Read the original op-ed here.

With the election behind us, Gov. Hochul and the Legislature can now focus squarely on policies and programs that will shape the state’s future. Chief among these will be next year’s budget. Far-sighted decisions would strengthen the state’s ability to weather future fiscal and economic stress. Short-sighted ones would weaken the state’s chances for a healthy, stable future, putting our most vulnerable at the greatest risk.

Though the current budget is balanced, future gaps approach $6 billion, and economists increasingly predict a recession. Steps to put us on a sound footing must start immediately.

Awash in federal COVID aid and recent strong tax receipts — including a record 2021 on Wall Street and temporary, making us highest-in-the-nation, tax increases — the state is spending like these are good times that will only get better. Last April’s budget agreement increased state spending by 12%, nearly $14 billion. That was on top of a $10 billion spending increase over the prior two years, and before another $19 billion is added over the next four.

The state financial plan shows that by FY 2027, spending will be $6 billion more than receipts. It does not reveal that the following year will not benefit from one-time money to prepay expenses and the expiring personal income tax surcharge, leaving a gap closer to $12.7 billion.

The good news is the state is building reserves for rainy days — credit to the governor for spearheading and the Legislature for agreeing. These can be the lifeline for needy New Yorkers during the next recession. The state now has roughly $10 billion in reserves, with plans to increase to $19 billion over the next few years. Ample as these seem, they pale compared to the potential need.

Economic fragility is not this year’s only risk. Though future budget gaps are significant, next year’s budget is nearly balanced already. Unfortunately, this short-term fiscal stability is budgetary catnip, yielding an almost compulsive temptation to expand programs.

While some will point to the great needs for education, housing, health care and income supports, they would do well to remember that short-term budgetary cavorting often gives way to the fiscal hangover that puts these very programs at risk.

How should the state’s leaders focus on a longer time horizon?

First, stay the course on reserves. The state comptroller recently took a nearly unprecedented step and included a recession in his forecast, providing a warning New York should heed.

Second, restrain spending growth. Limiting growth to 2% annually through 2028 would be enough to close that year’s $12 billion projected gap.

This cannot be done without controlling Medicaid and education spending, which comprise about 50% of the budget. New York’s Medicaid costs have been high historically, with some programs recently exploding. Charging a diverse panel of stakeholders to identify ways to transform not just Medicaid, but New York’s health system overall, is an excellent path to improve health and control costs.

In 2021, the state started to phase in a 32% education aid increase. The goal is laudable — to target aid to students in need and ensure a sound basic education for all. However, to stabilize the budget and increase equity, the state should better target aid to high-need districts, including money that now reimburses districts on how much they spend for transportation and construction rather than student need, and reevaluate assistance to wealthy districts, especially those that receive over $3 billion annually despite already self-funding a sound basic education.

Third, maximize job creation and environmental benefits by basing economic development and climate investments on data, evaluation and tradeoffs. Historically, New York has been a leader in economic development spending, but not job creation. Environmental investments, which will be significant, should be based on a thorough needs assessment, holistic planning and prioritizing cost-effective strategies.

Fourth, implement comprehensive performance management to deliver high-quality, efficient services and focus funds where the impact is greatest. The state should set goals for programs, use a robust portfolio of indicators to assess operations and measure progress, and institute a management review and accountability process. This would help both deliver results New Yorkers deserve and keep and attract residents and businesses.

Finally, mind New York’s tax competitiveness. New York already has the nation’s highest combined business and top personal income tax rates. The risk of chipping away at our revenue and economic foundation is real, especially after the pandemic showed other places can be attractive to live or run a business.

New York has no shortage of needs. The Metropolitan Transportation Authority has a massive structural deficit. Housing vouchers do not cover the spread between income and rents for many. And some call the Environmental Bond Act the tip of the iceberg. If the state’s leaders make the wise budget, policy and management choices now, New York will be better able to meet New Yorkers’ essential needs and face economic uncertainty. The alternative could have dire consequences for all, especially those in need.