Cuomo Sees State Budget Upturn Even as He’s Deeply Enmeshed in Scandals

Gov. Andrew Cuomo’s political fortunes have never been lower, but optimism over the state budget outlook is suddenly higher than any time since the pandemic gripped New York.

The state is expected to reap billions more than expected in tax revenues and President Joe Biden’s proposed $1.9 trillion pandemic relief package would deliver aid beyond Cuomo’s requests. Meanwhile, tax revenue projections are up for New York City, which is expected to directly receive more than $5 billion from the Biden plan as well as additional money for education funneled through the state.

But hanging over the impending state and city budgets is the precarious position of Cuomo, who is ensnared by sexual harassment allegations and a federal probe of his handling of coronavirus nursing home deaths.

One option for the governor is to adopt the key proposals of the progressives in the Legislature, who are among his harshest critics, with some calling for him to step down.

“They want the millionaire’s tax and he could give it to them,” said political consultant Hank Sheinkopf. “He has done a very good job of co-opting opponents by adopting policies like marriage equality, then strict gun control bills and $15 minimum wage.”

Cuomo had previously threatened to futher tax the rich if Biden didn’t come through with big bucks for New York. Opponents of a tax increase contend it would be a disaster — encouraging wealthy residents and businesses to flee the state.

“Raising taxes is contradictory to the need to bring back half a million jobs,” said Kathryn Wylde, head of the Partnership for New York City. “We don’t need higher taxes because of the increase in revenue and federal aid. The worst thing now is to raise taxes just to punish the wealthy and job creators.”

The Partnership and the five city borough chambers of commerce sent a letter to state legislators Tuesday opposing new taxes as a threat to the recovery. Wylde and others plan to intensify their efforts to convince legislators new taxes — whether an income tax increase or controversial plans to tax stock transfers or accumulated wealth — would end up reducing revenue.

Supporters of tax increases say they’re necessary to the state’s recovery and long-term health at a time when legions of New Yorkers are unemployed and facing housing uncertainty even as Wall Street booms.

‘Embarrassment of Riches’

With less than a month until Albany must adopt a budget for the fiscal year beginning April 1, there is little question the fiscal outlook for both the state and the city is no longer the doomsday picture painted last year as the pandemic shut down New York.

“State budget shaping up as embarrassment of riches — for now,” the Empire Center’s E.J. McMahon titled a Tuesday blog post on the latest estimates.

Earlier this week, the Senate, Assembly and the governor’s budget director agreed that the state will collect $2.5 billion more in taxes over the next two years than the Cuomo estimated less than two months ago.

Tax receipts are far higher than once projected because high-income earners, who pay the vast majority of income taxes, have kept their jobs and the financial sector is reporting near-record profits.

The state has already received at least $9 billion in federal money from the previous aid bills to come out of Washington, a report from the state Comptroller Thomas DiNapoli said Tuesday.

The Biden bill pending in Congress would send $12.6 billion in general aid to the state, $3 billion for Medicaid and provide more than $12 billion for education, most of which would be sent to local districts.

“Federal aid has been incredibly important in staving off the worst cuts and will play a big role in balancing the budget in the short-term,” said Maria Doulis, the state’s deputy comptroller.

City taxes revenue will be almost $62 billion for the 2021 fiscal year, which ends June 30, the Independent Budget Office said Tuesday.

That would represent a decline of just under $2 billion — or half the loss anticipated only two months ago. For the next year, tax revenues are expected to rise to $63.4 billion, up almost 3% despite weakness in property taxes.

In addition, the Biden plan would send the city $5.6 billion, plus additional education money expected from the state — which now won’t need to cut local aid.

Even before the higher revenue estimate and additional federal aid, the mayor’s budget proposal was balanced for the fiscal year beginning July 1.

“The pandemic devastated the local economy but the fiscal impact of the pandemic has not been as grave as many of us anticipated,” said Ronnie Lowenstein, executive director of the IBO. “It hasn’t led to the fiscal crisis many people feared.”

Long-Term Picture Cloudy

Still, budget officials — among them DiNapoli and city Comptroller Scott Stringer — cautioned that the state and city face long-term risks because New York’s economic recovery is likely to be weaker than the nation as a whole.

Fiscal experts want the state and city to use the federal aid as a bridge to a time when aid is no longer available.

A year from now holes could start to open in the budget Albany will be working on for the 2023 fiscal year, said Doulis. The gap between projected revenues and spending could be as large as $10 billion a year starting in 2024, she added.

“Wise choices on federal aid and spending reductions will allow the state to preserve critical services and stabilize its finances without having to delay the pending middle-class tax cut or increase high-earner taxes,” said Citizens Budget Commission President Andrew Rein.

The CBC has opposed higher taxes as unnecessary and argued for temporary reductions in economic development spending and borrowing to cover more long-term infrastructure projects.

Lowenstein has the same warning for the city.

“The city shouldn’t be using the aid to make long-term commitments that it can’t maintain,” she said.

This article was originally posted on Cuomo Sees State Budget Upturn Even as He’s Deeply Enmeshed in Scandals