than just a revenue problem. The state has plowed unanticipated amounts of money into fighting the outbreak: Just last week, New York spent or committed more than $600 million to buy medical supplies, including urgently needed masks, portable X-ray machines and ventilators, said Robert Mujica, the state budget director. “Prior to this, our budgets were very stable, our financial condition healthy,” Mr. Mujica said in an interview this week. “This seriously destabilizes our overall picture and, at this point, it’s too early to tell what the total fallout is and what the next steps are.” In New York City, officials are similarly bracing for dire consequences, as the tourism and hospitality industry effectively shuts down. The city could face revenue shortfalls of between $4.8 billion and $6 billion over the next 15 months, according to the city comptroller, an estimate predicated on the theory that recovery efforts will begin to take hold between late May or end of June. The Citizens Budget Commission, a nonprofit group, was less optimistic; Maria Doulis, vice president of the group, said the city could lose $20 billion in revenues over the next three fiscal years. The city could bleed 750,000 jobs in the cultural, restaurant, retail, airline and other sectors, eliminating between $1.5 billion to $2 billion in wages per month, according to James Parrott, director of economic and fiscal policies at the Center for New York City Affairs at the New School. Mr. de Blasio has ordered city agencies to identify $1.3 billion in budget cuts, but warned that he may ask for more as the city continues to “lose revenue and see massive new expenses because of this crisis.” With economists agreeing that the country is likely headed into a recession, the state’s estimates are based on two potential scenarios, one more devastating than the other. The first forecasts a short downturn with a recovery that begins in the summer months, leading to a $9 billion shortfall. The other foresees a longer recovery — “In line with the Great Recession,” Mr. Mujica said — that could cost the state up to $15 billion in lost revenue. “Everyone is projecting there will be a recovery, it’s just a matter of when it starts and how fast,” Mr. Mujica said. “Unlike other disasters or emergencies, where you kind of get a sense of where things are going, this is a little more uncertain still.” New York is incredibly reliant on the financial industry and taxes from high-income earners, which became a glaring vulnerability during the recession in 2009 when capital gains plummeted and the state lost billions of dollars in collections from personal income tax. That contributed to a $16 billion budget gap for the 2010 fiscal year, which was balanced primarily through tax increases and a federal stimulus bill, but still left a $7.4 billion gap for the following year. Turmoil over New York’s budget, one of the largest in the nation, has upended the political norms of budget negotiations in Albany, where Democrats control the Legislature. Mr. Cuomo’s proposal for a $178.6 billion budget is in flux because of the lower tax collection estimates. The intense focus on the outbreak has also threatened to leave some progressive priorities, like marijuana legalization, out of the final budget. Faced with a looming deadline to pass a balanced budget by April 1, state lawmakers haven’t convened in the capital in almost a week after three of their colleagues tested positive for the virus, even though negotiations with the governor have continued among staffers. It is unclear if legislators will convene this week; Mike Murphy, a spokesman for the State Senate Democratic majority, said that lawmakers are looking at the possibility of voting remotely. “The crisis is hitting with no end in sight and you’ve got to get a budget done within the next week,” said Thomas DiNapoli, the state comptroller and a former assemblyman. “That’s a very monumental challenge.” A hodgepodge of hurdles is having an outsized effect on the state’s finances, including a possible cash flow crunch within a few months. The federal government’s decision to allow taxpayers to delay filing their returns by up to 90 days means the state’s coffers will also see a delay in billions of dollars in tax payments. That reduced cash-on-hand will come at a time when the state is meant to dole out hefty payments in aid to school districts and reimbursements to taxpayers. With casinos closed, the state can no longer confidently rely on the $1.1 billion it expected to receive from the gaming industry next fiscal year. And with the markets in a spiral, the tax revenue from the securities industry in Wall Street — which accounts for 17 percent of all state tax collections — also looks bleak. Mr. Cuomo has said he does not regret taking actions during the coronavirus epidemic that have left tens of thousands without work. The state’s priorities, Mr. Cuomo said, are unequivocal: Saving lives should outweigh any economic repercussions. On Monday, however, the governor said he was devising a strategy to gradually jump-start parts of the economy while balancing public health priorities. He is exploring scenarios in which young people and those who contracted the virus, but were now healthy, could safely return to work. “You can’t stop the economy forever,” Mr. Cuomo said during a news conference. “Can you get to a point where the healthy, the people who are most likely not going to be affected, can go to work?” Some relief is already on the way: Congress recently passed an emergency package that provides many workers with some paid leave if they need to take time off because of the virus. That relief package also gave New York access to billions of dollars in additional Medicaid funds that could help plug the state’s existing $6.1 billion budget gap, mostly a result of growing Medicaid costs. Under a provision in the package, however, the state is eligible for the money only if it doesn’t make structural changes to its Medicaid program — something Mr. Cuomo is seeking to do through a recently convened Medical Redesign Team and by altering how much localities should contribute toward Medicaid costs. The governor is lobbying Congress to strike that provision, contending that the state needs to access the federal funds as it simultaneously changes the state’s growing Medicaid program.