New York’s Budget Negotiations and Climate Change

Posted by NYPIRG on March 20, 2023 at 8:46 am

New York State’s fiscal year begins on April 1st – one of the earliest deadlines in the nation.  Governor Hochul kicked off the budget process by unveiling her plan on February 1st.  The state Legislature then convened public hearings to examine the governor’s plans.  In response, last week the Senate and Assembly released their respective budget plans.

Now that each house has its own plan, the public process of the budget unfolds with joint conference committee meetings starting this week and – perhaps – rolling through the end of the month.  The real negotiations will play out behind closed doors with the goal of coming to a budget agreement by April 1st – or soon thereafter.

In a state budget that is likely to end up with record spending somewhere between $227 and $233 billion, there are still policy and spending disagreements between the governor, the state Senate, and the state Assembly that must be resolved.

For example, both houses of the Legislature rejected the governor’s plan to mandate new housing, instead advancing their own plans to spend millions of dollars in incentives for such housing.  Both houses rejected the governor’s plan to hike tuition at New York’s public colleges and universities.  Both houses agreed with the governor’s proposed mandate that new building construction must rely on electricity – not oil or gas – for power.  Yet within that general agreement is disagreement on approach to electrification of new housing construction.

In some areas, the differences among the leaders can be substantial.  One such area is climate change. 

Governor Hochul has advanced a “cap and invest” program to reduce the release of greenhouse gas emissions.  The cap-and-invest program sets a limit, or cap, on overall carbon emissions in the state and requires businesses to obtain allowances equal to their covered greenhouse gas emissions.  The cap will be tightened over time to ensure New York achieves its emissions-reduction commitments, which means the state will issue fewer emissions allowances each year.

Cap-and-invest is a market-based program – as allowances become more scarce, they become more valuable due to the powers of supply and demand.  Businesses that do not sufficiently reduce their emissions will be faced with increasing compliance costs, so investing in cleaner operations is good for the planet and their bottom line.  Governor Hochul’s plan also includes a legislative proposal to create a universal Climate Action Rebate to send more than $1 billion in future cap-and-invest proceeds to New Yorkers every year.

But there is opposition.  The program relies on the regulatory power of the state’s Department of Environmental Conservation and opponents complain that, so far, the Administration has provided too little information on how the program will be run – and how much businesses will have to pay.

The Senate advanced their own cap and invest plan that would make climate program spending subject to legislative oversight in appropriating funds, not leaving it up to the Administration.  The Assembly simply dropped a greenhouse gas emissions cap out of its plan altogether.

And there is opposition to the whole idea.  Some opponents are arguing that plans to fund climate initiatives will raise the prices of travel, electricity, and heating.  Thus, New York utility ratepayers and taxpayers will end up bearing the costs of climate-fighting initiatives.

Of course, there can be no doubt that dealing with the worsening climate catastrophe will cost – and cost big.  Yet, it doesn’t have to be ratepayers and taxpayers alone who shoulder the burden.

Included in the state Senate’s budget plan was a measure to force the world’s largest oil companies to pick up a large portion of the tab for climate damages.  Under the Senate plan, oil companies would be on the hook for $3 billion per year for each of the next 25 years to pay for climate costs.  The Senate’s plan is also designed to make sure that oil company investors – not the public – are the ones who pay the assessment.

Neither the governor nor the state Assembly have included anything like it in their budget proposals.

Which, of course, plays into the hands of opponents – ideologues, partisans, and oil companies – who want nothing to happen.  Scoring political points over costs to the public is an obvious move to stall climate progress.

The state Senate’s plan, on the other hand, offers a real alternative.  A plan that not only generates large amounts of money but does so in a manner that protects the public. 

The Senate is posing a pointed question to the governor and the state Assembly:  When it comes to paying for climate costs, where do you stand – protecting the public or the oil companies?

New Yorkers will know that answer by the end of the month.