With the Congressional stimulus negotiations seemingly at a stalemate, the financial health of New York is looking more and more grim. Comptroller Tom DiNapoli released a report earlier this month that calculated that the state had collected $3 billion less during the April-July first quarter than last year. But last week, his message got darker.
According to the Comptroller, the state should expect a further decrease in revenues of $1 billion, with the total budget gap projected to be $14.5 billion. He said that budget gaps will total over $60 billion for the next four years.
Let me repeat: $14.5 billion this year, with a total accumulated budget hole of more than $60 billion over the next four years.
Those catastrophic budget numbers reflect a state economy that has cratered since the COVID-19 pandemic began. It reflects real pain; hundreds of thousands have lost their jobs, countless businesses have faltered or are on the brink, and unemployment has risen to levels unseen since the Great Depression.
New York’s political leadership has been holding onto the hope that the Congress would approve another stimulus package that would reduce the state’s financial pain. Those negotiations continue, but it is increasingly clear that whatever benefits result, the state will still face massive financial problems.
In addition to the state’s problems, local governments are hurting too. The City of New York, for example, is facing a $9.6 billion revenue loss over the next two years. The sprawling Metropolitan Transportation Authority (MTA) – which runs the down state mass transit systems – announced last week its “doomsday” scenario.
The MTA is facing a $16.2 billion deficit through 2024. Under the MTA’s ‘doomsday’ plan, subway and bus service would be slashed by 40 percent. The budget cuts would also affect long-awaited improvements.
With such massive deficits in every corner of the state, even if a federal stimulus is approved, service cuts to programs like education and health care as well as revenue increases will dominate the debate in Albany. What has become crystal clear is that at a time of pressing needs Albany cannot cut services by more than $60 billion; revenues must be raised. But how?
A new coalition headed by former New York Governor David Paterson weighed in on that question saying that taxes on the wealthy must not be raised. Paterson – who has been a lobbyist for casino developer Sheldon Adelson – announced the formation of the coalition to fight taxes on the wealthy. Within days a number of the groups dropped out saying that they were misled about the intent of the effort. In fact, some stated that they supported raising taxes.
And also last week, New York State Assemblymember Phil Steck convened a forum on raising taxes. The panel, which included Nobel Prize-winning economist Joseph Stiglitz, focused on reviving a specific revenue idea. For over a Century, New York State has collected a small tax on the buying and selling of stocks. Since the early 1980s, instead of keeping the revenues, the state has rebated the money collected under the Stock Transfer Tax law back to Wall Street investors. The amount that the state collects – and then rebates – varies by year between $5 billion and $16 billion annually.
According to the panel, that tax should not only be collected, but expanded to cover other forms of financial activities. Their argument was that the tax would really only be paid by Wall Street speculators, the vast majority of investors don’t trade stocks frequently and thus would not notice the tax. In fact, they don’t really notice the tax now since it is collected (and then rebated). Moreover, the experts argued that the size of the tax – 0.25% or one quarter of a penny per trade – was so small that it would have no meaningful impact on the industry.
But it would raise billions for a state in desperate need of revenues.
Ultimately, Governor Cuomo and state lawmakers will face a serious choice – to cut services and raise revenues from middle- and low-income families and essential workers, or make the wealthy pay more. Most New Yorkers know what should be done, let’s see what the political leadership decides to do. Their decision will dramatically affect the quality of life for most New Yorkers.