ALBANY – Superstorm Sandy devastated New York City, but the superstorm’s impact will send shivers through the state’s economy and state finances in Albany.
The storm is expected to drive a hole into the state’s budget at a time when New York’s economy has been experiencing a shaky rebound amid relatively high unemployment.
State officials already are concerned about possible fiscal parallels between this week’s storm and the 2001 terrorist attacks that created a nose dive in the state’s economy and hit the government’s balance sheet hard.
“We don’t know how bad it is, but whatever it is, it’s not good,’’ Gov. Andrew M. Cuomo said earlier this week of the storm’s impact on the state’s economy.
In the months after the 2001 terrorist attacks, the state estimated Albany’s budget would be hit with more than $5 billion in lower tax revenues over a two-year period.
Just days after Sandy hit, and with recovery operations likely to take months, officials in the State Comptroller’s Office and Cuomo’s Budget Division said Wednesday they are still conducting an assessment of possible impact to the state’s economy and finances.
“In the short run, this can only be a negative in terms of impact. The question is how big the impact will be?’’ State Comptroller Thomas DiNapoli said in an interview Wednesday.
New York City Comptroller John Liu told a New York radio station that the storm is already costing the city between $3 million and $5 million a day in lost tax revenues. If Liu’s estimates are accurate, the lost revenues for the state would be even worse.
It is too early to determine whether the impact will mean a new round of spending cuts this year or take hikes next year to make up for lost revenues, including income and sales taxes from New York City, the state economy’s chief engine.
But the economic impacts are vast. As people lose their jobs even temporarily because of shuttered businesses in New York City and on Long Island it means lower tax revenue.
New York City’s vital tourism sector also may take a hit as the holiday season approaches.
Even the two-day closing of the stock exchanges will trickle down to lower revenues for the state. Transportation nightmares that shut down roads, major tunnels and the subway system mean lost state and local revenue.
And the thousands of businesses – from restaurants to dry cleaners – shuttered from lack of power also mean lost state revenue.
And there are worries about what effect the oil refinery closure will have on the state’s economy.
Then there are the unknown financial costs for the state.
While the federal government reimburses most of the emergency costs incurred by the state government, it remains a question mark how Albany – already facing a $1 billion deficit in the coming year – will afford the kinds of bailouts it gave to upstate communities following last year’s two hurricanes.
Washington normally reimburses for two-thirds of the costs, and Cuomo said Wednesday he’d ask for as much as 100 percent.
How long the storm’s financial impact is felt will dictate how deeply the state’s economy and the government’s budget are affected.
DiNapoli noted last year’s Hurricane Irene, after federal reimbursements were made, ended up costing state and local governments more than $200 million. Sandy’s tab, he said, will likely reach far higher depending on Washington’s ability to pay.
Only last week, DiNapoli warned that the $31.6 billion in revenues collected so far this year by the state are running $436 million behind estimates when the budget was passed in March. To make up for the slide, revenues between now and the end of the fiscal year March 31 would have to grow 6.4 percent – a challenge made worse by Sandy’s effects.
Early estimates of the economic impact of Hurricane Sandy across all the affected East Coast states are between $30 billion and $50 billion, according to Colorado-based IHS Global Insight, whose clients on economic forecasts include New York State.
That amount, smaller than the Hurricane Katrina hit, would still represent losses about equal to as much as nearly 2 percent of the region’s gross regional product.
While there already has been talk of a special legislative session, likely in December, to consider such ideas as legislative pay raises and changes to the state’s incumbent-friendly campaign finance system, now there is talk of any such session being driven by new fiscal challenges the storm will bring.
Only two weeks ago, before the name Sandy was on the lips of New Yorkers, Cuomo said any possible special session would not have to include financial fixes to the budget.
State officials have been confident that Cuomo could manage any revenue shortfalls this year in the five months left in the fiscal year. Now, with uncertainty over Sandy’s impact, that confidence is expected to erode.
“We weren’t going to have to have a midcourse correction. Unfortunately, you can never predict Mother Nature,’’ said Senate Finance Committee Chairman John DeFrancisco, a Syracuse-area Republican.
“So, at some point, we’ll probably have to deal with it either in a special session or when we get back in January.’’
While some parts of the economy, like construction, may benefit, it will not make up for losses that have already occurred, most observers said.
“Here we were already limping along with one hand tied behind our back in terms of recovery, and now you have this situation ... In a very slow recovery, it doesn’t help,’’ said Elizabeth Lynam of the Citizens Budget Commission, a Manhattan-based watchdog of the state’s finances.