Democrats who control New York state government are heading for an intraparty clash over tax policy as they seek to plug a $6.1 billion budget deficit.

Assembly Speaker Carl Heastie, a Democrat from the Bronx, said during a Thursday speech that he would push for more funding for public schools, housing and mental-health services. Mr. Heastie later told reporters he would advocate for raising more revenue.

David Friedfel, director of state studies for the Citizens Budget Commission, a nonpartisan fiscal watchdog, said top earners account for an outsize share of overall tax revenue. Based on 2016 data, New York taxpayers with taxable income of $1 million or more represented 1% of filers but provided 37% of income tax revenue.

“This isn’t a revenue issue. Revenues are coming in at or above expectations—this is a spending problem,” Mr. Friedfel said of the current deficit.

There was a somber tone to Gov. Andrew Cuomo’s 10th State of the State message in a year where the state is facing a $6 billion deficit and reeling from a recent spate of hate crimes, including a stabbing incident at a rabbi’s house outside New York City.

“It is going to be a challenging year,” Cuomo said Wednesday.

Andrew Rein, with the watchdog group Citizens Budget Commission, said it would not be wise for the governor to undo what has been considered a successful program.

“That would be a reversal of a great element of progress that he’s made,” Rein said. “The devil will be in the details when the budget comes out.”

Gov. Andrew Cuomo began his State of the State speech on Wednesday by acknowledging that 2020 will be a “challenging” year: earthquakes in Puerto Rico, instability in relations with Iran and a rise in hate crimes across the state.



Nearly an hour later, at about minute 50 of an 80-minute speech, he brought up a challenge much closer to home: the state's $6.1 billion budget gap, including a $4 billion deficit in the Medicaid program.

But he did not elaborate on how he'll bridge that gap.



“The situation is unsustainable," he said. "We have restructured Medicaid before with our MRT (Medicaid Redesign Team) program, and we’re going to have to do it again this year and we will and we can,” he said.

There were no details on the $1.8 billion in unspecified cuts and $2.2 billion in deferred payments Cuomo's administration has said it will make to plug the Medicaid gap before the fiscal year ends in March.

Indeed that action — freezing the increased costs — the was one of the biggest accomplishments of the Cuomo administration early on, said David Friedfel of budget watchdog Citizens Budget Commission, because it helped out poorer counties who have more Medicaid recipients.

“To reverse that would be the opposite of progressive, it would be regressivee, because you’re pushing more costs onto the poorest counties in the state and New York City, ” Friedfel said, referring to the theme of Cuomo's speech: “Making Progress Happen.”

Gov. Andrew Cuomo threw down the gauntlet in a bid to close the state’s yawning $6 billion budget deficit, suggesting that New York City and other local governments cough up more for a massive Medicaid bill.

“The situation is unsustainable,” Cuomo said during his annual State of the State speech Wednesday in Albany.

At the heart of the fiscal hole are the exploding costs of the state’s $77 billion Medicaid program for the needy, the costs of which are meant to be split between the federal, state and local governments.

Said Andrew Rein of the Citizens Budget Commission, “He [Cuomo] talked about Medicaid and the need for savings and he’s right on that.”

But Rein, too, said it would be counterproductive to simply stick the city with the bill, calling Albany’s takeover of a larger share of Medicaid costs one of Cuomo’s “signature achievements.”

If 2019 was any indication, Mr. Cuomo tends to get what he wants from his yearly wish list. The overwhelming majority of his proposals were approved last year, except for marijuana legalization.

The governor suggested he would insist on more accountability from local governments in the way they manage Medicaid programs, setting up a potential clash with New York City and Mayor Bill de Blasio, the governor’s intraparty rival, who called the proposal concerning. Cuomo administration officials later said that they did not intend to ask local governments to pay more, but rather root out “waste, fraud and abuse within the system.”

In recent years, Mr. Cuomo had chosen to unveil his budget during the State of the State address. But facing a budgetary quagmire this year, the governor decided he would present his budget separately later in the month.

“It’s the $29 billion elephant in the room and he knows it,” said Andrew Rein, the president of the Citizens Budget Commission, a fiscal watchdog, referring to the state’s projected cumulative budget gap of $28.8 billion through 2023.

“When you have a structural problem, the longer you delay addressing it the larger it becomes,” he added.

The Citizens Budget Commission, a business-supported fiscal watchdog group, warned Gov. Andrew Cuomo last year that Medicaid costs could spike, and spike they did with the rising costs helping to create a $6.1 billion budget hole in the coming year.

The governor will most certainly address the largest budget gap since he took office in his State of the State address this week, and lawmakers are already crunching the numbers to figure out how to close the looming budget deficit with new revenue sources — like raising taxes on the rich — certainly in play.

Niagara Falls Assemblyman Angelo Morinello, when asked about the state of the state this week, summed it up in two words: “Not good.” But he’s warning against quick new revenue fixes like more taxes on the state’s wealthiest taxpayers and instead favors making the state work better and more efficiently in serving the public.

Mayor Mike Bloomberg was winding down his final year in office when he gathered residents of a high-rise Manhattan co-op and announced plans to tackle what he called the “final recycling frontier — organic waste.”

Six years later, the now presidential candidate’s goal of a robust recycling program for food and yard scraps remains a pipe dream — the victim of municipal budget skeptics who think it's too costly and a current mayor who has heeded their concerns and suspended the program's expansion.

The nonpartisan Citizens Budget Commission concluded in 2016 that organics collection would cost the city between $177 million and $251 million each year. That figure, which the study deemed “prohibitive,” took into account an estimated 88,000 new truck shifts the sanitation department would need.

It also identified a supply and demand problem: The commission said facilities in the region that turn the waste into fertilizer could not handle the additional capacity necessary for a comprehensive expansion. The report also identified plans for anaerobic digesters to turn food waste into biogas, but noted many of those had not been built yet.

Ana Champeny, who has studied this issue for the commission, said the city now has contracts with facilities that can handle 250 tons of residential organic trash daily. If 20 percent of all food and yard waste was separated, it would need capacity for 800 tons per day, she said.

After the arrest of a high-ranking Department of Education official and the subsequent revelation that his background check was never completed despite years of DOE employment, the city's Department of Investigation's background check process is once again under scrutiny.

David Hay was fired from his position as Deputy Chief of Staff to Schools Chancellor Richard Carranza immediately after Wisconsin authorities arrested him for allegedly using a computer to facilitate a child sex crime on December 29th; he was then hit with federal charges for allegedly using a dating app to lure a minor into having sex and possession of child pornography on January 3rd.

Many city agencies run background checks for all kinds of public positions, but detailed scrutinizing by the Department of Investigation is typically reserved for senior, sensitive or high-paying jobs such as Hay's position.

The Department of Education has grown the most of any city agency since 2014, according to good government watchdog Citizens Budget Commission—the DOE gained 10,231 full-time teaching and administrative positions as well as 2,119 civilian positions. Overall, the city has added about 36,000 full-time positions since 2014, for a grand total of roughly 326,000, according to the CBC.

Facing a $6 billion state budget hole this upcoming fiscal year, Gov. Andrew Cuomo is seeking to tighten spending — and if history is any indicator, the city will be in his crosshairs.

At a speech in Manhattan Monday, Cuomo said he isn’t planning on proposing any revenue raisers or new taxes in his upcoming State of the State address Wednesday or his executive budget proposal, leaving little room for anything but cuts and cost shifting.

Reductions in state aid to the city would likely amount to cuts in social services, rather than cuts to education, said Ana Champeny, director of city studies at the Citizens Budget Commission.

Changes to Medicaid could disproportionately impact Health + Hospitals, the city’s public health system, which serves a large share of uninsured and Medicaid patients, Champeny said.

Rather than go for big cuts, the state previously has been “tinkering at the edges” and making smaller slices to state aid that comes to the city, something Champeny expects to happen again.

“I have concerns that the proposals to close the state gap will negatively impact the city, either by shifting costs to the city, or tapping city resources for revenue,” she said.

New York City could save up to $400 million in building costs through use of design-build project delivery following state clearance, according to Mayor Bill de Blasio.



Gov. Andrew Cuomo, in one of his final legislative approvals of 2019, signed the NYC Design-Build Act, which empowers city agencies to combine design and construction bids into one contract.



Bill de Blasio, mayor of New York City and then a 2020 presidential candidate, speaks during the American Federation of State, County & Municipal Employees Public Service Forum in Las Vegas on Aug. 3, 2019.

“Design-build means less red tape and more new-and-improved libraries, roads, and bridges," said New York Mayor Bill de Blasio. Bloomberg News

Two Queens lawmakers, State Sen. Leroy Comrie and Assemblyman Edward Braunstein, both Democrats, sponsored the bill.

The watchdog Citizens Budget Commission supported the bill despite some concerns that call for future amendments, CBC President Andrew Rein said in a letter to Cuomo.

"The bill ties the use of the alternative procurement and delivery methods to the use of project-labor agreements, which could affect the city’s ability to evaluate and revise its PLAs over time," Rein said. "Similarly, the protections for public sector capital project managers and the prohibitions on using outside contractors to maintain assets built through design-build could offset some of its efficiencies."

Plans to tax New York’s wealthiest residents are gaining support in the state Senate — including a measure repealing lucrative tax breaks for mega-yachts and private airplanes.

A group of Democratic lawmakers are preparing to back a revenue package that could raise an estimated $30 billion annually by targeting billionaires and the state’s highest earners, and fund large-scale investments in a guaranteed right to housing for all New Yorkers, the Green New Deal and other ambitious priorities that progressive advocates want to see in the state budget.

The proposals, which include raising income taxes on the wealthy and reassessing levies on banks, hedge funds and private equities as well as scaling back corporate incentives, come as the state faces a potential $6 billion Medicaid-induced budget hole.

However, fiscal watchdogs have repeatedly cautioned against measures that specifically target the state’s highest earners, noting that their money makes them more mobile.

“High income taxpayer mobility is a real thing and it’s something to be concerned about. So to further increase taxes you have the possibility of encouraging those people to leave and take their tax dollars with them,” said David Friedfel, the director of state studies at the fiscal watchdog Citizens Budget Commission.

As Mayor Bill de Blasio enters his seventh year in office, on the heels of a failed presidential bid and at a time when his political clout appears at its nadir, he faces many major challenges and big decisions ahead.

2020, the next-to-last year of his second and final term, begins with a focus on public safety, including recent spikes in anti-Semitic hate crimes, murders, and byciclist fatalities, as well as how the city is adjusting to new state-mandated bail reforms that the mayor has criticized.

As the new year begins, the next budget season follows. The city’s budget has rapidly expanded under de Blasio, with projected spending hitting $94.3 billion for the current fiscal year which ends June 30, 2020, according to the latest budget modification released in November. That’s a whopping $21.6 billion more than the last budget modification under Mayor Michael Bloomberg, shortly before de Blasio took office.

The city’s Office of Management and Budget predicts that spending will break the $100 billion mark within the next two fiscal years, a number that has fiscal watchdogs worried since savings and reserves haven’t increased at the same rate.

The good news is that economic growth the city has seen for years is expected to continue, albeit perhaps at a slower pace, though fears of a recession have not entirely been eliminated. There are some signs of slowing – the growth of the national economy has fallen but the city’s economic growth experienced a slight uptick in the first nine months of 2019 compared to 2018, according to a December 13 report by Comptroller Scott Stringer. The report predicts that the city will have a modest surplus by the end of the current fiscal year (June 30) and that gaps in outyears will be smaller and manageable.

“We're six years into an administration and there hasn't ever really been a big push to reexamine how government is doing things and making sure it's doing it in the most efficient, effective way possible,” said Maria Doulis, vice president at Citizens Budget Commission, a nonprofit fiscal watchdog, noting that the City Council has been more focused on finding savings than the mayor. De Blasio has begrudgingly instituted certain budget savings programs and the results, according to watchdogs, have been more appearance than reality, and certainly more limited than those watchdogs would like.