Governor Cuomo unveiled his proposed budget for the state’s upcoming fiscal year, which starts on April 1st. The governor’s presentation focused on the amount of aid that the state could receive from a federal stimulus package. The strategy of the Administration since the pandemic began has been to “kick the can” – putting off critical decisions – until it became clear what the Congress would do.
By the end of the calendar year, the Congress had approved stimulus plans, but little of the $4 trillion in aid was earmarked for New York State government. During that time, the governor engaged in keeping the state solvent by withholding approved spending to various agencies – both inside and outside of government. But withholding monies from programs targeted to get funding is not without pain.
Over time, that pain grew as over $2.5 billion in approved state spending was withheld from agencies. This strategy of withholding state payments was done largely outside of public view.
The November election of President Biden and the results of the Georgia special elections earlier this month offered the governor new hope that his strategy would succeed. Now a Democratic President and a Congress controlled by Democrats offers the possibility of a financial bailout for the state. The new President has called for Congressional approval of a new $1.9 trillion federal stimulus with hundreds of billions of dollars to help state and local governments staggered by the pandemic and the economic downturn.
Additional reasons for the state to be optimistic is that the new U.S. Senate Majority Leader is New York’s Senator Chuck Schumer. However, he only has a razor-thin majority. Whether the Biden administration and Congress can reach an agreement is unclear. Republicans are now in the minority and after years of reckless tax cuts that benefitted the wealthy and big corporations, they are now positioning themselves as fiscal conservatives. It is highly likely that there will need to be Senate Republican support for a new federal bailout if one is to pass.
Governor Cuomo’s budget presentation last week focused on the federal stimulus response. He argued that the state would have to enact big budget cuts and hike taxes if the bailout package did not provide $15 billion in immediate relief to New York. The budget that he presented to the Legislature assumed that the federal government would provide $6 billion in aid. If the state received the full $15 billion that the governor said is needed, some of the cuts and revenues proposals could be changed, he said.
But in terms of a proposed budget, the governor assumed $6 billion in federal relief. If that occurred, the governor proposed in his $193 billion budget the following:
- New revenues would be generated by an income tax hike for those making over $5 million as well as taxes generated by the sale of marijuana and from sports betting – both of which are currently illegal in New York. The governor would generate additional revenues by proposing a $1 per online transaction every time a driver uses the Department of Motor Vehicles.
- Public college students could pay automatic tuition hikes of $200 per year for each of the next few years.
- The governor proposes cuts to hard-hit community colleges and eliminates direct aid to financially strapped private colleges (although he argues that federal aid will offset these cuts).
- Remember that the governor was withholding 20 percent of approved state aid? Well, he’s willing to return most of it, but plans on making permanent cuts of 5 percent, instead of 20 – although it’s not clear if that percentage cut will be applied equally.
- And the governor proposes that the Legislature grant him continued authority to unilaterally decide on changes to state spending.
The Legislature kicks off public hearings on the governor’s budget plans this week. Much more will be discussed as lawmakers and the public dig into the details of the governor’s proposals. The ultimate fate of the state’s finances, however, may not be determined in Albany, but in another Capitol Building in Washington D.C.