From the Morning Memo:

A looming fiscal challenge awaits Gov. Andrew Cuomo and state lawmakers as budget gaps are opening up in the coming years, forcing decisions on issues ranging from school aid to Medicaid spending.

“There’s been a steady decline in personal income tax receipts relative to what was projected at the start of the fiscal year,” said Empire Center President E.J. McMahon.

A report from Cuomo’s budget division last week found tax revenue has been lagging so far this year — making gaps in the near future larger and all the more likely.

“Assuming the governor continues to hold spending at 2 percent, if he holds spending growth, we have budget gaps over the next three years starting at a little over $700 million starting next year,” McMahon said.

After that, the budget gaps will grow even larger, to around $2 billion. This could mean less money for costly items in the spending plan like school aid, which increased this year by more than 6 percent.

“Certainly we’re seeing the state tax collections being down,” said Comptroller Tom DiNapoli.

“I think it suggests a tougher budget year at the state level. That will probably mean there won’t be as much local government aid, including school aid, as there was this past year.”

Cuomo has pushed for budgets for the last six years that keep state spending under a year-over-year increase of 2 percent, a voluntary provision that Senate Republicans want to enact in law. But the pledge to stick to the spending cap could complicate next year’s budget negotiations.

“Now he’s really going to have to really make sure he tows that line,” McMahon said. “This is really going to be the acid test for Governor Cuomo’s commitment to fiscal restraint.”