The pandemic and its fiscal aftermath have given rise — temporarily — to a state budget trend unique in New York’s history: rapid growth in revenues, spending and surplus reserves.

Even more than most states, New York experienced a severe economic and fiscal disruption following March 2020’s COVID-19 outbreak. For a time, the shock waves seemed very likely to vaporize a chunk of Albany’s tax revenues and precipitate a fiscal crisis. But Gov. Andrew Cuomo’s inflated early predictions of massive deficits quickly dissipated amid waves of federal relief aid — along with unexpectedly large increases in the state’s tax revenues.

Within two years, state spending had been inflated by tens of billions in federal aid, buttressed by surging capital-gains tax revenues generated by a strong stock-market recovery — and topped off by the proceeds of significant (and unnecessary) tax increases in Cuomo’s final budget in spring 2021, targeted at New York’s highest-earning individuals and corporations.

Gov. Kathy Hochul’s financial plan assumes high-income households will remain literally and figuratively unmoved by the most significant marginal-rate hike since the early 1970s. But there’s troubling evidence to the contrary: Even before the latest tax hikes, between 2010 and 2020, New York’s share of the nation’s millionaire earners dropped from nearly 13% to just under 9%, the lowest level on record.

Wall Street, meanwhile, is slumping, and a recession may be just ahead (assuming it’s not already here). The state’s record reserves, feeding a sense of complacency in Albany, could rapidly diminish within the next two years.

Albany’s supercharged post-pandemic spending trend is simply unsustainable in the long run. How this fiscal cycle ends — in a soft landing or a crash that prompts even more tax increases — will be determined by the budgets of the next few years. Before it’s too late, the governor and Legislature should embrace fiscal policies grounded in the three Rs of restraint, responsibility and reform. Spending should be reined in, taxes reduced and economic competitiveness restored as a top priority.

The state’s budget-making process — rushed, secretive and increasingly cluttered with extraneous issues — needs to be more efficient, more transparent and more accountable to taxpayers. Flattening the spending curve to put state finances on a more sustainable footing — while, crucially, adjusting taxes to a more competitive level — will be a stiff multi-year challenge.

The to-do list of necessary policy changes is long but would include these priorities:

Reduce projected spending. Efforts to find savings in a $121 billion state operating funds budget necessarily must start with education and Medicaid, which already consume half that budget and are on track to grow faster than all other areas combined.

Roll back tax increases. The latest income-tax hike on high earners, enacted in 2021, is projected to raise $4 billion a year before its scheduled expiration in 2027 — but the history of supposedly temporary tax hikes suggests pressure will grow to extend it as the sunset date nears. To prevent further erosion in the tax base, it should instead be phased out sooner.

Mind the GAAP. New York’s financial plans are calculated on a cash basis, which makes it easier to manipulate the numbers and hide growing shortfalls. A better standard for budgeting would be the same generally accepted accounting principles imposed on New York City during the mid-1970s financial crisis.

Ban lump-sum appropriations. As Comptroller Thomas DiNapoli proposed, state law should be amended to prohibit the governor, as well as the Legislature, from introducing or continuing any form of lump-sum appropriations, such as those used to support the $2 billion State and Municipal Facilities Program. All funds should be allocated, up front, to a specific list of grantees through an open, competitive process with clear, measurable criteria, subject to the comptroller’s regular audit and pre-released pursuant to the Freedom of Information Law at every stage.

Under the state’s nearly century-old executive-budget system, the procedural and institutional tools exist to make these goals a reality — but only if the governor chooses to use them.

Adapted from “The Next New York: Renewing and Reforming the Empire State,” a project of the Empire Center at NextNewYork.net.