The original op-ed can be found here.

The American Rescue Plan will not only provide tremendous support to individuals, families, businesses and organizations, but can be a game-changer for New York state and city government. Success, however, is far from guaranteed.

Used wisely, this new aid could allow the state and city to stabilize their short-term and long-term finances — while avoiding harmful service cuts and counterproductive tax increases. If it saps all urgency to transform government, however, and instead props up inefficient and ineffective spending, the relief funds will only delay a coming fiscal reckoning.

What’s key is spreading federal funds over the next several years, to balance budgets and provide time to restructure government in ways that preserve services and increase fiscal sustainability. Immediately, the relief funds alleviate the need for harmful service cuts and support pandemic-driven cost increases, like safely returning students to classrooms. Fortunately, federal relief will do much of the economic and social heavy lifting.

But federal aid is only a bridge, which must land on a stable shore — where recurring revenues are enough to support critical services New Yorkers want and need, but not so high they risk driving away residents and business.

However tempting, the influx of aid should not support new programs or ongoing expenses. That’s how governments build fiscal cliffs programs tumble down when federal aid runs dry.

Still, some call to increase taxes. With unparalleled aid and unexpected revenue strength, the idea significant income tax hikes are needed to close gaps and preserve services can now be dismissed. Plus, the risk these taxes drive away people who pay large shares of needed revenue is greater than ever. That’s due to the federal cap on state and local tax deductions, the now proven viability of working from outside New York, and the fact amenities that make New York worth its high costs are temporarily limited.

In reality, the state’s fiscal fortunes have brightened significantly. Stronger-than-expected tax revenues reduced New York’s expected pandemic-related four-year revenue shortfall by over half. With the $1.9 trillion aid package, more than $25 billion in federal funds will erase more than 40% of the shortfall. Amazingly, the state’s resources are near where they were pre-pandemic, and in the near term they are greater.

So great in fact, the state could adopt Gov. Cuomo’s budget without its proposed personal income tax increases, and still have an extra $5.9 billion on hand by fiscal year 2023′s end. These funds could restore harmful cuts and provide that glide path while actions are implemented to restrain recurring spending.

For example, focusing the state’s education aid on high-need districts instead of increasing funds to wealthy ones could provide significant savings. And the state should eliminate unproductive economic development programs and temporarily change financing of some capital programs, all actions that could narrow future budget gaps — without raising taxes.

The city has an even greater opportunity to restructure operations to reduce costs without cutting services — all the more important since the city has reaped less from renewed economic strength and federal aid, and hard hit real estate sectors are causing a projected 4% decline in property tax revenues — not seen in nearly three decades.

The city’s fiscal position has been temporarily stabilized by a mix of reserves, federal funds, and short-term savings. While some service cuts and workforce reduction will provide some recurring savings, the city faces $5 billion annual budget gaps in the future.

Fortunately, the city is slated to receive $7 billion from the new package and enhanced FEMA reimbursement, plus likely additional education aid. Some money should support immediate pandemic needs, but the rest should be spread over the next couple of years to allow implementation of targeted restructurings that preserve essential services. Critically, the city must not use the funds to reverse the progress made shrinking the workforce.

The Citizens Budget Commission has identified nearly two dozen options to reduce labor costs by more than $1 billion annually through productivity enhancements and benefit changes. Sanitation routes could be lengthened so that trucks are filled before they are tipped. Fire engine companies all could be staffed with four firefighters, instead of some having five. The 108 union-administered benefit funds could be consolidated, and employees could contribute to their health insurance like state employees and those in the private sector.

The city also should over two years phase in efficiency initiatives, totaling 3 to 5% of city-funded agency spending. With the federal aid and the labor savings, this could halve future budget gaps, preserve crucial services, and fund pandemic-related needs without raising taxes.

New York city and state have great challenges, but a historic opportunity. Failure perpetuates the status quo of structural fiscal deficits, inefficient services and episodic painful cuts to services for those in need. Success brings a new, stable, improved New York. With billions of dollars in federal funds close at hand, public leaders should rise to the moment and make the hard choices and wise decisions needed to help New York thrive long into the future.