For N.Y., a tale of two budgets
In budget proposals, Cuomo stresses that state’s future depends on federal aid
New York is facing a crossroads, Gov. Andrew
M. Cuomo said Tuesday as he outlined his annual proposal for how to handle the state’s finances for the next year.
In an unusual move, Cuomo presented two executive budget proposals instead of one. In the first, taxes would be hiked, education cut by billions of dollars, proposed projects delayed — and the state would need to borrow heavily, leaving future generations to foot the bill. In the second, the state could restore funds that were delayed last year, lower taxes on the
middle class, build housing and help small businesses.
And it will all depend on how much aid New York receives from the federal government, Cuomo said, a point the governor has belabored repeatedly over the past 10 months, contending Washington’s “negligence” toward handling COVID -19 should leave them financially responsible for its ill effects on the Empire State.
President-elect Joe Biden’s proposed $1.9 trillion “American Rescue Package” includes $350 billion for state and local funding, Cuomo said. But he threatened to sue the Biden administration if New York does not receive $15 billion in federal aid.
The two proposals drafted by the state Division of the Budget include one called the “worst-case scenario,” where the state receives $6 billion in aid, and another Cuomo called the “fair funding scenario,” with New York receiving the $15 billion he has requested — enough to fill the budget gap.
For both plans, building on his statements from last week, Cuomo called for the legalization of recreational marijuana for adults and an expansion of online sports betting. He said online wagering, if administered by the state like the lottery rather than handed off to casinos, could raise as much as $500 million per year. And he said marijuana legalization would raise $350 million, with $100 million devoted to create a social equity fund and the remaining $250 million for the state deficit. Those figures reflect estimates a few years down the road, when the industries would have a chance to settle in New York.
The true worst-case scenario, despite what Cuomo said, would be that no additional aid comes from the federal government. Biden’s proposal is just that: a proposal, and despite impending Democratic control of the White House and the Democrats’ narrow control of the House and Senate, the proposal still is a long way off from passing. Budget Director Robert Mujica added later that “unless people are not telling the truth,” he expects the state to get a minimum of $6 billion. If not, he said, the budget would need to be rewritten.
“We’re asking for fairness — fairness from Washington,” Cuomo said, asserting again that New York has for decades been the number one “donor state,” giving the federal government more money than it receives.
And if the state gets it: “We are going to build back a state that you’ve never seen before. We know how to build, and we do it well. And we know how an investment pays
back dividends that you will see for generations.”
Economists and other political leaders have challenged the $15 billion figure that Cuomo has repeatedly cited as the shortfall faced by New York. Reiterating that claim again Tuesday, Cuomo also said the twoyear plan shows a $21 billion gap based on decreased tax revenues and the four-year plan shows a hole of $39 billion.
Under the $6 billion aid scenario, which Cuomo said he “would consider the 2021 version of the federal government saying ‘Drop dead’ to New York,” the state would need to make up the rest of the $15 billion gap by raising revenues, cutting costs and borrowing. Many of the programs unveiled in his State of the State speech last week would be delayed. Certain temporary spending cuts made last year would be made permanent, Mujica said in his address after the governor’s, and a new tax would be instituted for those who earn more than $5 million annually.
Six billion of the proposed $350 billion for states would be less than 2 percent of the total, Cuomo said, while New York’s population makes up nearly 6 percent of the nation’s total. Even the full $15 billion, he said, would be less than New York’s share based on its population.
And with the $15 billion scenario, Cuomo said, the state can fund labor agreements; restore the 5 percent across-the-board funding withheld last year; institute a middle-class tax cut previously approved by the Legislature; build housing to address New York’s homelessness crisis; invest $2.5 billion in child care; invest $7.5 billion in higher education; provide aid to small businesses; and invest billions in health care.
The tax hike on the wealthy would not be needed to balance the budget under the $15 billion aid scenario, Mujica said, although the Legislature could move to enact such a tax. Leaders from the Legislature signaled they intend to do just that:
“The wealthy have gotten wealthier during this crisis even as the middle class has shrunk and millions of New Yorkers have struggled to make ends meet. We must be ready to act as a state to advance efforts to raise revenues, including having the hyper-wealthy share this burden,” Senate Majority Leader Andrea Stewartcousins said in a statement after Cuomo’s address.
The two proposals drafted by the state Division of the Budget include one called the “worst-case scenario,” where the state receives $6 billion in aid, and another Cuomo called the “fair funding scenario,” with New York receiving the $15 billion he has requested — enough to fill the budget gap.