The federal government’s slashing of domestic spending (while boosting tax cuts for the wealthy) has put states’ budgets at risk.The impact on New York’s budget is unquestionably significant.
The federal legislation approved this past summer, dubbed the “One Big, Beautiful Bill,” covered a lot of issues.The ones that received the most attention are the changes to Medicaid (health insurance for the poor) and the SNAP program (subsidies to purchase food for the needy), the elimination of federal spending on climate programs, as well as increasing the nation’s debt ceiling to $5 trillion.
New York has been bracing for the state budgetary impacts: an estimated cumulative budget gap of $34.3 billion over the next three years.
Yet, last week New York received some good news on the budget front.According to the State Comptroller, Wall Street’s profits increased at “a faster pace than last year” and represented “the fourth-highest level on record.” The analysis concluded that Wall Street’s “profits and bonuses could help generate higher-than-expected city and state tax collections if this pace continues.”
While no one should bet the ranch on Wall Street continuing to boom for the rest of the year, it looks like its strong performance may cushion the expected fiscal blow to the state from the federal budget.
The smart move is to prepare for a still bad state budget next year.The state will need to focus on fixing or eliminating programs that are inefficient and spending that makes no sense.One obvious place to look is the state’s economic development and benefit programs.
New York spends billions on its so-called economic development programs, more than virtually every other state.Those programs have been subject to ongoing criticisms, in particular for the state’s failure to conduct a comprehensive review that evaluates whether these programs actually work.The state support for these programs hinges on the promise that they will generate jobs and stimulate economic activity.
In some cases, the failures are obvious, like the “Buffalo Billion” program, which came way short of the promises.In others, it’s hard to tell if the state got any “bang for its buck.”A fundamental problem is that there are few mechanisms for real-time evaluation, in particular to answer the “but-for” question: Would companies have hired workers or made investments at the same level they did but-for the tax incentives? In other words, was the tax incentive necessary to induce the companies' investments or would they have happened anyway?
According to some analyses, the answer to that question is “no.”
In addition, some tax incentives make little sense.For example, New York law provides tax benefits for the use of fossil fuels, usually to protect consumers from some taxes, like buying home heating products.
In the age of climate catastrophe – and possibly shrinking federal support for climate programs – tax incentives for oil, gas or coal products should be examined carefully to make sure that they are reasonable, meaning that they protect the public not Big Oil and its allies.Good examples of tax benefits that makes no sense in the age of climate catastrophe are those that give $350 million in benefits to the oil and gas industry.
The oil industry has been enormously profitable.And while a chunk of those profits have been used for additional investment in exploration, a lot has been “invested” in our political system.Here in New York, those political investments have paid off.
Their recent campaigns to roll back the state’s climate law, postpone fees on greenhouse gas emissions, and undermine electrification in the building of new homes, have registered.You can hear it in Governor Hochul’s pledge to support “all of the above” in terms of sourcing power.“All of the above” includes relying on fossil fuels, even though climate experts warn that such an approach will accelerate the climate catastrophe.
New Yorkers see the propaganda campaign advanced by Big Oil and its allies for what it is.But they should also know that they are unwittingly helping to subsidize this enormously profitable and dangerous industry.That subsidy should stop.
Legislation has been introduced to close loopholes in state law that benefit the oil industry.Of course, $350 million is a far cry from the billions needed to close next year’s budget gap, but it’s a good place to start.
Blair Horner is senior policy advisor with the New York Public Interest Research Group.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.
