Gotham Gazette

The Place for New York Policy and politics

Topics

Topics

Court Limits Aid to Aged and Disabled


Photo (cc) Cobalt123

Twenty aged, blind or otherwise disabled New Yorkers sued seeking supplemental local benefits to make up for federal benefits they cannot receive because they are legal residents of the United States, but not citizens. The state's highest court recently handed down a decision in the case.

As noncitizens, the plaintiffs are not eligible for Supplemental Security Income (SSI). In its decision, the court -- the New York Court of Appeals -- ruled they also are ineligible for Additional State Payments to make up the difference.

The specific question presented to the court was whether, under the state and federal constitutions, the plaintiffs and others in the same situation are entitled to receive from the state benefits similar to what aged, blind or disabled persons who are U.S. citizens receive from Social Security. As reported in The New York Times, the ruling affects between 9,500 and 37,000 people. As result of the decision, the state Office of Temporary and Disability Assistance will save approximately $100 million to $270 million that otherwise have needed to be added to it $1 billion budget.

The Welfare Laws

Reversing two lower courts, Judge Theodore Jones' majority opinion in Khrapunskiy v New York State Commission of Temporary and Disability Assistance ruled that the denial of the benefits did not violate any constitutional rights. The case name refers to plaintiff Boris Khrapunskiy, who came from the Ukraine when he was 90. He was 97 and living in Brooklyn when his SSI benefits were reduced.

Prior to 1996, that might not have happened. But that year, Congress enacted the Welfare Reform Act, officially known as the Personal Responsibility and Work Opportunity Reconciliation Act and the centerpiece of the Clinton administration's "end to welfare as we know it." Under that law, legal aliens, by virtue of not being citizens, no longer qualified for SSI and Additional State Payments. Congress restricted eligibility to people who became U.S. citizens within seven years. It later extended that by two years.

As Congress tightened federal requirements, New York amended its law to conform to the federal standard. It only provided noncitizens with safety net assistance of about $352 per month for shelter and a heat/energy allowance, while SSI benefits would have been $761.

Looking to the State Constitution

The plaintiffs argued that the state Constitution mandates that the state has a duty to "provide for the aid, care and support of the needy, whether or not they are citizens of the United States."

The government countered that New York's Constitution requires the state to "provide for the needy in a manner and by such means as the legislature may from time to time determine," but that it does not have to provide aid to any particular group. "Equal protection does not compel the state to create a public assistance program to provide benefits discontinued by operation of federal law," the state maintained.

In his opinion, Jones, writing for the five-judge majority, agreed. The Constitution, the court held, "does not command that the state always meet in full measure the legitimate needs of each public assistance recipient."

The Constitution, the decision continued, "does not compel the state to assume the federal government's obligation when an elderly or disabled person becomes ineligible for continued SSI/ASP benefits. ... Nor does it require the state to remediate the effects" of federal welfare law.

Jones also pointed out that New York once had a special assistance program for the needy, aged, blind and disabled but discontinued it more than 30 years ago, when the federal government began providing SSI benefits to that population.

Sharp Disagreement

In her dissent, Judge Carmen Ciparick, joined by Chief Judge Jonathan Lippman concluded that denying benefits based on immigration status was unconstitutional. In agreeing with the two lower courts that had decided in favor of the plaintiffs, Ciparick and Lippman concurred that the state has "an affirmative duty to aid the needy [and] preventing the Legislature from simply refusing to aid those whom it has classified as needy."

Some affected individuals, Ciparick wrote, did not attain citizenship within the required period because of "long delays in the processing of their applications as a result of hardships caused by age and poor health or lack of English-language skills."

According to the minority view, the social services law is "need-based." Basing aid decision on citizenship status, rather than financial status, "is incongruous to the plain meaning of the term 'standard of need,'" the two justices said.

In their strongly worded dissent, they found, "The majority today has turned its back on the history of New York's commitment to protect its most fragile and vulnerable populations."

The plaintiffs were represented by the Legal Aid Society, the Empire Justice Center and the New York Legal Assistance Group. The State of New York was represented by the state attorney general.

Emily Jane Goodman is a New York State Supreme Court Justice

The Regressive Effects of a Sale Tax Increase


The one big change in Mayor Michael Bloomberg's executive budget for fiscal year 2010 is his proposed increase in the city sales tax from 4.0 percent to 4.5 percent, double the increase he proposed in January's preliminary budget. The increase is, as the New York Times put it, the "centerpiece" of $1 billion in new taxes. Added to the state's 4.0 percent sales tax and the 0.375 percent sales tax dedicated to the Metropolitan Transportation Authority, the total sales tax on goods bought in the city would be 8.875 percent.

The sales tax increase, the largest in 35 years, includes the elimination of the current exemption for clothing and footwear. It is apparently meant to be the death blow to any notion of a personal income tax increase, such as the $1 billion plan City Council Speaker Christine Quinn floated briefly in February, with new top rates for the tax (up to 4.65 percent), often called a "billionaire's tax." The mayor made his stance clear back then on the radio when he said of the Quinn plan, "The first rule of taxation should be you don't try to tax people who can move."

The Independent Budget Office in its February Budget Options report pointed out that, even when both the state and the city in 2003 temporarily raised their personal income tax rates, "There is no evidence that these affluent New Yorkers left the city." The state has again raised top state income rates this spring, to 7.85 and 8.97 percent.

The mayor's argument seems to have worked. The City Council's formal response on April 1 to the mayor's January budget plan makes no mention of the earlier Quinn plan.

Tax Policies, 1974-2009

The council's concession to the mayor's argument about peripatetic millionaires and billionaires is perplexing, given the pattern of tax policy since the city raised its sales tax from 3 percent to 4 percent in 1974 and top personal income rates first reached 4.3 percent in 1976.

Bloomberg himself has successfully used higher taxes in times of economic and fiscal emergency, with no known exodus. For instance, the top city personal income tax rate is currently 3.648 percent. Yet the mayor himself set the top rate at 4.65 percent in 2003 and kept it there through calendar 2005. And the top rate was 4.3 percent from 1976 through 1986, and 4.46 percent from 1991 through 1999.

Interestingly, in New York State from 1975 to 2008, the top personal income tax rate dropped steadily from a high of 15.375 percent in 1975 to 10 percent by 1981, 7.875 percent by 1989 and 6.85 percent by 1997, according to a recent report by the Fiscal Policy Institute. The top rate stayed at 6.85 percent from 1997 through 2008 with the exception of a temporary top rate of 7.70 percent from 2003 through 2005. The Fiscal Policy Institute points out that, were the highest state rate still in effect, the state would have about $20 billion more in tax revenues per year.

The two new top state income tax rates will restore some of the progressivity of the state's tax system. According to data from the Independent Budget Office, based on 2006 state tax data, high-income taxpayers in New York City will pay nearly $2 billion more to the state in calendar 2009. The 19,185 city residents who have more than $1 million in income will pay nearly 80 percent of that increase, with a average total payment of roughly $82,000 each. The 22,573 earning $500,000 to $1 million will pay 15 percent of the total or about $13,000 each on average.

The city, in contrast, continues to keep its own personal income tax rate, historically, quite low. In fact, as the mayor's own Tax Revenue Forecasting Document, published in September 2008, shows, the current top city income tax rate is (with the exception of only three years, 1988, 1989 and 2001) at its lowest rate since 1975.

The mayor has been quite specific in his reasons for keeping the income tax rate low. He noted in his radio interview that the top 1 percent of city taxpayers pay about 50 percent of total personal income tax revenues and added that if "a handful" of those, "about 40,000 people," moved out of the city it would wipe out any increase in revenue from the tax hike.

While a "handful" of the super-rich leaving could have such an impact, history, again, contradicts the notion. The IBO explored the question, at least in terms of the average-rich, in the February Budget Options report. A top rate of only 4.2 percent would raise $455 million in 2010 and would cost those making over $500,000 an average of $10,400 more in 2010. If 5 percent of those paying that average increase left the city, the new top rates would bring in $183 million less.

Sales Tax vs. the Income Tax

But what about the impact of the sales tax. Who pays that? As the mayor acknowledged on May 1, the sales tax is a "regressive" tax, a greater burden on lower than higher income taxpayers. He added, "Is it a good tax? No. None of these taxes are good taxes."

Well, that's a bit disingenuous. The personal income tax is certainly less regressive than the one-rate-fits-all sales tax. The personal income tax is "progressive" in the sense that higher-income taxpayers pay a slightly higher tax rate (3.648 percent) than do lower-income taxpayers (2.907 percent).

Since 1974 the city sales tax has been 4 percent (with the exception of an increase to 4.125 percent from mid 2003 through mid 2005). The mayor's proposal is thus a 12.5 percent increase in a sales tax that's been pretty much untouched for 35 years, presumably in large part because most people recognize its regressive impact.

In his executive budget, the mayor, who, according to the Times is "the wealthiest person in New York," not only claimed that the wealthy might flee an income tax hike; he suggested they would pay more with the sales tax increase, because "the people that have more money buy a lot more things, and they spend a lot more of it."

The notion that the wealthy spend a lot more than the less-wealthy breaks no new ground, but it dodges the big question: How much of the sales tax increase will the wealthy and the less-wealthy, in fact, pay?

We know that the wealthy pay the bulk of the personal income tax. In fact, the Tax Revenue Forecasting Document shows that, in the 2005 tax year, the 315,000 city taxpayers who had $100,000 or more in taxable income (only 9.2 percent of all filers) paid nearly 73 percent of the total personal income tax, even though they accounted for only 9.2 percent of all filers. Most significantly to the mayor's point, the 1 percent of filers who have incomes of $500,000 or more accounted for 49 percent of the total income tax.

Lower-income filers, of course, pay much less. The 1.64 million filers (48 percent of total filers) who have less than $25,000 of taxable income pay only 2.2 percent of total personal income taxes. That's the nature of a progressive tax system.

The sales tax presents a very different picture. A 0.5 percent sales tax increase will have a greater impact on lower- and middle-class taxpayers (and a lot of New Yorkers who pay no personal income tax at all) than higher-income residents.

The Times, using Independent Budget Office data, provided a partial answer to the impact question. The IBO estimates that a household making $35,000 a year would pay an additional $129 in sales tax, one making $125,000 would pay $356 a year more, and a household making $500,000 would pay $840 more.

Those numbers alone provide a good example of how regressive the sales tax is. For instance, the additional burden on the $35,000 household (measured by dividing $129 by $35,000) is 0.37 percent, more than twice that on the $500,000 household ($840 divided by $500,000), 0.17 percent.

Tax Politics

The last time the mayor recommended an increase in the sales tax was in November 2002, when it was part of a $3 billion tax revenue package to fill the huge deficit created by a national recession and the impact of 9/11. At that time he actually proposed a 0.25 percent increase, but the council negotiated that down to the ultimate 0.125 increase, to 4.125 percent, which was in effect from June 4, 2003 to May 31, 2005.

The council this spring has thus far rejected the mayor's proposed increase, and if history is a guide, there might yet be a compromise that lowers or cancels any increase. (Mayors often find some unexpected, non-tax dollars to fill budget gaps between May and June.) But with the exception of the City Comptroller, Bill Thompson, who has proposed the more conventional and progressive alternative of a higher personal income tax rate for those making more than $500,000, there has been surprisingly little attention to the scope of the mayor's regressive proposal.

Of course, it's an election year. The political cooperation between the mayor and the City Council leadership that led to the sudden extension of term limits seems at the moment to be holding. Apparently neither the mayor nor the council leadership wants to tax higher-income New Yorkers this year.

But the notion that the 40,000 richest taxpayers - and especially the "handful" of super-rich so much on the mayor's mind - should be protected in these tough times, while some 8 million New Yorkers pay 12.5 percent more in sales taxes, remains a curious, if not cruel, re-writing of four decades of tax policy in this city.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.

Bloomberg's Budget Revival


If Mayor Michael Bloomberg's fiscal year 2010 budget proposal were a Broadway show, the sales tax would be headlining. Not far down the marquee, you might see $3.4 billion worth of slashed services, a city work force reduction of more than 13,500 and a five-cent tax on plastic bags. At curtain call, the audience gets a new pension tier aimed at new hires.

Cue the spotlight, the fiscal year 2010 budget is taking center stage.

But the set and the players seem strangely familiar. Little has changed in the mayor's executive budget for fiscal year 2010 since his preliminary budget in January. With the exception of the sales tax (a proposed increase the mayor would like to double from what he envisioned in January) and health benefits for unionized city employees (which won't be tackled until next year), the administration's proposal adds little new to this year's budget debate. In these tough economic times, Bloomberg is relying on the old standbys of tax hikes and service cuts to close a $4.8 billion gap.

(See if you can fix the city's fiscal woes. Play Balance.)

Fiscal year 2010 is no opening night. Most City Hall observers say it feels more like a revival. But now with an election six months away, how will the budget's critics -- from the City Council to Albany to unions to advocates -- react?

It Could Be Worse?

Act I: Enter stage left, Bloomberg dressed in a charcoal suit and red tie with a laser pointer in tow.

On Friday, the mayor released a $59.4 billion budget proposal for fiscal year 2010, which starts in July, slightly down from this year's $61.2 billion budget. At its core, the proposal relies on cuts to every city agency -- reductions that climb up to 29.5 percent in some cases, such as the Health and Hospitals Corp.

In total, the mayor is proposing to cut $3.4 billion in city spending. With every agency and department on the chopping block, Bloomberg said everyone has to make do with less.

"It's about keeping our streets safe for our kids, yours and mine," said Bloomberg. "It's about keeping New York, New York."

Despite the cuts, the mayor has committed to no layoffs for teachers and uniformed police officers. To cut back, the Police Department will see 395 members of its civilian workforce laid off and a reduction of 125 traffic management enforcement agents, mostly through attrition. The department's controlled operating expenses, which do not include pension, debt service or health care costs, will be slashed by 10.9 percent.

The Department of Education will see a 13.3 percent reduction in controllable spending, mostly from discretionary funds allocated to school principals, according to the mayor's proposal. It will most likely require "personnel reductions," the proposal states.

Most of the city's workforce reduction will come from attrition. Including the reductions the mayor proposed in November and January, the city's workforce would shrink by 13,541 positions. Of those, 9,782 would be from attrition. The largest layoffs -- 943 positions -- would come from the city's library system.

In total, this plan would layoff 3,759 city workers.

This graphic shows the percentage reduction of controllable city spending department by department. Department figures include reductions in city spending as well as any revenue (such as increased fees) the departments are implementing to close budget gaps. We included the city’s largest layoff figures. Figures were provided by the mayor’s office.

With the economy floundering and Wall Street still suffering, Bloomberg said the city's revenues are down by $5 billion since 2008. This fiscal year, revenues from the city's real estate transaction tax fell by 47.1 percent, while economically sensitive tax revenues on the whole, from the sales tax to the personal income tax, have decreased 14.1 percent.

Though federal stimulus funding, including $1 billion that would go toward Medicaid, has propped up the city somewhat, it is not enough to cover the revenue losses of the last year.

Much of what the mayor proposed will need approval from Albany. For example, the mayor has called for increasing the city sales tax by 0.5 percent to 8.875 percent (in January he proposed an increase of .25 percent). He wants to eliminate the sales tax exemption on clothing sales below $110 and implement a five-cent tax on plastic bags. These measures could raise $1.05 billion in revenue, if the State Legislature approves them all.

This fiscal plan also relies on $400 million worth of concessions from the city's unions, including the creation of a new pension tier, which would lower retirement benefits for new hires. The pension tier too would need Albany's approval.

Even with all of these actions, the mayor warned, the city still faces a $4.6 billion budget gap in fiscal year 2011.

The Other Side of City Hall

Act II: Enter the City Council. All 51 members grimaced, primarily because of the sales tax.

Calling an increase in the sales tax "regressive," City Council Speaker Christine Quinn, a usual Bloomberg ally, has set the stage for a sales tax showdown between the two sides of City Hall. Most City Council members do not support an increase in the sales tax. Earlier this year, Quinn had proposed increasing the city's personal income tax on residents making more than $300,000. Because the state implemented a similar proposal, she has said the council will explore other revenue options. For now, it appears, the sales tax will not be one of them.

"I continue to believe that increasing sales tax is a regressive way to generate revenue because it places an unfair burden on those who have the least," said Quinn in a prepared statement. "The idea of eliminating the tax exemption on clothing only compounds that burden."

Finance Chairman David Weprin agreed on Friday and said that he was not ready to sign onto the proposal, even though he understood how tough times are. Also at issue for the council, said Weprin, are agency reductions. The council is concerned over cuts to fire engine companies and the amount of layoffs at city agencies.

Specifically, members of the council took issue with the mayor's plan to reduce the number of firefighters at 64 engine companies by one so that four individuals would staff each engine. The move would not close any firehouses nor would it layoff any firefighters. City officials said about 140 other engine companies already have the same policy. This and other cuts would reduce the department's controllable spending by 10.2 percent.

In addition, critics said that by laying off workers and cutting human services, the city would hurt those who need help the most.

"Once again, he's balancing the budget on the backs of poor people," said Councilmember Charles Barron, a perennial Bloomberg critic. "If you want to increase economic activity, you don't increase the sales tax."

As in most budget years, the council is expected to focus on cuts to social services and libraries. Weprin said this budget would do away with six-day service, which the council has fought to protect for the last year.

Cuts Hard and Deep Times Two

Act III: Advocates take the stage, and they aren't happy.

To them, these cuts are just an encore presentation of those that the city approved last year. Another round -- particularly from the human services sector -- has left many reeling.

So much so that they are taking to the airwaves. On Friday, the Coalition for the Homeless released an ad airing on NY1, which calls the mayor's new budget "ruthless." According to the coalition, the mayor's plan would close two drop-in centers for the homeless, Peter's Place in Chelsea and the John Heuss House in Lower Manhattan. Drop-in centers elsewhere could also see a reduction in operating hours from 24 hours a day to 13 hours per day, under the mayor's proposal, the coalition said.

"While the federal stimulus money provides vital funding to restore cuts to homeless prevention, the mayor's budget closes drop-in centers and contains cuts to family and adult shelter providers that will harm homeless New Yorkers," said Mary Brosnahan, the Coalition for the Homeless' executive director, in a prepared statement. "It's sad that at a time when we are seeing record family homelessness, New York City can find funding for gold plated stadiums but not for these vital services."

Elsewhere, advocates have said the budget would get rid of thousands of after-school slots and slash senior centers. More than 10,000 slots have been cut from a city after-school program, said Nancy Wackstein, the executive director of United Neighborhood Houses of New York.

"After school is something that supports working parents and gives kids opportunities," said Wackstein. "This will be a very, very serious impact on the community."

City officials said the city would not close any senior centers, but would reduce funding to them, possibly threatening some programs. The city also plans on saving money by cutting the time adolescents spend in foster care and scaling back youth summer programs. The vast majority of the $3.4 billion worth of agency cuts were announced in January.

Some federal stimulus money, advocates say, has helped save cuts to the city's meals on wheels program. But, the cuts that remain, they say, are severe.

Unions Get a Break?

Curtain call: The city's labor force marches on stage. Some are relieved, but others balk.

A crucial element of the mayor's plan in January was to require that unions contribute 10 percent of their health insurance premiums, which could have raised about $357 million (most currently contribute nothing). On Friday, the mayor announced he was not confident that the city's unions and the administration could come to an agreement in time for this budget cycle. In response, he said he would delay any change until fiscal year 2011 -- conveniently after this year's mayoral election.

Some saw the move as political.

"It's not a surprise he doesn't want to shake any cages in an election year," said Doug Muzzio, a professor at Baruch College.

Despite abandoning the health care benefits, the mayor still is relying on compromises from the city's labor unions, including the creation of the new pension tier and other health care reductions, in order to close the budget gaps. Some unions don't think the proposal is palatable.

"What remained unsaid is that the pension improvements the mayor wants to jettison were in fact negotiated by city workers many times in lieu of salaries," said United Federation of Teachers President Randi Weingarten in a prepared statement. "For working and middle class families, pensions are a very important part of retirement security."

Weingarten said her union would be willing to consider retirement incentives and savings from their health care benefits. Other unions, including the city's largest municipal workers group, District Council 37, released statements in opposition to the mayor's plan.

An Election Year

According to some reviews, this budget production could get a lot worse.

About $1.5 billion of the mayor's plan to close the budget gap relies heavily on Albany. This year -- and in plenty of years past -- the State Legislature has failed to act on a plethora of issues (see the recent debacleover the Metropolitan Transportation Authority bailout).

Relying on upstate to solve the city's fiscal woes may not be the strongest strategy, say critics. "I want to see a real plan," said Citizens Budget Commission President Carol Kellermann. The mayor's proposal is "grim," she said, but probably does not go far enough. "I think things may be more serious than this," she said.

In an election year, the mayor's options may be limited -- heeding the call of re-election rather than ruffling feathers. If Albany doesn't approve these measures, then there may be little else for the mayor to turn to.

"Who is he cutting?" asked Muzzio. "Are you hurting a powerful voting constituent? In a sense you cut on the backs of the weak because they don't vote."

And who knows in this economic climate whether anyone can get a standing ovation.



Print Friendly and PDF

Editor's Choice


Gotham Gazette: New York Voters Approve $4.2 Billion Environmental Bond Act
New York Voters Approve $4.2 Billion Environmental Bond Act
Gotham Gazette: 
New York City Voters Approve Racial Justice Ballot Measures
New York City Voters Approve Racial Justice Ballot Measures
Gotham Gazette: 
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Housing Development in New York City Slows to a Crawl as Officials Debate Tax Incentives
Gotham Gazette: 
City Council Examines Low Voter Turnout, Moving Local Elections to Even Years City Council Examines Low Voter Turnout, Moving Local Elections to Even Years