Thanks to billions of dollars in federal COVID-19 relief funds, New York for the first time in recent years received more federal money than it sent to Washington in taxes. According to a new reportfrom Democratic State Comptroller Tom DiNapoli, New York in fiscal year 2020 received $146 billion more in federal spending than was paid in total taxes to the federal government. He notes all states had a positive balance of payments in 2020 due to the unprecedented influx of federal relief tied to the pandemic. DiNapoli says in fiscal year 2020, of every tax dollar paid to Washington, New York received $1.59 — an increase of 91 cents from the prior year, but still below the national average of $1.92.
DiNapoli spoke with WAMC Wednesday.
It's certainly welcome news for a change to say that we're getting more money back from Washington than we send, and that’s certainly reflective of the huge influx of billions of dollars as part of the federal response to the to the COVID pandemic. Obviously, New York being hit early and so hard, we needed to benefit from those federal dollars. So that really is the big change in the dynamic in terms of the balance of payments for New York.
But good things don't last, right?
Well, that's exactly the point, you know, this is temporary in terms of those federal dollars. And my view is that when those monies are all spent down, when we go back to a more normal time, you will probably see the imbalance that we saw prior to COVID, that that'll probably come into play once again. And that's the concern. Even when you look at, you know, getting $1.59 back for every dollar that we sent, the national average is $1.92. So compared to other states, we're still behind. The good news is we're on the plus side. But you know, my view is that we'll go back to the prior trend in short order, but at least it's positive news for today.
Can you explain why that dynamic exists to begin with? Like separate from the pandemic changes, why is this imbalance in place?
Well, there are probably different reasons. I mean, one reason is that, you know, New York is a wealthier state by comparison. So since a great deal of federal revenues are derived from a progressive income tax, when you have a state that's wealthier, and not that we don't have a lot of poor people, because we do, but we also have a lot of very wealthy people. So they are going to contribute an outsized percentage of tax revenue.
And, you know, some folks argue when they see these reports that New York will probably always be more a donor state than a state that benefits but, you know, I think our point, and Senator Moynihan, who really began this whole process, is to try to move the needle more closely to some level of parity.
We have to acknowledge that there are some parts of the federal budget where New York tends to do better compared to other states. Some of the benefit programs like Medicare, like food assistance, like SSI, you know, Medicaid, these are some of the categories where New York actually fares better than many other states. Although the net number has been a negative, there are some programs where, in fact, New York benefits more strongly than some other states, again, because of the mix of our population and how the federal money is distributed.
I also think, and you saw this with the response to COVID, we've benefited from having, you know, Chuck Schumer as Senate Majority Leader and our congressional delegation in the majority in both houses, so when they structured some of these relief programs, be it the Paycheck Protection Program or money for health care, money for transit, the way the formulas were set up, our state benefited from that. So having the political clout of our congressional delegation, and, you know, I would say the White House as well, and New York supported the president, I think that's helped us as well. What that will mean for the future, especially if there any political changes down there in Washington, remains to be seen.
Well, that's a good place to follow up because we know the midterms are looking somewhat perilous for the Democrats. And we also know New York will be losing a member of Congress in the latest round of redistricting. So In the long run, do you expect that things will revert to where they were in terms of this imbalance?
You know, it's so hard to say. Keep in mind, we did lose a seat. But there are also new maps that have come up. So certainly for New York, the expectation is that the number of Democratic representatives will increase. We saw just recently, the Supreme Court did not overturn more fairly drawn maps in two states when the Republicans have been trying to reverse that. So it may not be as dire in terms of a political dynamic as folks might have projected initially.
And I think we also have to recognize this there's incredible uncertainty in the political environment. You know, a couple of weeks ago, everybody was like, ‘Oh, you know, inflation is gonna really hurt Biden and the Democrats.’ Well, you know, now everybody's looking at Ukraine, and what has been our response. And I think, you know, from much of what I hear, people feel the Biden administration has been providing the appropriate leadership. So we hope that that situation resolves soon and peacefully. That’s probably too optimistic view right now given what's happening, but if that situation resolves, and the United States leadership is helpful in resolving it to minimize the harm to Ukrainian people, I think that will boost the prospects for the president's popularity and by extension for the Democratic Party as well. Certainly if inflation gets tamed, that will be a big factor. So I think, look, there's so many variables out there. March is way too soon to really start betting on which party is going to control the House, which party is going to control the Senate.
You know, the last time we talked, it was when you released your analysis of Gov. Hochul’s budget plan. I wanted to get you to react to something she said this week, she was asked about how the budget may be impacted by the volatility we're seeing largely tied to Russia's invasion of Ukraine, here's what she said:
The surpluses we have from tax receipts, the stock market, as well as stimulus funds will not be there in the future. So I already budgeted in a way that does not have out year growth. Everything that we're putting in our budget, we're going to be able to fund, but I'm also very cognizant of the fact that we could be facing a recession, and that I cannot count on the revenues, the tax receipts, as well as the stock market revenues generate for us as being there even next year. So doesn't mean we're taking something out. But it means that we're going to be very thoughtful as I have been about what the growth in the out years of our expenses are.
Now initially, Comptroller DiNapoli, you were pushing for maybe an even more ambitious approach to building New York's reserves. Should lawmakers and the governor be doing anything differently based on this latest uncertainty?
Well, I think her comments and observations were right on target. And I do think it underscores the importance of building up the reserves in a more ambitious way than that even she has proposed and, and you know, we've talked about not having them be in formal reserves, but statutory protected reserves.
I think the main the main concern that I would have right now, is that as the budgets being negotiated, we are in a strong position with our finances today. But the concern is those out years. So if there are going to be any add-ons to the budget, and that's often what happens, right, especially when you have money, and I think it's an election year, sometimes that plays a role in deliberations.
Oh really?
It's very important that any new spending not be a recurring nature. What I mean by that is to create new programs that will be baked into future budgets would be a mistake, because to the governor's point, there's tremendous volatility right there that's facing us, both in terms of prices because of inflation, absolutely because the federal money is not forever. And you know, she mentioned the stock market, you know, Wall Street's done very well in recent years. Again, what that will mean, we have a long way to go before we see what the end of year numbers are going to be in that regard.
But right now, our financial plan has no out year budget gaps projected, and we haven't had that in anyone's memory. But if you start making spending commitments of a recurring nature, you will start to go back to the days of budget gaps much more easily than then if you're being thoughtful about it. So I guess that would be my concern. I think the governor's right. If the legislature is going to add any spending, it should not be of a recurring nature unless they're going to back it up with revenues. And absolutely, building up those reserves more aggressively. All of all of that needs to be in the mix.
And we should just say we haven't seen the one-house budget bills yet from the Assembly and Senate. Just one more thing while I have you. There's also some debate that's come up about doing away with gas sales tax, as prices at the pump have reached record highs. And here's what Gov. Hochul had to say about that this week:
I've actually looked very closely at this and had a conversation with our Budget Department last night and again today to analyze the question, which is this, if we reduce the taxes, now we have funding dedicated toward transit, the MTA downstate, roads and bridges upstate, so if you're willing to ensure that that money is actually gonna end up in the pockets of consumers, it has my attention.
What do you say? Is it a good idea to do away with gas sales tax right now?
Well, I mean, everybody is feeling the pinch at the pump, right. So that’s one of the proposals. It's certainly worthy of consideration. I mean, at the end of the day, that's the call of the governor and the legislature. And in a year where we do have revenues coming in higher than projected, at least on a temporary basis, you could consider it. Will it really move the needle very much? It absolutely might not, I think to the governor’s point, what's the guarantee to be sure that the money is going to go back in the in the pockets of New Yorkers, New York consumers, and not just end up, you know, in the profits along the way?
So look, they're considering it. We have the money, certainly, to have that as an item to think about. But you know, whether or not that's going to be the most effective response to this, you know, I think that's anybody's guess right now.
But look, you certainly can kick it around. If you're going to do it, make sure the consumers actually benefit from it. And if you do it, it really needs to be a temporary reduction from my point of view, because of the spike that we're seeing now. You know, certainly none of us want to see that to be a permanent spike. But I think it's just so tied to the global situation, what's happening in Ukraine that again, we all pray will be resolved sooner or later in a positive way.
