ALBANY — Addressing a sharp drop in state revenue, the Cuomo administration has ordered the heads of state agencies to eliminate all non-essential spending and refrain from issuing discretionary grants to municipal governments, according to an internal memo obtained by CNHI.

"While the Governor is aggressively seeking federal aid to compensate for this lost revenue, we cannot count on timely or adequate assistance," Robert Mujica, the director of the Office of the Budget, advised agency executives in the memo this week. "Accordingly, we must act immediately to reduce State spending."

The belt tightening comes as Cuomo administration officials brace for a $10 billion to $15 billion reduction in revenues this year, with recurring shortfalls in later years.

Mujica, a member of Cuomo's cabinet who helped shape New York's $174 billion budget, insisted agency administrators strictly adhere to the following directives:

• Strictly enforce the state's existing hiring freeze with the exception of jobs that relate to response to the COVID-19 pandemic.

• Eliminate spending on all "discretionary" spending on such items a supplies and contractual services.

• Hold all discretionary local aid grants and awards "until further notice."

In addition, top state officials have initiated a review of all capital projects overseen by agencies and public authorities under Cuomo's control.

Mujica's memo states: "Agencies and authorities are barred from entering into new contracts for capital projects except where an agency or authority certifies that not initiating a project poses an imminent threat to public health and safety."

Cuomo aides confirmed the memo was issued after CNHI obtained a copy from other government officials.

Fiscal watchdogs said the new belt-tightening moves appear to be a prelude for what will be even stronger measures to slash state spending.

"To use an analogy, they are taking their foot off the accelerator now because they will have to slam on the brakes soon," said David Friedfel, director of state studies for the Citizens Budget Commission.

Another analyst, E.J. McMahon, research director for the Empire Center for Public Policy, said the Cuomo administration has been slow on the draw in responding to a fiscal calamity that began when stock prices began dropping in late February amid growing concerns about the pandemic's economic impacts.

"Frankly, this memo should have gone out two months ago," said McMahon. "The governor has been behind the curve on the budget every step of the way."

McMahon, beginning six weeks ago, has been advocating that a broad-based pay freeze be imposed on state and local government salaries. Such a move that would require legislation from Cuomo and lawmakers and would save nearly $2 billion in public money, he estimated.

While Cuomo has not acted on that option, he has temporarily stopped a 2% raise that had been slated to go into effect April 1 for state workers represented by three separate unions.

The fact that the state is holding up some local grants means the fiscal pain already being felt by municipal governments will likely deepen.

The state's latest financial plan, issued last week, envisions $10.1 billion in new spending reductions. State agency operations are expected to take a 10% cut while health care and education funding also face significant cuts, as does support for local governments.

New York has had the worst outbreak of the virus in the nation, with 18,321 fatalities as of Thursday, up 306 over the past day.

The number of New Yorkers who have tested positive for COVID-19 was pegged at 304,372 Thursday.

The state's effort to reopen the economy is being accompanied by support from Michael Bloomberg, the billionaire businessman and former New York City mayor, for a new contact tracing program that could employ up to 17,000 people. The tracers will be deployed to reconstruct the movements of infected people in an effort to curb the spread.

"Contact tracing is our best hope of isolating the virus when it appears and keeping it isolated,” observed Bloomberg.

Cuomo said he expects to announce Friday whether public schools will reopen before the end of the academic year. Classrooms have been closed since March 18.

Regents exams that had been scheduled to be held in August were canceled Thursday by the state Education Department.

The current shutdown of the state's nonessential businesses expires May 15, though Cuomo said it could be extended in regions where infections have not abated.

Joe Mahoney covers the New York Statehouse for CNHI’s newspapers and websites. Reach him at jmahoney@cnhi.com

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