The COVID-19 pandemic may lead state legislators to adopt a continuation of the state’s 2019-20 budget for the first part of the coming state fiscal year.

State Assemblyman Andrew Goodell, R-Jamestown, said the coronavirus is adding several layers to what was already a difficult state budget process. The state started the year with a $6.1 billion budget shortfall largely created by growth in the Medicaid program. Gov. Andrew Cuomo proposed a second Medicaid Redesign Team to find ways to close that gap in addition the governor’s proposal to give counties a 3% annual increase in Medicaid spending, with counties paying the rest of the increased cost each year. Additionally, if local governments’ increased Medicaid spending comes in less than 3%, counties get to keep a quarter of the savings.

That plan, as well as a Medicaid Redesign Team finding more savings in the Medicaid budget, is going to be difficult with the onslaught of COVID-19 cases around the state. In addition to increased health care spending, Comptroller Thomas DiNapoli is forecasting a hit of between $4 and $7 billion in state tax receipts.

“The coronavirus will likely cause a short-term increase in Medicaid costs at the very time when the budget is running a huge shortfall,” Goodell said. “In addition, the governor’s actions in shutting down whole segments of the economy will have a huge impact on our revenue projections as referenced by the comptroller’s announcement. On top of that, it’s important to recognize that about 20% of all revenue comes from Wall Street. About 40% of personal income tax and 20% of revenue. A lot of that revenue is driven by performance-based bonuses. So when the stock market loses 20% of value in a period of three weeks, unless it rebounds substantially, it will have a substantial negative impact on income tax collections.”

Some pundits had discussed the state Legislature trying to finish discussions and approve of a 2020-21 state budget early, though those discussions came before COVID-19 became a pandemic. DiNapoli, in his letter to Cuomo on Tuesday, recommended the state Division of the Budget and the state Legislature’s fiscal committees to conduct quarterly or more frequent meetings similar to the Consensus Forecasting Conference held annually in late February and to do more to increase the state’s reserves.

Goodell said it’s difficult to cut spending by enough to balance the budget, and there are pitfalls that come with raising taxes on the rich enough to balance the budget as well. Those difficulties mean a budget extender could be the only way for the state to proceed, because the state has to have a balanced budget to submit to the state comptroller.

“It’s very difficult for the state to cut spending on that magnitude, $10 billion, at the same time the economy is reeling and local governments are going to be reeling from the financial impacts of the virus,” Goodell said. “The state is required under the state Constitution to have a balanced budget, and the state comptroller, who is individually elected, has to sign off on that budget. It’s unlikely the comptroller will simply look the other way at a multibillion dollar structural deficit. Unfortunately, when faced with that magnitude of a budget shortfall, with a very short time period to address it, coupled with the virus itself, I would anticipate that the legislature may enact a temporary continuation of the current budget, just extending it while they are evaluating both the revenue loss and the expense increases that are attributed to this virus response.”

Stocks tumbled 9% on Wall Street Wednesday and wiped out the last of the gains for the Dow Jones Industrial Average since President Donald Trump’s inauguration. Even prices for investments seen as very safe fell as investors rushed to raise cash amid fears about the coronavirus pandemic. Markets have been incredibly volatile for weeks as Wall Street and the White House acknowledge the rising likelihood that the outbreak will cause a recession. The typical day this month has seen the stock market swing up or down by 4.9%. Over the last decade, it was just 0.4%. The S&P 500, which dictates how 401(k) accounts perform much more than the Dow, is down 32% from its record set last month, though it’s still up nearly 8% since Election Day 2016. The S&P 500’s slide was so sharp that trading was halted for 15 minutes Wednesday. The losses deepened after trading resumed, and the S&P 500 was down 9%, as of 2:17 pm. Eastern time.

Those are numbers Goodell is watching closely as legislators debate the budget, including several proposals to increase taxes in one form or another on the state’s wealthiest residents. Among those proposals are A.9650, sponsored by Assemblyman Harvey Epstein, D-New York City, would impose an additional 2% sales tax on retail sales of motor vehicles costing more than $50,000, jewelry costing more than $5,000 and clothing, footwear, handbags, luggage, umbrellas, wallets or watches sold for more than $1,000. Assemblyman Robert Carroll, D-Windsor Terrace, introduced A.9045 to reinstate the sales tax on yachts costing more than $230,000 after an exemption was placed on such vessels in the 2015 state budget while also introducing A.9053 to again collect sales and compensating taxes on some private, non-commercial aircraft. Sen. Jennifer Metzger, D-Middletown, proposed S.7629 to impose a tax on all corporate stock buybacks of issued shares and Sen. James Sanders, D-New York City, has introduced the Millionaire’s Tax and Economic Equity Act of 2020 to extend the top tax state income tax rate to 11.82% for taxpayers who earn more than $100 million.

“There are some who have been urging that we dramatically increase taxes on the rich,” Goodell said. “Keep in mind that New York state has led the nation on the net exodus of net adjustable gross income. so the latest data from the IRS and the Census Bureau indicates that New York lost over $8 billion in net taxable income for the last year that we have data. If you increase the taxes on the very wealthy they are also the most mobile. And the virus is teaching the wealthy how they can run their business without going to Wall Street. So the risk is that a high tax increase on the wealthy will result in the wealthy doing more telebusiness from states that have no income tax.”