Gov. Cuomo threatens tax hikes without $15B in federal aid
New York Gov. Andrew Cuomo warned Tuesday his state will raise taxes and reduce spending if Congress doesn’t send $15 billion in unrestricted emergency COVID-19 aid.
The Democrat presented two vastly different budget scenarios: one if Congress provides New York with $6 billion and another if New York receives $15 billion. His state is facing a dramatic loss in sales and income tax revenue in the wake of sweeping COVID-19 restrictions that jettisoned last February’s budget projections.
The governor blamed President Donald Trump’s administration for allowing COVID-19 to hit New York and the rest of the nation by failing to ban travel from Europe until mid-March. New York has now recorded nearly 42,000 deaths of people with COVID-19, according to data compiled by John Hopkins University.
“What happened to New York was no fault of New Yorkers,” Cuomo said in his annual budget address, which was delivered virtually. “It was because the federal government lost track of coronavirus, literally.”
He said Washington is “legally, ethically and politically responsible” for providing New York with the aid he’s demanding as President-elect Joe Biden takes office and Democrats take over the Senate.
Cuomo said he would pursue legal action if Congress doesn’t send $15 billion in aid — but he didn’t specify who or what the state would sue.
Cuomo’s $103 billion, one-year budget proposal relies on New York receiving $3 billion in additional federal aid, and the governor said the state would set aside the other $3 billion from Congress for the next year’s budget. The Democratic-led Legislature faces an April 1 deadline to pass a budget.
His budget would allow up to $8 billion in short-term borrowing and authorize a $3 billion line of credit.
Cuomo also proposes raising taxes on high earners, a one-year delay of a middle class tax cut and $1.5 billion in across-the-board spending reductions and a freeze on contractual salary increases.
“And you would have to do all of this in a COVID pandemic,” said Cuomo, who warned that could slow the state’s economic recovery.
He estimates his proposal to raise taxes on high earners would bring in $1.5 billion and give New York the highest income tax rate on top earners in the nation.
Cuomo said $15 billion in total extra federal aid would eliminate the need for tax increases and spending reductions. His plan would also split an additional $9 billion from Congress over two years — meaning his one-year budget proposal would rely on a total of $7.5 billion in extra federal aid.
His budget director Bob Mujica said extra federal aid means the governor could then work with lawmakers to potentially increase spending beyond Cuomo’s proposal.
Cuomo’s budget proposal is a 1.2% increase over the current $102 billion budget.
The governor’s proposal would increase school aid by $2 billion, add a low-cost broadband plan for low-income families, provide $1.3 billion in rental assistance, fund $1 billion in student financial aid, eliminate Medicaid co-pays and launch $130 million in tax credits for small business rehiring, hard-hit restaurants and musical and theatrical productions.
His proposal would also release much of the $3 billion in state aid that his administration has been withholding from local governments since last summer.
Cuomo estimates his proposal to allow mobile sports betting could bring in $500 million a year, while legalized adult-use marijuana sales could eventually bring in roughly $300 million. Previous marijuana legalization proposals have failed amid safety concerns from suburban Democrats and questions from the party’s left-wing over how the state will use revenues.
He also wants Congress to repeal a 2017 federal law that capped a deduction for state and local taxes — known as SALT — at $10,000.
The governor has warned in past months that the state needs $15 billion in extra federal aid to steady the state’s budget because of the loss of revenue.
But several fiscal watchdogs say New York has benefited from last year’s COVID-19 relief package and that the state’s economy is recovering better than expected.
The state comptroller Thomas DiNapoli projects that New York will bring in nearly $4 billion more in tax revenues than expected through March.
Congress’s COVID-19 package last year sent New York $1 billion for schools and $3 billion in Medicaid relief. Cuomo proposes spending $2.5 billion of federal COVID-19 aid received last year on payroll for the state corrections and health departments.
The governor has also reduced state agency spending by $1.7 billion since last spring.
Cuomo’s own budget slideshow on Tuesday estimated that New York’s current budget gap is now around $4.7 billion through March, down from $8 billion as of this fall. Cuomo’s one-year budget proposal would close that gap by relying on at least $3 billion in extra federal aid.
Still, Cuomo said $15 billion in federal aid over two years is needed to prevent tax hikes and protect New York from budget gaps and potential spending reductions in years ahead. Mujica said New York is nearing $7 to $8 billion in spending on the state’s COVID-19 response — including the cost of its vaccination program.
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