Thanks to the vagaries of hyper-partisan politics, the odds of Washington passing a pre-election stimulus bill dropped significantly with the passing of Justice Ruth Bader Ginsberg. Which raises questions about the budget strategy Governor Andrew Cuomo appears to be employing.
“Waiting for Washington to act is just not a strategy,” the Fiscal Policy Institute’s Ron Deutsch told NPR last week. “And it’s certainly not a viable strategy at this point because we have no idea if and when they are going to act.”
Tuesday, Deutsch told Spectrum News that the passing of Justice Ginsburg “makes the swamp particularly murky, right now.”
When asked to respond to criticism by people like Deutsch that the Cuomo administration’s strategy to deal with the recession is “waiting for federal aid”, Budget division spokesman Freeman Klopott told Spectrum News last week that’s not the case.
“We’ve already reduced spending by $4 billion year over year,” Klopott said, “We’ve frozen pay increases, frozen hiring, frozen new contracts, temporarily withholding portions of payments.”
Several financial experts told Spectrum News that the governor isn’t being proactive enough, especially now that a Supreme Court fight has sucked a lot of the oxygen from the stimulus funding debate.
“The federal government should provide New York with additional aid, but the time for waiting has passed – we’re halfway through the state fiscal year,” David Friedfel, the Director of State Studies for the Citizens Budget Commission told Spectrum News. “The state needs to release a plan of how it will balance this year’s budget, and do so shortly. School districts, localities, Medicaid providers, and other state vendors need to be able to plan for the remainder of the year.”
“The governor was clearly counting on having some money from the feds. Here we are looking at the final week in September and now Congress is in this state of red-hot polarization,” E.J. McMahon, founder and senior fellow at the Empire Center for Public Policy told Spectrum News.
Underscoring McMahon’s point, House Democrats are now looking to postpone a vote Tuesday to keep the government funded through December 11. While the postponement on this continuing resolution isn’t directly related to stimulus funding, it speaks to the hardening of positions in Washington.
Based on the parties’ divergent positions, any deal on stimulus would have required serious, meaningful compromise. That is far less likely now.
So, what are the governor’s options?
The CBC outlined a plan which will allow the state to balance this year’s budget. The plan includes both tax cuts and leveraging rainy day reserves. It also changes how capital expenses are financed, makes limited cuts in school aid that would only impact wealthy districts, delays tax cuts, and suspends certain tax exemptions.
“By (the state) announcing its intentions, it will allow New Yorkers to plan and adjust as necessary,” Friedfel told Spectrum News.
Deutsch is more focused on raising taxes.
“Now is the time to start looking at revenue raisers,” he said. “We shouldn’t be waiting for Washington to act before we start to generate the revenue we need to fill the enormous budget holes that we have.”
“My position is, don’t move immediately to raise taxes,” McMahon told Spectrum News. “Let’s stay on the budget for a minute. You’ve got to cut the budget.”
McMahon recommends eliminating the sales tax exemption on clothing purchases under $110, which, according to the latest state Tax Expenditure Report, has a fiscal impact of $915 million a year. He would also eliminate the $420 million film tax credit, and the $350 million scheduled PIT cuts.
He also says school aid needs to be cut.
“I’m made suspicious when (State Budget Director Robert) Mujica lectures school districts not to cut their spending yet,” McMahon said. “It makes me wonder how big a problem they actually have right now.”
McMahon is referencing a recent column written by Robert Mujica and published in the Albany Times Union, in which the State Budget director says some school districts acted prematurely when they laid off teachers.
“How can you say that,” McMahon asks. “They’re the biggest item in the budget and you’re telling them not to restrain spending yet? What does he know that we don’t know?”
The State Division of the Budget says the current year budget gap is around $14.5 billion. E.J. McMahon estimates it’s more like $8 billion. Out year budget gaps are estimated to be much higher.
“It’s clear that DC isn’t going to come through with the amount of money the governor says he needs, whether it’s $30 billion over the next two years, or $60 billion over the next four years,” Ron Deutsch said.
According to Deutsch, fiscal conservatives and Governor Cuomo appear to be of the same mind when it comes to raising taxes. “That we shouldn’t be asking anything of the wealthiest New Yorkers, at a time when so many are suffering, which I think is ludicrous,” said Deutsch.
Deutsch points out that polling by Hart Research shows that 90% of New Yorkers support asking the wealthiest to pay more in taxes.
“Whether that’s a tax on billionaires, multi-billionaires, or second, third, fourth, or fifth luxury homeowners, homes valued at over $5 million,” argued Deutsch. “And then, you have 105 majority members of the legislature who support raising taxes.”
These lawmakers signed a “statement of principles," saying that “we need to raise revenue from the wealthiest New Yorkers before we start making massive cuts to services and balancing the budget on the backs of those who have already been most impacted by COVID.”
Many of the suggestions by these financial experts aren’t possible without the legislature taking action; but lawmakers haven’t been in session since July. The conventional wisdom is that lawmakers won’t return to Albany before the election because cutting programs and/or raising taxes are unpopular.
One thing Friedfel, Deutsch, and McMahon agree on is that the legislature must return to Albany, and the sooner the better.
“The legislature should come back and they should come back soon,” said Deutsch.
“Just because the legislature has its usual excuses doesn’t mean the rest of us have to accept it. They can say, ‘Oh it’s an election year we can’t do that.’ I don’t care. You should have done your job months ago,” McMahon argued.