Experts tell revenue-consensus panel that FY26 receipts beat expectations but risks from capital gains, tariffs and AI could erode gains

The New York State Division of Budget reported that FY2026 tax receipts have exceeded earlier expectations, driven largely by strong personal income tax collections, but economists warned the gains may be fragile as the state completes its statutory revenue-consensus process on March 1.

Blake, the meeting moderator representing the Division of Budget, said the extra receipts “will allow the state to bolster reserves, avoid debt, continue commitments to Medicaid and child care and early childhood education across the state,” and emphasized the need to finish the receipts consensus under state law by March 1.

Panelists said the current fiscal picture reflects last year’s unusually large financial‑sector income and that a key shortcoming of forecasts remains the volatility of capital gains and bonus-related withholding. Don Boyd, an economic presenter, cautioned that “capital gains are large, volatile and concentrated” and that estimated payments and late‑year bonuses can materially shift year‑to‑year revenue outcomes.

Kajal Lahiri of the State University of New York described a mixed‑frequency dynamic factor model he and colleagues developed to nowcast New York receipts. He said the model incorporates a tax‑policy variable and gives a 14‑month‑ahead nominal growth nowcast for FY2027 of about 4.89% (approximately $131.36 billion), while stressing wide uncertainty bands around point estimates.

Maria Mastro of Goldman Sachs Asset Management and Parul Jain of Rutgers Business School both highlighted macro and market risks that could reverse recent revenue gains. Mastro said the largest near‑term risk is a sharp equity market correction that would reduce capital gains realizations and depress withholding; her firm’s scenario analysis finds a 10% stock‑market drop could shave roughly 0.5 percentage points off 2026 GDP growth and materially reduce income‑tax receipts. Jain noted tariffs and federal policy uncertainty as additional upside‑and‑downside drivers for inflation and trade, which in turn affect consumption and revenues.

Legislators at the meeting pressed panelists on the potential labor‑market effects of AI, outmigration and how federal tariff rulings could affect state receipts. Assemblymember Gary Pretlow asked about AI’s implications for New York’s tight labor market; panelists said measurable disruption is occurring in specific industries but that the net effect on statewide employment may take one to three years to become clear.

Speakers repeatedly warned that much of the recent revenue strength reflects last year’s extraordinary financial‑sector income and that the state relies heavily on withholdings and estimated payments, which are sensitive to timing and taxpayer behavior. As Blake noted, finalizing a conservative but realistic receipts consensus is essential for producing an on‑time, balanced budget.

The meeting concluded with participants reiterating next steps: budget staff and the legislative fiscal committees will use the presentations and the SUNY nowcast to guide the March 1 revenue consensus and finalize the revenue baseline for the 2026–27 budget.