In Cuomo’s budget address, what’s left out says as much as what’s said
It was more than a budget address, Gov. Andrew Cuomo said. But it had less detail than a budget address, experts said.
As he did in the State of the State, the governor laid out the case that New York is under attack from the new federal tax law, thanks to a controversial $10,000 cap on the state and local tax deduction that will hammer many high-income New Yorkers.
“Washington hit a button and launched an economic missile and it says ‘New York’ on it. It’s headed our way,” Cuomo said on Tuesday, advocating the state “get out of the way before it lands” by moving from an employee-paid income tax to an employer-paid payroll tax.
“It’s not just the budget this year, its an economic transformation of the climate this year,” Cuomo said during his fiscal rundown, which was relatively brief at just under 40 minutes.
Yet critics and budget experts alike noted that the governor still didn’t explain how he would carry out all of the goals laid out in his State of the State address earlier this month.
“Unfortunately, today’s Executive Budget presentation was long on finger-pointing, yet short on financial details,” Assembly Minority Leader Brian Kolb, a Republican who is seeking his party’s nomination to run against Cuomo this fall, said in a statement criticizing the address as little more than political positioning. “We need more specifics on the governor’s spending plan for a complete assessment of its potential.”
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Generally, fiscal policy experts agreed that the governor spent little time elaborating on exactly how he planned to raise and spend New Yorkers’ money during the budget address, leaving them to wonder how Cuomo’s raft of proposals would meet his stated goals, as they and the rest of Albany poured over the notoriously dense budget documents.
“An understandably un-detailed budget presentation,” David Friedfel, the director of state studies at the Citizens Budget Commission, said shortly after the governor’s address. Friedfel also noted that the scandals surrounding state economic development investments and funding for homelessness were noticeably absent.
“The economic development funding is a concern. The state has continued to spend tremendous amounts of money with lackluster results,” Friedfel said, adding that he hoped the state would not end up increasing spending in that area. “It’s money that could be much better directed elsewhere.”
Several experts also were surprised at the lack of information on the governor’s proposal on congestion pricing, which is now slated to be released later this week by Cuomo’s Fix New York City panel after having missed its planned December deadline.
“The congestion pricing piece is a little surprising. The federal tax reform happened relatively recently, but congestion pricing, those ideas have been around for a while,” said Friedfel. “This isn’t a new issue.”
To generate revenue for his $168 billion budget – and close a $4.4 billion gap – Cuomo did roll out several proposals to raise revenue, including a tax on health insurance companies, which get a 40 percent corporate tax cut under the new federal law; introducing a surcharge on opioid manufacturers; eliminating the carried interest loophole, with the cooperation of other states; and introducing a sales tax on internet marketplaces like Amazon.
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But several experts cited Cuomo’s decision to transfer the Payroll Mobility Tax Revenue to the Metropolitan Transportation Authority as an obvious tactic to simply make it appear as though state budget spending would stay within the administration’s long-term goal of only 2 percent growth by effectively shifting a major expense into another column.
“Essentially (it will) never hit the state’s books, so it won’t count as state revenue or state spending, which isn’t really a big deal from a budgetary perspective,” Friedfel said. “From an accounting perspective, it lets them say their spending declined by $1 billion, when it hasn’t. It’s just kind of changed pockets.”
For Ron Deutsch, executive director of left-leaning Fiscal Policy Institute, it appeared what was missing from Cuomo’s budget presentation was enough ways to raise the money needed to close the state’s $4.4 billion budget gap.
Cuomo “comes up with a few solid mechanisms to basically generate some needed revenue,” said Deutsch. “We would suggest he actually needs to do more to raise revenue.”
“So one of the things we would be suggesting and I think the governor may be alluding to this a bit would be to develop a recapture tax where you try and recapture a substantial percentage of the federal tax cuts from both businesses and individuals who are going to be receiving a big windfall.”
Deutsch said a stock transfer tax, a mansion tax, or a pied-a-terre tax could be used to make up the difference.
For others, what was missing from the governor’s budget was their slice of the pie.
“One item that was particularly concerning for us is that the executive budget eliminates all operating aid for the not-for-profit colleges,” said Mary Beth Labate, the governor’s former budget director who is now president of the Commission on Independent Colleges and Universities, which represents private, nonprofit colleges and universities on issues of public policy. “That funding was zeroed out in the executive budget. It is used to provide financial aid for students. We obviously are concerned about that.”
Labate said she plans to try to convince legislators and the governor’s office to reverse that decision in the coming weeks.
She will not be alone.
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Blair Horner, executive director of the New York Public Interest Research Group, was similarly disappointed, but not surprised, that there was no mention of anti-corruption reforms in the governor’s address since they were hardly mentioned in the State of the State. At first glance, he said, it appears that the ethics and voting reforms are wrapped up in Article VII bills, which can be easily rejected by legislators. A cybersecurity measure, however, made it into an appropriations bill, which Horner said indicates it will likely pass.
What will follow in Albany is several weeks of legislative hearings on the executive budget proposals, as lawmakers, lobbyists and interest groups jockey for a better outcome and constituents can weigh in on how the proposals would affect them.
Deputy Majority Leader Sen. John DeFrancisco also noted an omission, of sorts. Despite the governor’s extensive tirade against the Washington tax bill, he see a potential for a new hidden state tax hike in the governor’s proposal to dodge the fiscal impact of federal taxes.
“I’ll bet you 10-to-1 if this payroll tax comes into being, it will be as the governor calls ‘revenue enhancer,’” DeFrancisco said. “What I call an increase in taxes.”
Correction: An earlier version of this story misidentified Fiscal Policy Institute Executive Director Ron Deutsch's institution.