New York state Comptroller discusses state fiscal and political issues during Plattsburgh visit
In the past few weeks, the New York state Comptroller office has released reports on local sales tax collections and an analysis of the new state budget.
Comptroller Thomas DiNapoli, a Democrat, was in Plattsburgh on Wednesday touring the center city area. During his visit to northern New York’s largest city, he sat down with North Country Bureau Chief Pat Bradley to talk about state fiscal and political issues. DiNapoli says he was in Plattsburgh because the mayor invited him.
I saw Mayor Rosenquest at a mayor's conference not that long ago and he said you haven't been in Plattsburgh for a while. It's time for you to come and see some of the exciting projects we have underway. So I actually was invited to speak at an event in Lake Placid this week. So I said you know what it's time for me to take the mayor up on his invitation. So obviously with COVID a lot of my travels have been limited over the past couple of years. So it's nice to be able to get back out here again and to see firsthand what's happening in Plattsburgh, which is a very important city in our North Country region.
Some of the downtown area that you toured is the DRI area, the Downtown Revitalization Initiative area. As you toured this, was this just something for you to absorb or were you looking at it from a comptroller's perspective and thinking how are they spending for this? What's the economic potential? I mean, were things like that going through your mind?
Oh, sure. Although I wasn't there to audit the project, because I don't know if the mayor would have invited me if I was going to do that. But you know it's interesting. We've, I think as you know, I've done a series of audits over the years from the comptroller's office looking at state economic development programs. From my experience the DRI initiative, the Downtown Revitalization Initiative, is one of the state's economic development programs that actually worked pretty well. And part of it is from what I saw today is that you've had tremendous local input in terms of developing the plan. You have a thoughtful plan that's been put in place and what the state money does is allow for implementation because the, whether it's Plattsburgh or any of the other communities that get this DRI money they couldn't do it on their own and that's why they compete for this money. So, you know, Plattsburgh is building on some good ideas and plans that are already been there. For instance the Riverwalk, which already to an extent exists, but to really maximize the benefit of the Saranac River. You know when I think of Plattsburgh I always think of the lake. It's such a big presence. But I didn't realize the river has also great potential for enjoyment, recreation, by extension economic development, enhancing Plattsburgh as a destination. When you're redoing Margaret Street it's not just a question of the surface repaving. But as the mayor was pointing out when you go down and you see some of the pipes that are there, the wastewater pipes, they're old. And what was interesting when I was in Lake Placid the other day they're going through a similar project in terms of their Main Street. It was exactly the same point that both mayor's made. Mayor Devlin and Mayor Rosenquest, when they went down and looked at the pipe the date on the sewer pipe was 1903, both in Lake Placid and Plattsburgh. But Lord knows it's time for that infrastructure to be replaced. So that's where the DRI money complements local financing and any other grants that may be available. But it really ends up being the piece of the puzzle that pulls it all together.
Although in Lake Placid they're not using DRI funding.
Right. That's not DRI funding. Right.
But that also is probably a reflection of the fact that infrastructure across the state, I think, many communities are going to run into the aging infrastructure underground and such.
We've done a number of reports on that Pat. Our Cracks in the Foundation report that we've updated over the years. But in Lake Placid they are benefiting from state grants. And some of that's federal money that comes through. And of course we're really at an historic moment now because you've got some of the American Rescue Plan money. Some of our localities are using some of that money for infrastructure. You've got the federal infrastructure act and so that money is starting to come through and more to come as the years roll on. And then the other piece is the voters will have a chance to have a say on the proposed Environmental Bond Act, $4.2 billion bond act and some of that money will also go to localities to help them with their environmental infrastructure. So I think we really are at a time in our state's history where rather than just bemoaning the fact that we're an older state, we've got to replace our infrastructure, we're going to have more dollars to be able to do that than we've seen in anyone's recent memory.
Now while you're here in Plattsburgh, your office released data on local sales tax collections. It shows that there was a statewide increase of 15.7% this April compared to April of last year. That seems pretty substantial. What's driving the increase in sales tax collections across the state?
Pat it's been a pattern we've seen for a while and I guess it's been a good pattern because sales tax is a very important revenue to our localities and to the state as well. We're actually seeing numbers stronger than 2019 pre-COVID tax collection numbers. What's driving is people are spending money again. Now part of that in the most recent numbers, you know, inflation obviously is part of the explanation. But I do think the bigger explanation is that despite all the challenges that are out there right now, the uncertainty, the volatility in the markets, the impact of inflation, the prices that are concerning people, people are still spending money. And I think it's nothing more than that. Consumers are still out there spending money. And that's good from a government revenue perspective. Let's hope that it holds up.
Now it also says that the office is closely monitoring the impact that inflation is having on New York's economy. What about a potential recession?
I mean, look, that's a concern for all of us. For me as the trustee for the pension fund I'm very concerned about that as well. We don't want to see a downturn there. And we know that this year both in the economy and for the investment climate, besides COVID, besides inflation, this terrible war in the Ukraine has really upended the markets in many ways. So there are a lot of uncertainties with geopolitical trends, national trends that we don't control here in New York, so we don't control here on the North Country. So that's why we have to look carefully. So the kind of numbers we look at, you mentioned sales tax, we're also looking at personal income tax collections. For the state that's still the biggest revenue source. And again we're seeing tax revenue, particularly driven by personal income tax, to the state coming in way higher than projected. And so the projections were updated based on most recent numbers and we're still coming in ahead of projections. So maybe it to a certain extent it defies what people would have expected right now because of all the issues that are out there. But the money's coming in. The revenue's there. People are paying their taxes. But we have to look at it closely. Because if in fact inflation doesn't go down, if it continues to go up, if a recession hits and we start seeing instead of unemployment continuing to go down it starts to go back up, this could really change that whole revenue picture in a dramatic way. The other piece too that we want everybody to be mindful of, since the federal money is driving a lot of us, the federal money is not forever. And so my warning to the state, to our localities as well, as you're spending down that federal money recognize that you should not be making commitments to recurring spending or new programs if you're not going to have the revenue to back it up when the federal government dollars are not going to be there. The expectation is the economy will recover to the point that economic activity and tax revenue will make up for the federal money that will be spent down. No guarantee on that especially because of all the uncertainty out there. So being careful. Putting money in reserve. I was very glad the governor and the legislature did a significant increase in the money that we have in our rainy day reserves. I would have liked to have seen a little more. I would have liked to have seen more in statutory protected kind of like a lockbox reserve rather than just kind of have it on the side there because if it's more discretionary it can be used for any purpose. But I think for local governments as well, don't spend it all. If you can build up your reserves because, look, we know everything goes in cycles. And because we've had such a roller coaster with our economy and not to bring up politics but we could have a change in Washington in terms of who's in charge with the elections coming up. A change in federal policy can impact on all this as well. So a lot for us to keep close attention to. Don't assume even though the revenue picture is good, you know, today in May of 2022 it's going to look the same in July, August or December.
Right now the revenue, and obviously the local sales tax collections, look pretty good. In the report on tax collection, sales tax collections, you break it down by county and even that seems to have a very wide range in the year to year growth. It says in New York City it increased 10-and-a-half percent, here in Clinton County 25-and-a-half percent increase. But in Schenectady County it went down 12.6%. Do you actually track locally why the increases or decreases occur or is it kind of based on the economic sectors that dominate each region?
Sometimes we can figure it out. Often we can't. Schenectady is interesting. I was actually in Schenectady the other day and they've got a lot of good stuff going. It was the only county that had a negative. Schenectady was the outlier and I don't have an answer as to why. But what we've seen is pretty much across the board of close to, if not in fact, double digit increases that have continued. Yeah, I mean, sometimes we could we could drill down, you know, sometimes it's just beyond what we're able to assess and that's why we track it on a monthly basis because it's not a static number.
You were also talking about volatility and inflation and you mentioned the pension fund. How do you think the stock market's volatility is going to be affecting the state pension fund? You already mentioned how you thought inflation would affect it. What about everything that's going on with the stock market right now?
We had a really good recovery year last year. We were up over 33%. We've never had that high a return. When you look at the end of year numbers, March 31 is tied to the state fiscal year 2021. I don't have the final numbers for how we did March 31, 2022 yet because we're still getting the final numbers. And a lot of this was triggered by the war in Ukraine when the markets got really volatile. And we are part of a globalized economy. So it has an impact on all of us. I'm hoping that we're going to be close to if either a little below or a little higher than our 5.9% goal that we have as our long term goal for an investment return. But what I have comfort on is that we go into even a challenging time like this as a well funded pension plan. We're over 99% funded, which is unusual for a state public pension plan. I have confidence in our asset allocation. We are not tied completely to the stock market although it's a little over half of our portfolio. And most of that money is in index funds that we kind of ride the market's ups and downs. But that's why we do have a diversified portfolio so our fixed income investments, treasuries and bonds and our private market investments, real estate, private equity infrastructure is meant to not be correlated to what the stock market is doing. So when you're as big as we are 260-some-odd-billion dollars, you know, we have money everywhere. And again I have confidence that the asset allocation is going to hold together. But I was a little concerned because of the timing of what happened with the war in Ukraine, that our March number wasn't going to be as good as I thought in January it was going to be, But when I saw how the markets performed in April and May, I'm actually glad I've got 'till next March 31 before we value the fund again. So I always have to remind people when the stock market goes up, up or down on a given day, we're in it for the long haul. We're a patient, long term investor. It's always that anxiety that I have at the end of March because that March 31 number is the number we have to live with. That goes into the calculation that then results in the employer contribution rate that we charge. So I think we're well positioned. It has been a volatile time. But we don't make fast moves. Because you know if you make a fast move based on something that may be a downturn today by the time you catch up with it, it's moved again. And so being patient with how we handle our investment strategy, it's worked well for us for over 100 years. It's going to continue to work well for us.
Comptroller DiNapoli, you released an analysis of the 2022-23 state budget about two weeks ago now. How much could that change with all of the variability that we're seeing? We're seeing inflationary and recessionary potential pressures. You mentioned some of the international monetary issues that are affecting things. Could this analysis that your office put out need adjustment at some point?
Yeah, well, I mean, it always does and we look when the when the state's financial plan is updated we will do further analysis when that happens, I would say at this point, because again, we're looking monthly as we do when we put out not only the sales tax numbers but the cash report that looks at state revenue and spending. Again the revenue is coming in higher than projected. So I do think in terms of where we're at right now with the state budget that was adopted in early April, it's holding together. My bigger concern really is in the out years because traditionally New York has these out year budget gaps that always become a challenge. In the financial plan that went into the executive budget proposal for the first time in anyone's memory there were no budget gaps that were projected. My concern because we've seen increased volatility and the impact of inflation, things are gonna cost more and having a better handle on the timeframe of when the federal money will be spent down, it's possible that we may start to see some out year gaps. So Pat, I would say short term I'm not too concerned right now where we sit in May because the numbers, the revenue numbers, are coming in even better than our most updated projections. But I think the bigger issue is how are we heading into next year and the year after? And one of the concerns that I identified, I say this for the state and I say this for our local governments as well, do not commit to to new and recurring spending programs without a clear identification of recurring revenue that could back it up. And that's where I think we need to be very careful.
Tom DiNapoli, do you have any thoughts on these new proposed House maps and the redistricting maps that have been issued?
Well I would say first of all Pat I'm very glad that the boundary for the state of New York hasn't changed so that my running for comptroller is not impacted. It's created a lot of confusion. You know you've got colleagues ending up in the same district. You've got some new districts for the Senate and Congress where there's nobody who's an incumbent. And maybe some people feel good, you know, let the incumbents get shaken up now and then. But I do worry from the perspective of our clout in Washington. You know you want to have a mix of some folks who've been around for a while because seniority matters and we may lose some of our senior people with the way this has come about. I'm also concerned you have confusion because we've got a primary in June, which was the intent, you know, for us when the date was moved up. So that's for the statewides and for local races and for the assembly lines, which weren't changed. And then in August we have a primary for Congress and you have a primary for state senate. You've got people scrambling where are they going to be running? I think there's going to be a lot of confusion among voters as to what district they're in, who's running. People aren't used to voting in the third week in August. I worry you're going to have low participation particularly in that August primary. That's not good. We need to maximize participation not have less. Obviously the courts found lacking with how reapportionment was handled for Congress and Senate. And of course, while we're having this conversation, there's still a chance for some review and maybe some alteration. But if they go with what this master, who probably is a smart fellow, but he's from Pennsylvania. No offense to people in Pennsylvania. I almost went to college in Pennsylvania. I didn't. I stayed in New York. But I don't know how much he took in some of the local dynamics. Some of these districts are drawn without respecting certain clear communities of interest and including racial communities of interest. So there may be some litigation coming out of this as well, who knows? I mean the lifeblood of our democracy is participation. And when people get discouraged, disillusioned and drop out of the system that's bad for all of us. So I guess I would say we'll sort through these final maps as they're finalized and who the candidates are, but please, please, please just find out where your district is who the candidates are and don't give up. We need you to vote and participate.
And one more political question. What do you think of Governor Hochul's appointment of Antonio Delgado as Lieutenant Governor?
You know I've worked with Antonio Delgado, particularly on the issue of broadband. He's been a leader on that issue in Washington. In fact our broadband report we announced in the city of Hudson along with the congressman. He's smart. He's capable. He's been elected in a swing area. He's been successful. So I think he's going to be a good consensus builder. So I think in the short run he'll be great Lieutenant Governor. I think he'll be an asset to Governor Hochul on the ticket and to all of us on the ticket. I think while he's well known in the Hudson Valley a lot of New Yorkers aren't familiar with him. I think they're going to like him as they get to know him.