Governor Andrew Cuomo, in his budget address Tuesday, said New York state’s fiscal future is dependent on how much aid it receives from Washington under the new administration of President-elect Joe Biden and the Democratic-led Congress. Cuomo, also a Democrat, is seeking $15 billion to plug two years of state budget gaps, and he’s threatening to sue if he doesn’t get it. Cuomo presented two starkly different scenarios, depending on how much aid New York ultimately gets from an anticipated new federal relief package that would provide a total of $350 billion to state and local government hard hit by the COVID-19 pandemic.
One, if the state gets $6 billion in aid. Cuomo says that would result in a $9 billion gap that he proposes filling with new, higher income tax brackets for the state’s wealthiest residents, delaying the next phase of a middle class tax cut, and a 5% across the board cut to all state funding for state agencies as well as schools, health care providers and local governments.
“Worst case scenario, I would consider that the 2021 version of the federal government saying drop dead to New York,” Cuomo said, referring to a famous tabloid headline during the New York City fiscal crisis of the 1970s.
The governor says if the state receives the full $15 billion in federal aid, then none of those things would happen, and the state would add programs, including a $130 million stimulus package for restaurants and small businesses devastated by the pandemic-related economic shutdowns. It could also begin a $300 billion infrastructure program, paid for through state borrowing, and federal and private funds.
Cuomo says if Biden and the Democratic-led Congress don’t come through with the full amount he is seeking, he will commence litigation. The lawsuit would focus on the governor’s grievances from what would then be the previous administration of President Donald Trump and Republicans who led the Senate during most of the pandemic so far.
Cuomo says New York is “unique in the nation” in the amount of economic loss it has sustained.
“The COVID assault in New York was caused by federal negligence,” Cuomo said. “And second, New York was used as a political piñata for this federal government.”
In a briefing with reporters, Cuomo’s budget director Robert Mujica, says while the state’s finances are grim, there have been some signs of improvement in recent months. He says revenues from tax collections are higher than initially expected, and his office took many steps to hold down spending, including freezing hiring and planned wage increases, imposing a moratorium on all new state contracts, and temporarily withholding 20% in aid payments from schools and local governments. He says 15% of the money withheld can now be restored.
But Mujica says half of the nearly 2 million jobs lost in March and April 2020 have not come back, and employment in New York may not fully recover until late in 2023 or even 2024.
“The current situation is one of uncertainty,” Mujica said.
Mujica did not provide a specific action plan if the federal aid package falls somewhere between $6 billion and $15 billion, saying his office would discuss options with the legislature.
Democrats who lead the state Senate, in a statement, say they favor raising taxes on the wealthy if those choices have to be made. Democrats in the Assembly have previously said they also favor the tax hikes.
Republicans, who are in the minority in the legislature, criticized the governor for blaming Washington for the state’s fiscal problems, and for not giving enough credit for previous federal relief packages that among other things, included $4 billion in education aid.
Senator Tom O’Mara, the ranking Republican on the Senate Finance Committee, says the governor is shirking responsibility by waiting for a federal bailout.
“We have to be able and ready in New York to pull ourselves up by our bootstraps,” O’Mara said. “And not just to continue to wait for handouts from the federal government to appease our overspending ways in New York State.”
O’Mara says New York already had a $6 billion structural deficit before the coronavirus hit.
As for Cuomo’s threat to sue if he does not receive $15 billion in federal aid, O’Mara says that is not the most “amicable” way to start a relationship with the new president.
Regardless of the amount of federal aid that New York ultimately receives, Cuomo is proposing two new programs that would raise an estimated $800 million in state revenues: legalizing the sale of marijuana to adults for recreational purposes and expanding mobile sports betting.
