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After Election Day, NY Eyes Resolution To Budget Deficit

New York state Capitol
Jim Levulis

New York Governor Andrew Cuomo said he’d wait until after the general election before deciding how to close the state’s multibillion dollar budget gap, hoping that Democratic wins for president and U.S. Senate might lead to a larger federal relief package for blue states. Now that Election Day has come and gone, and with the most likely scenario a President Joe Biden but a Republican-led U.S. Senate, the governor and the legislature will have to soon make some big decisions.

It’s becoming clear that Republicans will likely keep control of the U.S. Senate. That might mean less money for the state in a federal relief package. Senate Leader Mitch McConnell has said repeatedly that he does not want to bail out blue states, though he did say on the day after elections that he expects a new pandemic federal stimulus package to be approved before the end of the year.

Democratic Governor Andrew Cuomo says the total debt is so high that it’s nearly impossible for the state to close alone.

“New York State is already $50 billion in debt between state and local governments. And they have not passed legislation on the state and local relief,” Cuomo said on October 18.

The $50 billion figure includes debt from local governments including New York City, as well as the MTA, which has suffered huge drops in ridership during the pandemic.

EJ McMahon, with the fiscal watchdog group, The Empire Center, says the more immediate problem is dealing with the current year’s state budget deficit. The governor’s budget office, in its mid-year report, estimates that to be $8 billion. McMahon says while that number may be less dramatic, it’s no less worrisome.

“That’s as big a problem as the state has ever had in history,” said McMahon who said next year’s gap is projected to be $16 to $17 billion.

“You don’t need to exaggerate that much to understand what the size of the problem here is,” McMahon said.

Cuomo’s budget director, Robert Mujica, says in the mid-year report that the state has already reduced spending by $4.3 billion. Actions include a hiring freeze, and a temporary halt to any new state contracts. Planned raises for the state’s workforce have also been delayed. The budget office has also temporarily withheld 20% of state aid due to school districts and local governments.

McMahon says there are some signs the recession might not be as bad as first predicted in the early weeks of the pandemic. The budget office predicts that personal income will increase for the year by 2%, bringing in an additional $50 billion to New Yorkers. Some of that will be collected in taxes.

“It’s a huge decline from last year, but it’s less bad than originally projected,” McMahon said.

Wall Street continues to flourish, and profits there are tied to annual bonus payments to stockbrokers, which are heavily taxed. Revenues from Wall Street make up around 18% of the state’s total tax collections.

New York can still draw on money left in the first COVID-19 relief package, now that the federal government has loosened the rules on what the money can be spent on.

Cuomo also has the option of extending a short term borrowing option for another year. This year the IRS extended the tax filing deadline from April 15 until July 15. The governor was authorized in the budget to borrow to cover the three month delay in income tax collections, and he is allowed to extend that short term borrowing into next year.

The governor, speaking on WAMC, says now that elections are over, he expects the Republicans in the U.S. Senate to provide New York with some of the money it needs. He says it’s not only Democratic-led states that have deficits.

“I’m the chairman of the National Governors Association, I talk to the Republican governors all day long, they need a stimulus package,” Cuomo said. “They spent money on COVID, their revenues are down.”

The Democratic-led House of Representatives supports a federal relief package of more than $3 trillion, $33 billion of that would go to New York. Any new package agreed to by the Senate is likely to be substantially less than that amount.

McMahon says even if New York benefits from a federal bailout package, it will only take the state through one more fiscal year. After that, he says, New York will have to take steps to curb its long term problem of spending more money than it takes in in revenues.

“The federal government is going to give you something that’s a stop gap filler, not a permanent lift,” McMahon said. “Delay is not your friend. Delay is costly.”

Cuomo has warned of spending cuts, tax increases and long-term borrowing, if the federal relief package falls short.

The governor, in the interview on WAMC, also suggested another way of gaining revenue for the state- legalizing the adult use of recreational marijuana.

“I think this year it is ripe, because the state is going to be desperate for funding,” Cuomo said.

Legalizing marijuana would not go far toward plugging a multibillion dollar budget gap, though. It’s estimated that annual revenues from sale of the drug would be around $300 million a year.

Karen DeWitt is Capitol Bureau chief for New York State Public Radio, a network of public radio stations in New York state. She has covered state government and politics for the network since 1990.
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