Statement on the NYS FY 2020 Announced Budget Agreement
Citizens Budget Commission (CBC) President Andrew Rein issued this statement on the New York State budget agreement on behalf of CBC:
"The Adopted Budget makes progress on a number of important policy areas, significantly in enacting congestion pricing to fund the Metropolitan Transportation Authority (MTA). Unfortunately, the State's leaders did not take sufficient action to protect New Yorkers from the fiscal and service impacts of a possible economic downturn.
The Adopted Budget increases spending more than needed and does not appear to bolster reserves to anything near the level needed to stave off the potentially damaging impacts of a recession. The Governor wisely pledged to add the additional revenue identified by the Comptroller to the Rainy Day Reserve fund, but a fund less than $3 billion pales in comparison to a three-year potential gap of $34 billion in a recession.
Despite claims of holding spending to the 2 percent spending "cap," state operations spending will likely well exceed 3 percent - a full accounting will not be possible until the full financial plan is released. School aid will grow by $1 billion, $840 million more than is needed to ensure that every district has enough resources to provide a sound basic education. Another $820 million will be allocated to economic development capital spending, and $840 million is added to the wasteful film tax credit with minimal commitment to increased transparency. The budget also leaves intact the wasteful property tax relief credit, which will cost taxpayers more than $1.3 billion in fiscal year 2020.
Like the Executive Budget, the Adopted Budget relies on a five-year extension of the 'temporary' personal income tax surcharge on wealthy taxpayers that was enacted to help New York weather the last recession. Phasing out the surcharge would have softened the impact of the federal cap on state and local tax (SALT) deductions and eased an option to raise revenues to weather the next recession. Instead, the extension helps bolster spending increases.
State lawmakers deserve credit for adopting several measures to fund and reform the MTA. Most importantly, they approved a congestion pricing program to reduce traffic and pollution within Manhattan's central business district and raise needed funding for the MTA capital program. With implementation details still to be determined, it is critical to limit fee exemptions in order to preserve projected revenues and traffic reduction. The MTA will also receive new dedicated taxes from Internet sales and from an additional real estate transfer tax. These revenues should not replace resources already promised by the State. The new revenues rightly will be accompanied by new efforts to improve efficiency and transparency at the MTA and to speed capital project execution through expanded use of design-build contracting. However, design-build is not a panacea for improved capital project management; mandating its use on all projects greater than $25 million may be counterproductive on some projects, and requiring a waiver from the State Division of the Budget (DOB) is unnecessarily burdensome.
Other worthwhile measures include: broadening the sales tax base to require online sellers to collect sales tax; ending sales tax exemptions for energy service companies; and a ban on plastic bags coupled with local authority to charge a fee on paper bags and other alternatives.
The budget also allows DOB to develop plans to cut local aid if it determines the State general fund will have an imbalance of $500 million or more; the Legislature will have 30 days to respond. If State leaders fear an imbalance while adopting the budget, they should restrain spending growth and increase the State's paltry rainy day funds. The Enacted Budget Financial Plan will be critical to get a fuller picture of the Adopted Budget and any additional meaningful steps to offset the deleterious impact a recession would have on the State's finances."