Gotham Gazette https://www.gothamgazette.com/component/tags/tag/509 Mon, 26 Aug 2019 09:45:00 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) In End of Session Deals, Cuomo and Legislators Pass Capital Budget, with New 'SAM' Money https://www.gothamgazette.com/state/8628-end-of-session-cuomo-legislators-pass-capital-budget-sam-money https://www.gothamgazette.com/state/8628-end-of-session-cuomo-legislators-pass-capital-budget-sam-money gov cuomo inspects

(photo: the Governor's office)


As part of their end-of-session rush, the State Legislature passed this year’s state capital budget, months later than usual after it was not passed as part of the other budget bills that moved on or before the April 1 start of the new state fiscal year.

One provision of the $3.9 billion capital budget added $385 million to the coffers of the opaque State and Municipal Facilities Program, often referred to as SAM, which has in a sense replaced the old “member item” system for awarding pork projects to legislators, while also providing the governor millions to work with.

SAM already has over $1.9 billion in unspent funds that have been rolled over from previous allocations. As of June 12 of this year, there are over 1,800 grants currently administered under the program that amount to just over $988 million in current or planned spending, which leaves about $1 billion remaining for the governor and state lawmakers to use at their discretion. This is more than SAM has spent in any single year since its inception.

Now, there is the additional $385 million that has not been committed to any particular projects, leaving almost $1.4 billion to be used as a pork barrel program for state legislators and Governor Andrew Cuomo.

These funds can be used for any number of things, from additional police cars for local departments to playgrounds and skate parks to local library renovations. The programs are not immediately lined out in the budget, but allocated based on an even less transparent internal process.

The program is relatively new, having been started by Governor Andrew Cuomo and legislative leaders in 2013, the same year that Republicans and the Independent Democratic Conference first formed a majority coalition in the State Senate. Former Senator Jeff Klein, the one-time leader of the IDC, was the biggest beneficiary of the program, getting $12 million from 2013 to 2015, much of which came from SAM, according to Politico New York. During that period, Klein received more earmarked funds than any other state senator and other IDC members were also top receivers of earmarks.

SAM can be seen as a successor to member items, a process where legislators could use money from a discretionary fund controlled by the legislature for projects in their districts.

E.J. McMahon of the Empire Center think tank calls SAM “basically member items on steroids,” because member items traditionally funded smaller needs like Little League uniforms and meal programs for seniors, but SAM supports larger programs such as gazebos and highway garages.

According to McMahon, member items “amounted to $100 million or so a year at their peak,” but SAM will now be authorized to spend over $2.3 billion in the coming years. According to SeeThroughNY, run by the Empire Center, the state government spent over $500 million through the same program in 2018.

Cuomo opposed member items as Attorney General and during his 2010 gubernatorial campaign. Funding for member items stopped in 2009, but it only took four years before a new discretionary fund for legislators and the governor emerged. (Cuomo was first elected governor in 2010.)

Now, the governor is an active participant in the “pork barrel” program akin to the one he previously opposed. According to McMahon, Cuomo gets to “claim his own big hunk [of SAM funds], and has used it to supplement capital spending in areas that already have their own very large capital budgets,” such as the MTA.

For SAM projects, the governor or individual legislators make requests, and those requests are then approved (or not) by the state’s Division of Budget or the Dormitory Authority. The Dormitory Authority then administers approved funding. The Division of Budget reports to the governor and the Dormitory Authority’s board consists of five direct gubernatorial appointees, three gubernatorial appointees to other positions who serve on the board ex-officio, and one appointed by each of the Assembly Speaker, Senate Majority Leader, and State Comptroller.

There is only one member of the 11-person board who is not directly affiliated with the Governor or state legislators. The Governor and legislators request funding for local projects and then their appointees approve them.

With the IDC no longer around and the state facing fiscal challenges, the program’s future was slightly in limbo when it was not included in the April budget, as the whole capital budget was kicked down the road.

Governor Cuomo line-item vetoed about $44 million of the budget’s capital spending after it passed the State Legislature. However, he had said in an interview with WAMC radio that the capital budget would be dealt with “in the coming weeks” while also declaring that his infrastructure agenda is “the most aggressive infrastructure plan in the United States of America.”

McMahon says SAM is “a completely indefensible program,” because “it’s all financed with borrowed money, effectively diverting scarce capital resources from core infrastructure needs.”

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by Andrew Millman, Gotham Gazette
   

Read more by this writer.

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In End of Session Deals, Cuomo and Legislators Pass Capital Budget, with New 'SAM' Money Tue, 25 Jun 2019 04:00:00 +0000
The MTA is Fiscally Exhausted https://www.gothamgazette.com/130-opinion/8600-the-mta-is-fiscally-exhausted https://www.gothamgazette.com/130-opinion/8600-the-mta-is-fiscally-exhausted MTA Cuomo finances

(photo: MTA/Patrick Cashin)


We call it the distraction circus. Donald Trump’s advisor, Steve Bannon, called it “flooding the zone with sh*t” to befuddle the news media and critics. Whatever you call it, the endless kerfuffle Governor Cuomo is stirring around the Metropolitan Transportation Authority (MTA) is obscuring what we think are the MTA’s potentially catastrophic money problems.

Yes, even after new revenue from congestion pricing is factored in, the MTA is still in big financial trouble.

Five very big things jump out in terms of the MTA’s fiscal health. First, Governor Cuomo and legislative leaders are sending strong signals they are going to renege on the remaining $7.3 billion they promised the MTA in direct state aid in the 2016 state budget for the 2015-2019 MTA capital plan. Second, the governor says state monies will generate only about $30 billion of the $40 billion to $60 billion his own workgroup estimated the MTA needs for its 2020-2024 capital plan.

Third, the governor is strongly suggesting the MTA will have to borrow roughly $10 billion to $30 billion on top of its already soaring debt load. Fourth, even with massive cost cutting, the MTA’s debt payments are rising to alarming levels, with 19% of operating income possibly going to debt by 2022, raising the harbinger of a “death spiral.”

Fifth, these are not the MTA issues the Board, Legislature, or transit reporters are talking about nearly enough.

Importantly, the MTA is facing these dire fiscal pressures while New York City’s economy is in the midst of a decade-long boom and state and city tax revenues are at record levels. What happens when there is the inevitable downturn?

The MTA is Fiscally Exhausted, so Where is the $7.3B?
With much fanfare, the Governor and State Legislature included in the 2016 state budget a “historic” commitment of $8.3 billion in direct state aid to the MTA’s 2015-2019 capital plan. More than three years later, the state still owes the MTA $7.3 billion.

The devil is truly in the details for state budget promises. The much touted 2016 state bailout of the MTA allowed $1 billion to be given to the MTA without condition, but an additional $7.3 billion will only be available after the MTA borrows until it can borrow no more -- in other words, when the MTA is fiscally “exhausted.” (See Part NN of the 2016 budget.)

As of May 2019, the MTA has gotten only $1 billion of the state bailout money promised in 2016, and $11 billion from all sources for the $33 billion it planned to spend on the 2015-2019 capital plan.mta1

The Subway Action Plan: A Distraction from the $7.3B owed by the State?
As of December 2017, the MTA had received only $65 million of the state capital dollars promised in the April 2016 state budget for its 2015-2019 capital plan. In July 2017, the governor announced the Subway Action Plan, which included $328 million for capital projects (which is less than 5% of the $7.3 billion of the promised state capital funds). Yet, the Subway Action Plan has become a proxy for effort by the state. The governor’s office has repeatedly emphasized the millions the state was contributing to the Subway Action Plan while glossing over the $7.3 billion it owes the MTA.

[READ: There's Plenty of Money in the MTA Capital Plan, It's Just Not Being Spent]

MTA Tens of Billions Short of Funding Needed for Capital Plan Starting in 2020
To recap, the state still owes the MTA $7.3 billion for the current, 2015-2019 capital plan. Now, the governor says the MTA won’t get new state funding for the next capital plan.

Last week, Governor Cuomo doubled down on his rhetoric that the MTA must “reform” or it won’t get more funding from the state for the MTA’s 2020-2024 capital plan. Speaking on The Brian Lehrer Show, the governor said that the MTA will get only $30 billion from the state for the MTA 2020-2024 capital plan, including congestion pricing and state dedicated taxes, saying it needs to do better with the billions it has. This is much less than the $40 billion to $60 billion Cuomo’s own MTA Sustainability Workgroup concluded in December 2018 would be needed for the 2020-2024 plan.

The biggest problem with this statement is that the MTA is already fiscally exhausted, and “reform” -- including possible consolidations from a forthcoming reorganization plan (more on that here) -- will not possibly make up the additional $10 to $30 billion that the MTA is missing to meet its needs for the next capital plan. 

Skyrocketing Debt Payments: 19 Cents of Every Fare Dollar
While the MTA has been borrowing itself into a state of “fiscal exhaustion” to meet the terms of the 2016 state budget for its promised $7.3B, debt service payments have soared to record levels.

In 2017, debt payments cost 17% of the MTA’s operating budget. By 2o22, debt payments will consume 19% of the operating budget, as projected in its February 2019 financial plan. (All charts in this piece are sourced from data in this plan.)

In total, debt payments will be $3.22 billion in 2022 -- an increase of 27% since 2017.

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And with a threat from the governor of no more state funding, the MTA seems to be on the path toward even more borrowing if it is to even attempt to meet its capital needs for 2020-2024.

Blunt Cuts Won’t Save the MTA
With debt service on the rise and ridership declining, the MTA is facing a large operating deficit. The operating budget pays for everyday subway, bus, and rail service, and money borrowed to pay for capital expenses. Every dollar paying back borrowed money is a dollar that cannot be spent on subway or bus service.

As debt costs soar, so does the ongoing gap between the MTA’s income and expenses. The MTA’s deficit for 2020 has now reached $467 million, with even larger gaps in the years to come. (To be sure, the MTA is also struggling with costs including health care for current and retired workers -- a problem for many big employers in the U.S.)

mta2

If the MTA can’t reduce its debt payments, how can it make up future operating losses? The biggest likelihood is through workforce reductions, which could increase the risk of entering a “death spiral” of less service, fewer riders, and less farebox revenue. Labor makes up 60% of operating costs and the MTA’s labor contracts are up for renewal this year. The MTA has 75,000 employees and is by far the largest unit of state government. 

There are rumors of big layoffs circulating within the MTA. The obvious concern for riders is how layoffs affect customer service. A smart reorganization of the MTA could make sensible consolidations, but there is tremendous pressure to close the MTA’s operating deficit and chop out dead wood. The risk is the reorganization could decimate the MTA’s workforce at a time when working for the MTA is not likely at the top of job seekers’ lists, all while the governor continues to harshly criticize the MTA professional staff for lack of innovation and execution.

Exhausted and in Danger
In the 2016 budget, the governor and Legislature committed $8.3 billion to the MTA. They have given it $1 billion. Will the MTA get the remaining $7.3 billion? Will the governor and Legislative Leaders finally level with the public? Where the heck is the MTA supposed to find the roughly $50 billion it needs for the 2020-2024 rebuilding plan? How much money does the MTA really need? What is the debt redline? Some states keep debt payments at 5% to 7% of their operating budgets, while the MTA is edging towards an astronomical 19%. The danger signs for the MTA are mounting, and we need an honest discussion of how to fix this problem before it’s too late.

[READ: There's Plenty of Money in the MTA Capital Plan, It's Just Not Being Spent]

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Rachael Fauss is Senior Research Analyst and John Kaehny is Executive Director at Reinvent Albany. On Twitter @ReinventAlbany.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

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The MTA is Fiscally Exhausted Thu, 13 Jun 2019 04:00:00 +0000
New York City Must Fully Restore Article 6 Public Health Budget Cuts https://www.gothamgazette.com/130-opinion/8547-new-york-city-must-fully-restore-article-6-public-health-budget-cuts https://www.gothamgazette.com/130-opinion/8547-new-york-city-must-fully-restore-article-6-public-health-budget-cuts mathur inte selman

(photo: William Alatriste/City Council)


As health care providers and public health advocates, we believe that all New Yorkers deserve access to high-quality, comprehensive, compassionate health care. We believe that health care is a human right—not a luxury for the privileged. 

And yet, New York State has cut vital public health programs for our city—and only our city. Known as Article 6, these state funds help support critical services provided by local health departments, including immunizations; tuberculosis outreach, education and testing; and sexual and reproductive health. In New York’s most recent budget, New York City’s reimbursement for this program was cut by 16%, resulting in more than $62 million in lost funding to essential city public health programs.

The Mayor’s Executive Budget plan includes $59 million in funding to restore cuts to the Department of Mental Health and Hygiene administrative programs and organizations funded by the administration. However, it does not cover the millions in lost Article 6 matching funding for City Council discretionary-budget public health programs, such as those that support immigrant health, health education, health insurance access, HIV/AIDS prevention and treatment, child and maternal health, viral hepatitis, and more.

Currently, the City Council estimates cuts will result in no less than $3.4 million in lost funding across dozens of community-based organizations.

We are calling upon Mayor de Blasio and the City Council to stand up for our communities and say no to these cuts to our health care funding. We are calling for this funding to be fully restored in the city’s fiscal year 2020 budget, which is due by July 1, including full funding for Council-discretionary funded nonprofit providers.

Funding for City Council public health initiatives is a small fraction of the $90-plus billion city budget. We can't afford to not invest in public health.

Lack of access to quality health care can lead to devastating outcomes, from premature death to high prevalence of chronic diseases, especially in our most vulnerable communities. The leading causes of illness, disability, and death in New York City are largely preventable. Clinical encounters with medical staff are critical opportunities for health promotion and disease prevention and treatment, yet many New Yorkers face egregious barriers to accessing care.

New York City has a long way to go before all our communities are able to access the health care they need and deserve to lead healthy, autonomous lives. We are on the ground every day, from the Bronx to Staten Island, providing care to those who need it most. We still have so much work to do—and what we need is more support for our lifesaving work, not a budget cut that threatens our progress and our communities’ health and futures.

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By Anthony Feliciano, Executive Director of Commission on the Public’s Health System; Laura McQuade, President and CEO of Planned Parenthood of New York City; Mark Harrington, Executive Director of Treatment Action Group; Jennifer March, Executive Director, Citizens’ Committee for Children of New York; and Charles King, CEO and co-founder, Housing Works.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

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New York City Must Fully Restore Article 6 Public Health Budget Cuts Mon, 27 May 2019 04:00:00 +0000
After Major Tax Revenue Drop, a ‘Positive Note’ & Much Uncertainty for State Fiscal Picture https://www.gothamgazette.com/state/8457-after-major-tax-revenue-drop-a-positive-note-much-uncertainty-for-state-fiscal-picture https://www.gothamgazette.com/state/8457-after-major-tax-revenue-drop-a-positive-note-much-uncertainty-for-state-fiscal-picture govandcuomo albany

Budget Director Mujica, Gov. Cuomo, Comptroller DiNapoli (photo: governor's office)


New York’s tax revenue fell by $3.7 billion, a 4.7% decline, in the 2019 fiscal year that ended March 31, according to the cash report released Friday by State Comptroller Tom DiNapoli. A drop was expected in projections made last year, but not to the degree it occured, setting off alarm bells earlier this year as the state started to see apparent effects of New York taxpayer behavior resulting from the new federal tax code. The state's latest projections from February did, however, more accurately account for the decrease in revenue as the fiscal year came to an end.

The drop in revenue largely stemmed from lower personal income tax receipts, though the comptroller said the year ended on “a positive note” because revenues came in higher than expected in March. Part of the decline was also related to the MTA payroll tax, which brought in $1.4 billion last year, being shifted out of the budget as a revenue source, and the new federal tax law led to many filers and employers moving their payments to the 2018 fiscal year, creating the appearance of a  drop in payments that doesn't reflect the larger economy, according to the state Division of Budget. But fiscal watchdogs are nonetheless concerned that the state could quickly face a cash crunch if revenue is lower than expected in April, the month that not only starts the new state fiscal year but is also home to the tax filing deadline.

The drop in personal income tax was first evident in data from December and January, raising a red flag for the state economy and creating uncertainty about future spending as Governor Andrew Cuomo and the state Legislature negotiated the budget for the 2020 fiscal year. In a February news conference called to discuss the startling numbers, Cuomo and DiNapoli pointed to the 2017 federal tax overhaul as the culprit, chiefly a provision that capped the deductibility of State and Local Taxes (SALT) at $10,000 and how New Yorkers may be responding to it. They said much more would become clear in the following months.

The governor and Legislature had to take that uncertainty into consideration when making revenue projections for the new fiscal year and that if those projections are significantly off they may need to restructure the state budget. 

The comptroller’s latest report noted that personal income tax revenue by the end of the fiscal year declined by $3.4 billion in total, or about 6.6% from the previous year, though other forms of tax revenue increased, including consumption tax, business tax, and miscellaneous revenue that included massive monetary settlements with financial and other corporations. March was a good month, with taxes coming in about $812 million higher than the state Division of Budget had projected in February.

“After months of concern over lower-than-expected tax collections, the state ended the fiscal year on a positive note,” DiNapoli said in a Friday statement. “The sharp revenue declines in December and January, however, remind us to take nothing for granted. With expectations of a slowing economy and ongoing concerns regarding federal fiscal policies, a strong commitment to building robust reserves in preparation for the next economic slump is essential.”

After a recent allocation of $250 million, the state’s current rainy day reserves stand at $2 billion, and are expected to increase to $2.5 billion by the end of the 2020 fiscal year. This sum pales in comparison to the recently-adopted $175.5 billion state budget for the fiscal year 2020.

The crucial period lies ahead as the state begins to take stock of tax returns that New Yorkers file in April. In February, the governor and state DOB projected that April would show an additional $1.4 billion in personal income taxes, and total collections of about $8.2 billion. In comparison, the state averaged between $5 and $7 billion in April tax revenues between 2016-2018. It’s not totally clear why the projection is so optimistic.

“When they made that adjustment in February, they said, we came in really low for January, but some of that money we think is gonna come in in April. And we don’t know if it’s going to or not,” said Dave Friedfel, director of state studies at Citizens Budget Commission, a nonprofit watchdog. “If it doesn’t, if they made a mistake in making that assumption, then suddenly the fiscal year 2020 budget could be in trouble only one month into the fiscal year.”

Should revenues come in below projections, the state could be in for tough times ahead.

“Depending on how that number comes in, if it’s significantly short, the state may need to tighten its belt a little bit further,” Friedfel said, noting that at minimum it would put a damper on conversations around increasing capital spending as the rest of the legislative session progresses. Cuomo and legislative leaders passed the new state budget without adding new capital expenditure plans, though many were carried over from prior plans.

E.J. McMahon, research director of the Empire Center for Public Policy, a think tank, agreed that if the April revenue doesn’t meet expectations, it would be “a sign of trouble.”

“However, even if it’s above the forecast, it’s not necessarily solid proof that things are much better because...the real number to watch this year, that has a bigger reflection of the economy, will be the quarterly estimated payments in June and especially September,” he said, pointing out that higher-earning New Yorkers have more complicated tax returns and may be filing for extensions.

The new budget does give the state Department of Budget, which is under the governor, the ability to make mid-year changes to spending in case of a $500 million deficit below projections, in which case the Legislature would have 30 days to respond or the DOB adjustment would take effect.

But a bigger issue is the state’s paltry reserves. CBC’s Friedfel said the state should at bare minimum have 10% of the operating budget in reserves, closer to about $10 billion. “That would be enough to really absorb the shock for one year and even more than that would be beneficial,” he said.

“The state has gotten about $12 billion in monetary settlements over the last six or seven years, certainly during the governor’s tenure, and they’ve put very little of that into reserves,” Friedfel continued. “They’ve actually used some of that for operations which sets up kind of a higher base of spending, which makes it harder to fill those gaps in the future.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Note - This article has been updated to clarify that the state Division of Budget's latest projections did expect revenues to drop as much they did though they did not originally. Additional context was also added about the MTA payroll tax and early filing of payments in the 2018 fiscal year.  

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After Major Tax Revenue Drop, a ‘Positive Note’ & Much Uncertainty for State Fiscal Picture Sun, 21 Apr 2019 04:00:00 +0000
Uncertain Future for Secretive State Pork Program Tied to Renegade Democrats https://www.gothamgazette.com/state/8461-uncertain-future-for-secretive-state-pork-program-tied-to-renegade-democrats https://www.gothamgazette.com/state/8461-uncertain-future-for-secretive-state-pork-program-tied-to-renegade-democrats cuomo klein via gov

Cuomo and Klein (photo: governor's office)


Few New York residents have probably heard of the State and Municipal Facilities Program, or SAM, but in recent years, it has been one of the top avenues by which state lawmakers “bring home the bacon,” providing many millions of dollars in funding for district projects. Otherwise known as “pork,” these projects include things like new or renovated parks, schools, libraries, and more, with far greater funding going to legislators based on their political power.

However, in this year’s recently-adopted state budget, there are no new appropriations for SAM. And SAM is also different because it is lump sum appropriation, with specific project funding decided outside the budget process by the governor and legislative leaders.

Started in 2013, SAM is a creation of Governor Andrew Cuomo and legislative leaders. It is controlled by the Dormitory Authority of the State of New York (DASNY), one of the state’s many public-benefit corporations, responsible for assisting state and local governments, as well as non-profits and colleges, with construction, financing, and other services. Currently-planned SAM projects include everything from renovations to the Brooklyn Public Library to creation of a skateboard park in Albany to new fire trucks and patrol vehicles in Poughkeepsie.

DASNY’s board consists of five gubernatorial appointees, an appointee from the President of the State Senate, another from the Assembly Speaker, and four ex-officio members: the State Comptroller, Education Commissioner, Health Commissioner, and the Budget Director.  The health commissioner and budget director are both appointed by the governor and the education commissioner is appointed by the state’s Board of Regents.

The program has long been criticized as an unnecessary discretionary fund -- in other words, a politically advantageous “slush fund.” SAM is one piece of the state’s larger capital budgeting, mainly for construction projects.

In his assessment of the 2018 state budget, Comptroller Tom DiNapoli criticized “the state's use of lump-sum appropriations that leave broad discretion for use of funds with limited disclosure.” He specifically cited SAM, which received a 25% increase in appropriations that year, saying “the need for additional discretionary spending authority was not made clear.”

Criticism has also come from good government and fiscal watchdog groups. E.J. McMahon, research director for the Empire Center for Public Policy, said last year that state lawmakers were “basically like teenagers with credit cards” when it comes to using SAM.

“It’s just pork. There is nobody even pretending that there is statewide importance to any of these,” McMahon told The Buffalo News. “There is no process. No airing. There’s complete discretion.”

David Friedfel, the director of state studies for the Citizens Budget Commission, told Gotham Gazette “these lump sum appropriations are not a wise investment of state resources. The allocations are a product of political expediency instead of a thorough analysis of the state’s needs. It’s nice for the communities that receive these grants, but the state taxpayers shouldn’t be footing the bill.”

Surprisingly, in this year’s state budget, there were no new appropriations for SAM. However, Friedfel notes that state lawmakers “have not allocated all of the money previously appropriated so they may have decided to just spend down existing appropriations this year.” There still remains over $1.9 billion in SAM appropriations that have gone unspent since the program’s creation in 2013, and that money is carried over into the new fiscal year 2019-2020 budget that took effect April 1 of this year.

As of April 8, 2019, there are over 1,800 grants currently administered by DASNY under SAM that amount to over $900 million in planned spending. This leaves a little over a $1 billion in discretionary funds for state lawmakers to access, which is more funding than SAM has ever spent in a single year.

Freeman Klopott, a spokesperson for the state’s Division of the Budget, which is under the governor, said in a statement “there were no capital additions to the Budget and, as we have said already, additional capital funding will be addressed in June at the end of legislative session when we have a better sense of the State’s fiscal picture.”

There has been little indication from Albany leaders if there will be additional SAM funding in the capital budget when it is decided. The state’s current fiscal outlook, the availability of reappropriated funds, and the demise of the Independent Democratic Conference (IDC) all appear to make additional SAM appropriations unnecessary or unlikely.

The program’s 2013 introduction coincided with the first state budget following the 2012 state legislative elections, in which Democrats won a majority of State Senate seats. However, the IDC partnered with Senate Republicans to maintain the Republican-led majority. The addition of a new discretionary spending program a few months after the deal was struck was suspicious to many. There has been reporting to indicate, as well as widespread belief, that Governor Cuomo, now a third-term Democrat, preferred and encouraged the creation of the IDC and its coalition with Republicans.

SAM was utilized over the years to benefit members of the IDC handsomely, while the funding also benefited Senate Republicans and Assembly Democrats.

Several years after its creation, in the 2018 budget, an additional $90 million was added to SAM’s annual appropriations. This was a few weeks before the IDC’s dissolution -- a deal Cuomo brokered -- and five months before that year’s primary elections, when six of the eight IDC members were defeated by Democratic challengers.

Former State Senator Jeff Klein, who had been the leader of the IDC, was one of the primary beneficiaries of SAM projects before his loss to Alessandra Biaggi in the 2018 state legislative elections. A 2015 article in Politico New York explained “Jeff Klein’s alliance with Republicans has paid off.” Klein received almost $12 million in earmarks, much of which came from SAM, over three years between 2013 and 2015, according to Politico. Klein’s earmarks were triple that of any other state senator at the time, though other members of the IDC also reaped significant benefits, as did other legislators.

In an April 1 interview with WAMC Northeast Public Radio, Cuomo acknowledged that the capital budget and capital projects were not “fully included” in the recently-passed state budget. He said that “we have to negotiate on the capital side and we’ll do that in the coming weeks.” He also reiterated that the state’s $150 billion infrastructure plan “is the most aggressive infrastructure plan in the United States of America.”

While Cuomo’s major infrastructure projects continue apace, it is unclear what the fate of the SAM program will be, whether the reallocated money will be spent down or whether new money will be added.

On April 12, Cuomo issued 123 line-item vetoes to cut $44 million in capital spending added by the Legislature, in order “to maintain a properly balanced budget,” the governor wrote, and for technical reasons, such as being duplicative or were unnecessarily held over from several years prior.

While SAM is among the largest sources of funding legislators can use for capital projects in their districts, it is not the only source. And according to Friedfel, the final state budget also took out a provision that would have given the state’s inspector general greater oversight of discretionary spending.

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by Andrew Millman, Gotham Gazette
   

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Uncertain Future for Secretive State Pork Program Tied to Renegade Democrats Thu, 18 Apr 2019 04:00:00 +0000
Battles Over the MTA’s Long-Term Planning are About to Really Heat Up https://www.gothamgazette.com/130-opinion/8409-battles-over-the-mta-s-long-term-planning-are-about-to-really-heat-up https://www.gothamgazette.com/130-opinion/8409-battles-over-the-mta-s-long-term-planning-are-about-to-really-heat-up govandrewcuomo canarsie engineer

(photo: governor's office)


For those of us who want the MTA to finish a favorite project before our grandchildren are retired, now is the absolute best time to let Governor Cuomo know how you feel. The MTA is finalizing a document that will shape the New York region’s public transportation system for decades. Construction firms, unions, suppliers, and real estate interests are all lobbying the MTA to protect and further their own interests.

Every five years, the MTA issues a report of its capital needs for the next 20 years. This document identifies projects designed to improve travel for subway, bus, and railroad riders as well as for the drivers who cross the MTA’s seven bridges and two tunnels. The upcoming report will identify the transportation system’s critical needs and more than $100 billion worth of projects that the MTA deems essential. This is an extraordinary amount of money considering that the federal government ’s contribution to the MTA’s capital program has been less than $1.5 billion per year (and its contribution to all 6,800 public transportation systems across the country totals only about $13 billion per year).

The MTA’s 20-year needs assessment will set the stage in the fall for yet another document, a five-year capital program. The proposed program will identify which projects in the 20-year needs assessment should begin between 2020 and 2024. Aside from the state’s budget, the MTA’s five-year capital program is one of the most important and controversial items that the Legislature deals with on a regular basis.

In 1999, the MTA released a 20-year needs document that reflected the priorities of Governor George Pataki and Mayor Rudy Giuliani. The MTA saw the need to relieve crowding on the Lexington Avenue line and provide subway service to the Jacob Javits Convention Center. The MTA subsequently built three new subway stations on Second Avenue and extended the No. 7 train to the far West Side. Some of the initiatives identified in 1999 have not panned out though, such as extending subway service to LaGuardia Airport.

The current five-year capital program, which ends this year, has allocated approximately $33 billion to upgrade the transportation network, including purchasing new rail cars, modernizing signals and stations, and building new maintenance facilities. Nearly one-quarter of the program has been devoted to major expansion projects. These initiatives are the ones that are the most debated and anticipated, and include bringing the Long Island Rail Road to Grand Central Terminal, preliminary construction for the second phase of the Second Avenue Subway, and engineering for work that will allow Metro-North to access Penn Station and build four new Bronx stations.

The MTA will propose to spend even more over the next 20 years than it has in the previous two decades. New York City’s population and train ridership have grown more than planners expected 20 years ago. Moreover, New Yorkers want the MTA to provide modern and safe services, and the bar that defines such a system is continuously raised. The new subway stations on Second Avenue have become today's minimum standard: spacious and quiet stations with numerous escalators, elevators, and electronic signs, along with platforms that are cooled on hot summer days.

One thing is very different about this year’s preparation for the 20-year needs assessment and capital program. Five years ago, Governor Cuomo paid little attention to the MTA. Now, the governor is intimately involved with the MTA’s planning and operations. The MTA’s 20-years assessment will be, in effect, the governor’s 20-year vision for the future of transportation in New York City, Long Island, and the Hudson Valley.

Undoubtedly, the MTA’s 20-year needs assessment will state that the authority will connect Metro-North to Penn Station and Long Island Rail Road to Grand Central Terminal. The second and third phases of the Second Avenue subway are also likely to be considered essential. This would extend the subway north from 96th Street to 125th Street and south from 63rd Street to Houston Street. Future phases of the Second Avenue subway, including extending it to Wall Street, may not be in the 20-year needs assessment, indicating that construction will not begin until after 2040.

The document will probably also indicate that the MTA needs at least $6 billion per year to maintain and upgrade its equipment and facilities. There will be a huge gap between the amount of money available and the MTA’s needs. Hopefully, the state does not burden future generations with excessive debt. In recent years, the MTA has been unable to appreciably improve service because it is spending more than $2.5 billion annually on principal and interest to pay back the money it borrowed to finance its previous capital programs.

The 20-year needs document will reveal the governor’s thinking about how he wants to allocate funds between suburban and city projects, as well between new expansion projects and basic infrastructure projects. When it comes to the most expensive projects, he will have to choose between those that would help spur new growth (like the extension of the 7 train has done in Hudson Yards) or ones that alleviate existing subway congestion (like continuing the Second Avenue Subway). The 20-year assessment and 5-year capital program will also indicate how the governor plans on accommodating the preferences of key players in the funding debate including Mayor de Blasio and the leaders of the State Senate and State Assembly.

One caveat about the assessment report and how it will be indicative of the MTA’s level of transparency and accountability. Officials might not want to release the document for many reasons. For example, despite the passage of a congestion pricing program, it is likely to show the need to raise future taxes, tolls, and fares. Likewise, the report will reveal how the MTA is slipping behind certain goals that it had set to upgrade its sprawling network. Just because the MTA has issued these reports every five years does not mean it will release one this year. That would be a shame because the public and elected officials should be aware of the progress that the MTA has been making, and to better understand its ongoing and enormous needs.

For the rest of the year, elected officials will argue vociferously, in public and behind the scenes, about funding levels and specific projects. Although the media and public opinion will shape the final outcome, savvy interest groups know that the best time to push for their favorite projects is now.

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Philip Plotch is a political science professor at Saint Peter’s University and the author of Politics Across the Hudson: The Tappan Zee Megaproject. His book about the Second Avenue subway (The Last Subway) will be published by Cornell University Press in the first quarter of 2020. On Twitter @profplotch.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

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Battles Over the MTA’s Long-Term Planning are About to Really Heat Up Wed, 17 Apr 2019 04:00:00 +0000
Max & Murphy Podcast: Senator Jessica Ramos on the Adopted State Budget & Upcoming Albany Agenda https://www.gothamgazette.com/state/8459-max-murphy-podcast-state-senator-jessica-ramos-albany https://www.gothamgazette.com/state/8459-max-murphy-podcast-state-senator-jessica-ramos-albany jessica ramos 600a

(photo: @RamosforStateSenate)


April 17, 2019 - Max & Murphy Podcast: State Senator Jessica Ramos on the Albany Agenda

jessica ramos 150State Senator Jessica Ramos of Queens joined the show to discuss her first budget season in the state Legislature -- accomplishments, disappointments, lessons learned -- and what lies ahead on issues including marijuana legalization, rent regulations, and her farmworkers' rights bill.

Listen to the conversation and let us know what you think -- we're on Twitter @TweetBenMax and @JarrettMurphy. You can listen to the show through the embedded audio below or download the episode wherever you get your podcasts, under "Max & Murphy," and listen to Max & Murphy live on Wednesdays at 5 p.m. on WBAI radio, 99.5FM or wbai.org

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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Max & Murphy Podcast: Senator Jessica Ramos on the Adopted State Budget & Upcoming Albany Agenda Wed, 17 Apr 2019 04:00:00 +0000
The Devilish Details of Albany’s MTA Budget Package https://www.gothamgazette.com/130-opinion/8448-the-devilish-details-of-albany-s-mta-budget-package https://www.gothamgazette.com/130-opinion/8448-the-devilish-details-of-albany-s-mta-budget-package govcuomo photos

(photo: governor's office)


My organization, Reinvent Albany, applauds Governor Cuomo and the legislature for passing congestion pricing in the state budget. Yet we are concerned about it being undermined by boundless exemptions for politically powerful interest groups, and a proliferation of other new structures and requirements for the Metropolitan Transportation Authority (MTA) that passed along with the tolling program.

Paradoxically, the MTA legislative “reform” package also included a deal for the Legislature to approve new CEO/Chair Pat Foye without the extensive confirmation hearings and scrutiny expected for the head of the MTA—a behemoth that is the biggest unit of state government, with a $17 billion operating budget and 75,000 staff.

We believe the net effect of the changes made to the MTA further confuse decision-making and aggravate the lack of public accountability.

We will be living with the details of the “MTA Reform and Traffic Mobility Act” for years, so it is worth taking a detailed look. Below is a summary of the various provisions and our brief analysis. (Those interested in reading the 30+ pages of law that makes up the package can read Part ZZZ -- yes, ZZZ -- of the state budget's Revenue Bill).

1. Congestion Pricing
Congestion pricing is officially known in law as the “Central Business District Tolling Program.” The program will be designed and implemented by the Triborough Bridge and Tunnel Authority (known as MTA Bridges and Tunnels or informally as B&T), with a Memorandum of Understanding (MOU) laying out the details of how B&T will coordinate with the New York City Department of Transportation to get the program up and running. The law also gives B&T enforcement officers the power to issue notices of violations for transit infractions around B&T facilities, including the new tolling infrastructure.

The Central Business District is defined as 60th Street and south in Manhattan, but for FDR Drive, the West Side Highway, and the underpass to the Hugh L. Carey Tunnel (formerly the Brooklyn Battery Tunnel).

Tolls will be charged to vehicles entering the Central Business District by the B&T, with the amount of the tolls to be determined and approved by a majority of the MTA Board, as well as any exemptions. This will be informed by a new Traffic Mobility Review Board (TMRB). The CEO/Chair gets an additional vote if there is a tie.

The TMRB is to be appointed by the MTA Board. The TMRB’s plans must ensure that the recommendation would at a minimum raise $15 billion for the 2020-2024 capital plan, including costs of operating the program. The TMRB also is given the authority to “review” MTA capital plans, though what this will entail is unclear. It will have six members total, including a chair, with one member recommended by the Mayor of New York City, one member residing in the Metro North Railroad (MNR) region, and one residing in the Long Island Rail Road (LIRR) region.

Some exemptions to the toll are listed in the law, such as for emergency vehicles and  “qualifying vehicles transporting a person with disabilities.” The TMRB will make additional recommendations for credits, discounts, or exemptions. This will include consideration of credits or discounts for the current fee imposed on for-hire vehicles that was passed as part of last year’s state budget. A separate tax credit was created for residents in the congestion pricing zone earning less than $60,000 annually, provided they aren’t using their vehicle for business purposes.

Revenue from the tolls will go into a “central business district tolling capital lockbox.” Funds are to only be used for the costs of implementing the program and for the MTA’s 2020-2024 capital plan. Funds will be split 80-10-10: 80% of funds are to be for capital costs for New York City Transit (NYCT), with priority to the subways, accessibility, buses, and expanding transit in outer boroughs; and 10% of funds for both LIRR and MNR, with priority given to parking, rolling stock, capacity enhancement, accessibility and expanding transit in areas with limited transit.

Annual reports are due from B&T to state and city government officials as well as the public on receipts and expenditures, to be posted on the MTA website. Another report is due from B&T due on success of program in terms of traffic congestion, air quality, transit ridership, and bus speeds after one year, and then every two years. NYC DOT is to conduct a separate study on parking around the central business district 18 months after congestion tolls go into effect.

The TMRB will make its recommendation to the MTA Board on exemptions no earlier than November 15, 2020, or no later than 30 days before a tolling program is initiated. The program will be in operation no earlier than Dec 31, 2020. There will be a 30-day testing period where no tolls are collected, and then another 60 days where only tolls are collected, but not other charges and fines.

2. MTA Reorganization
The budget requires the MTA to develop a reorganization plan by June 30, 2019. This will be informed by a separate “independent forensic audit.” The plan will require approval of the MTA Board by majority vote; Chair gets 2 votes in event of tie. The reorganization cannot result in dissolution or merger of the authority and its subsidiaries. The legislation also allows the MTA and its subsidiaries and affiliates to share employees within and between entities, provided the employee will be doing a similar function. The law states that employee sharing will not impede or infringe upon collective bargaining agreements currently in place.

3. Design-Build
The budget adds to the mission and purpose of the MTA, stating that design-build is to be used in all projects over $25 million; however, it allows for a waiver from this streamlined bidding-design-construction requirement to be issued by the Director of the New York State Division of the Budget (currently Robert Mujica), who is appointed by the Governor.

4. MTA Board Appointments
The budget makes the terms of appointees to the MTA Board coterminous with their appointers. It also limits the amount of time that MTA Board members can serve in “holdover” status to 60 days (several MTA Board members were ousted as a result of this change, with new nominations made by the Governor during the budget weekend). The law also puts in place a process for an acting CEO/Chair to be in place not more than six months unless the Senate has not acted on a nomination from the Governor to fill the position. Any candidate filling the vacancy requires advice and consent of the Senate, as for regular appointments.

5. Independent Forensic Audit and “Reviews” of Waste, Fraud and Abuse
A provision retained from the Senate’s one-house bill requires the MTA to hire a certified public accounting firm to conduct an “independent forensic audit” that will review the MTA capital program, among other items. The firm cannot have done business with MTA in the last five years, or employ a former MTA employee who moved over in the past three years. The forensic audit is to be completed by January 1, 2020, and will be posted on the MTA website 30 days after submission to the MTA Board.

It also requires the MTA to hire a financial advisory firm with a national practice to review waste, fraud, abuse, and conflicts of interest; duplication of functions; cost efficiencies; the 2015-2019 capital plan; the MTA’s performance metrics; and cash flow and accounting of expenditures. The firm will submit its “reviews” by July 31, 2019 to the MTA Board, which will be posted on the MTA’s website.

6. Major Construction Review Unit
The MTA is now required to create a Construction Review Unit within the authority, which will consist of a panel of “internal and external experts” appointed by the MTA Board. It will review all “large scale projects” (this is not defined). It is given specific authority to review plans involving signal upgrades, including Communications Based Train Control (CBTC), the current industry standard, and ultra-wideband technology before they are implemented. Ultra-wideband is one component of CBTC, the radio technology for potential use as the “communications” part of CBTC. Its review of any project must be completed within 30 days of submission by MTA staff.

7. Capital Program Review Board
Members of the Capital Program Review Board, which is made up of four voting members, one each from the Governor, Senate and Assembly majorities, and New York City Mayor, are now required to provide a written explanation if a member rejects the MTA’s capital plan or any amendments the Board is considering. The written explanation must include specific areas of concerns and steps to address these concerns. The MTA may provide a response to the rejection, and after 10 days the disapproving member can withdraw the disapproval.

8. Debarment of Contractors
The budget authorizes the MTA to develop a debarment process for contractors to prevent bidding on future contracts for a five-year period. Any regulations developed must ensure notice and an opportunity to be heard. Debarment is to only be provided for situations involving: failure to substantially complete work within time frame of contract, or in a subsequent change order by more than 10% of the contract term; or where disputed work exceeds 10% of the contract cost and claimed costs are deemed invalid.

9. Fare Evasion Plan
The MTA is required to establish a plan to combat fare evasion, in consultation with the Governor, Mayor, and District Attorneys within New York City by June 30, 2019. The details of this consultation are not defined, and presumably will be dependent on the interest of the official identified as being participants.

10. East Side Access
The budget requires that the “L Train independent review team” (the Deans of Columbia and Cornell University who provided an alternate plan for the L Train shutdown), will evaluate the East Side Access project, and make recommendations to accelerate its completion. The project is currently at $11.3 billion in total costs, up from a projected $4.3 billion in 2006, where it was projected to be finished in 2009. It now expected that service will start running in December 2022.

11. Capital Plan Legislative Funds
The budget gives the Legislature a pot of funding that is set aside from the 2020-2024 capital plan for transportation improvements for the subways, buses and commuter railroads, subject to a Memorandum of Understanding (MOU). These types of agreements have been used in the past for other pots of funds, and are not required to be made public. They have not been voted on publicly by the members of the Legislature, so the public in the past has not known which members are requesting individual projects.

This MOU is to be entered into by the Senate Finance Committee Chair (currently Senator Liz Krueger), Assembly Ways and Means Chair (currently Helene Weinstein) and Director of the Budget (the Director of the Division of the Budget - currently Robert Mujica). The MOU is to be approved not more than 90 days after approval of the capital plan by the Capital Plan Review Board.  It should be noted that last year’s budget created a separate $50 million outerborough transit fund, to be used annually by the Legislature for individual projects.

12. Procurement
The budget legislation made a number of changes to procurement at the MTA, relating to both how it selects contractors and who reviews any contracts before they are executed. It extends until 2023 requirements regarding the selection of lowest possible bidder, where possible. It also raises the threshold for requiring use of lowest possible bidder to contracts of $1 million or more from $100,000, and raises the threshold for MTA Board approval of contracts not awarded to the lowest possible bidder or conducted under formal competitive process to $1 million or more.

Where the State Comptroller has existing pre-audit authority for NYCT and MTA contracts (the ability to review noncompetitive contracts over $1 million or those involving state funds, and not making them enforceable until approved), the Comptroller must provide a determination within 30 days receiving the contract from the MTA.

13. Performance Metrics
Another component remaining from the Senate’s one-house bill is a requirement for the MTA to use specific performance metrics, largely borrowed from Transport for London, which are defined in law, including:

-Additional platform time
-Additional train time
-Customer journey time and excess journey time
-Elevator and escalator availability
-Major incidents metrics
-Staff hours lost to accidents
-Terminal on time-performance

On-time performance is defined as arriving within two minutes of scheduled time. Note that two minutes for the subway is very different than for Metro North and Long Island Rail Road, which are required to use the same standard though the frequency and length in terms of mileage of service are very different.

The new law also requires the MTA to publish weekly performance reports for NYCT, LIRR, and MNR, as well as release of an annual report with international benchmarking on costs per mile for operating and maintenance, as well as staff and contractor hours for passenger journeys, and staff hours lost to accidents. Lastly, the law requires release of an annual implementation report for the Legislature and Governor by December 31 every year, which will be posted on the MTA website.

14. Twenty-Year Capital Needs Assessment
The last component remaining from the Senate’s one-house bill requires for the next capital plan (2025-2029) that the MTA submit to the Legislature a 20-year capital needs assessment before October 1, 2023, and every five years after for future plans. Its last 20-year capital needs assessment was released in 2013 prior to the finalization of the current 2015-2019 capital plan.

The 20-year needs assessment will include broad long-term capital investments to be made, and establish a non-binding basis for planning of strategic investments involving capital elements of five-year capital plans. The assessment does not require the MTA Board or CPRB approval, and is for information purposes only, though it is required to be certified by the MTA CEO/Chair and entered into the formal records of the minutes of the CPRB.

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Rachael Fauss is Senior Policy Analyst at Reinvent Albany. On Twitter @RachaelFauss & @ReinventAlbany.

 

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

 

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The Devilish Details of Albany’s MTA Budget Package Sun, 14 Apr 2019 04:00:00 +0000
Federal Tax Reform is Shaking Up New York’s Finances But Flow of Bank Settlement Money is Bailing Out the State Budget https://www.gothamgazette.com/130-opinion/8444-federal-tax-reform-shaking-up-new-york-bank-settlement-bailing-out-state-budget https://www.gothamgazette.com/130-opinion/8444-federal-tax-reform-shaking-up-new-york-bank-settlement-bailing-out-state-budget cuomo salt weather

(photo: governor's office)


The federal tax law overhaul enacted at the end of 2017 capped state and local income and property tax deductions on federal income tax returns at $10,000, damaging millions of New Yorkers’(and tens of millions of other Americans’) ability to itemize deductions on their federal tax returns. The change also resulted in sudden shifts in New Yorkers’ behavior toward their own New York tax payments. Over the past two budget cycles the changes have destabilized New York State’s tax revenue collection patterns and caused considerable uncertainty in the state’s budget and funding for the services New Yorkers rely upon.

A recent report by Moody’s Investors Service indicates the fears of Governor Cuomo and other New York leaders that the federal tax deductions cap will cause New Yorkers to flee the State may be exaggerated. But that report only reviewed New York outmigration patterns through 2017 -- this analysis focuses on immediate changes in New Yorkers’ behavior as New York taxpayers and how those changes have affected the past two budgets and the one just adopted. How many New Yorkers will leave the state remains unknown.

In December 2017, following Congress and Trump’s tax reform, the state government experienced a sudden spike in tax payments as New Yorkers chose to make tax payments in 2017 rather than 2018 so they could still deduct in excess of $10,000 in New York taxes from their federal returns, and avoid, at least briefly, the coming limits on deductions to the extent that they could.

According to a 2018 State Comptroller report, the State Division of the Budget estimated that $1.9 billion came into the New York treasury that represented an acceleration of 2018 tax payments into 2017 to take final advantage of full state and local tax (SALT) deductibility. As a result, New York’s tax revenue rose more than 6% in 2017-18 over 2016-17. But, of course, it was anticipated that these 2017 payments would affect 2018 payments and that tax collections would correspondingly fall in 2018. At the time of budget adoption in 2018, the state predicted tax revenue would fall 2% in 2018.

In December 2018 and January 2019, however, tax collections fell precipitously, resulting in a $3 billion drop below estimates made at the time of the April 2018 budget enactment, for a total drop of $ 4.4 billion, or 6.4% below the 2017-2018 budget, not 2%.

Many wealthier taxpayers, with large incomes from capital gains, pay significant portions of their New York State taxes in quarterly estimated payments, including a regular January quarterly payment, rather than in withholding taxes, which are usually related to wages and salaries. Before the federal tax overhaul, New York taxpayers had an incentive to make their January estimated payment in December to assure they could take their tax deductions for that year on their next federal return. But with itemization nearly wiped out, the incentive to make the estimated tax quarterly payment early disappeared. The loss of this incentive is believed to be the main factor in the dramatic revenue declines this past December and January.

The State Division of the Budget believes that some of the money might be recouped in estimated payments in the first quarter of this year following January, but since the state adopted its budget for the April 1 start of the fiscal year, there was no way to know yet how much of the money might be recouped. So the governor and the Legislature chose caution and limited spending increases this year.

New York is not going broke, and the economy and tax revenue are still anticipated to grow, but the shock from the billions in lower revenue informed a cautious approach. The 2018 stock market decline also affected New York’s tax revenue from capital gains. For the first time in many years the governor and the Legislature added to the rainy-day reserve funds rather than add a lot of new spending.

Shoring up the state’s financial situation has been an extraordinarily fortunate additional development over the past few years. Litigation against the financial industry for wrongdoing that occurred during the Great Recession has resulted in many banks and financial companies agreeing to settle lawsuits for fraud and other problems with New York State for almost $12 billion(!) since 2015. New York spent much of the first of these settlement dollars on economic development to help the stagnant economy in Upstate New York , but in 2017 and 2018 $2 billion more has come in from new financial settlements, and the state has simply used the money to bail out the state budget and fund the MTA.

In the 2018 fiscal year the state put $461 million from over $800 million in new settlement funds that year into the state budget, and set aside $155 million to cover future labor contract increases. In the adopted fiscal year 2019 budget (for the fiscal year beginning April 1, 2018), the state put another $383 million from financial settlement into the budget, and took $194 million of additional settlement funds to help pay for the one-time 2018 cost of the MTA Subway Action Plan (2019 and beyond was covered from a tax).

But as 2018 progressed, an extra $1.2 billion more in financial settlement funds came into the state treasury that had not been booked by the state in the April budget adoption! In the budget just adopted a week ago, Governor Cuomo and the Legislature took $336 million of the new money to cover the early 2019 winter shortfalls related to apparent taxpayer behavior changes, and have set aside more than $600 million from the financial settlement funds in reserves to reduce future risks in the case of economic downturn, federal cutbacks, or other problems.

The combination of rainy-day funds and financial settlement reserves now totals $5 billion for the 2019-2020 fiscal year, which began April 1 and has a total state budget of $175.5 billion.

In an important revenue action, the state again renewed the higher rate for taxpayers with incomes over $2.2 million at 8.82%, yielding $770 million this year and an extra $4 billion next year, for five full years.

School aid was increased 3.7% (New York City got 3.4% more). The Legislature restored $550 million for the Medicaid program that the governor tried to cut after the shortfalls appeared.

The minimum wage increase that took place on December 31 to $15 per hour for New York City necessitated $700 million in additional Medicaid spending to cover the cost of raising the pay of workers in hospitals, nursing homes, and home care agencies who made less than $15 an hour in the city, as well as somewhat lower raises outside the city.

The state anticipates tax revenue will recover from the decline this past December and January, although overall it will be lower than had been hoped last year.

The challenges to fund the MTA will continue, since the tax and fee increases to assure $25 billion for its 2020-24 Capital Plan don’t approach the $40 billion estimated to be needed for that plan or the $7 billion for the current 2-15-2019 plan that remains unfunded. But don’t expect more tax increases for the MTA in an election year in 2020.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

 

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

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Federal Tax Reform is Shaking Up New York’s Finances But Flow of Bank Settlement Money is Bailing Out the State Budget Thu, 11 Apr 2019 04:00:00 +0000
Report Undercuts Cuomo and DiNapoli Claims of Outmigration Because of Federal Tax Law https://www.gothamgazette.com/state/8440-report-undercuts-cuomo-and-dinapoli-claims-of-outmigration-because-of-federal-tax-law https://www.gothamgazette.com/state/8440-report-undercuts-cuomo-and-dinapoli-claims-of-outmigration-because-of-federal-tax-law governor and cuomo salt rev

Gov. Cuomo, middle, and Comptroller DiNapoli, right (photo: Governor's office)


In the last few months, Governor Andrew Cuomo and State Comptroller Tom DiNapoli have raised red flags about the impact of the 2017 federal tax overhaul ushered through by President Trump and Republicans in Congress. Chiefly, they said that a new $10,000 cap on the State and Local Tax (SALT) deduction has led to a massive drop in revenue and is likely being accompanied by increased outmigration of high-earning New Yorkers to states with lower taxes.

But Cuomo and DiNapoli never provided concrete proof of the alleged trend and a new report undercuts their claim, to an extent, showing that New Yorkers have not been leaving the state because of the SALT cap but rather as part of continuing demographic trends and shifts in job markets.

Moody’s Investors Service, a leading ratings agency, released a report on Monday that said there are “no discernible signs” that the change in the SALT deduction is leading to people moving out of high-tax states, and notes that the impact of the new cap “will be felt widely for the first time this tax season and possibly spur some out-migration, but jobs and demographic trends will continue to influence relocation patterns more than tax burdens.”

The initial findings, based on 2017 data, fly in the face of the governor’s more definitive claims that the federal tax reforms -- which largely benefited corporations and wealthy individuals -- were leading to outmigration from high-tax Democratic states like New York, Connecticut, and New Jersey, where high-income earners make up a large part of the revenue base.

“We hope Moody’s is right, but with the first filing deadline post-SALT still upcoming, we are in the first inning of a long game,” said Freeman Klopott, a spokesperson for the state Division of the Budget, which is under Cuomo. “By the federal government’s own calculation, the cap on SALT is a more than $600 billion tax hike that will be borne overwhelmingly by New York and similarly situated states, making it an attack on the work we have done to strengthen New York State’ economy with a 2 percent limit on annual State spending growth, a cap on local property taxes, and a tax cut for every New Yorker.”

Brian Butry, a spokesperson for DiNapoli, said in an email, “As New Yorkers finalize their taxes, some are learning for the first time the impact of the SALT cap. The jury remains out on what the long-term effect will be.”

At a February 4 news conference, Cuomo and DiNapoli made a dire announcement that personal income taxes had come in $2.3 billion lower in December and January than the prior year, warning that even a small amount of outmigration of high-income residents would have a significant impact on state revenue. The SALT cap, they said, cost the state $14.3 billion in total.  

“SALT encourages high-income New Yorkers to move to other states,” Cuomo said, using his typical and misleading shorthand of “SALT” to mean the new cap on SALT deductions (the governor also regularly says that SALT was ended, when it has been capped). “And what you have to remember is even if a small number of high-income taxpayers leave, it has a dramatic effect on this tax space.”

He continued, “Taxpayers are adjusting in response to SALT....We have been hearing all along from the major accounting firms, to major individuals, that this is going to be the tipping point and that people now will be making a decision to make a geographic location change. And the SALT provision, remember, did not go into effect yesterday. It had over one year to adjust, so you didn't have to move on 24 hours' notice. You had one year to start to plan a move. And it goes into effect this April, so if you had to move or decided to move, now is the time that you would do it.”

DiNapoli was less forceful in making that argument that day. “We certainly have all heard anecdotally, as the Governor pointed out, people who say they're going to change their legal address, and I think these numbers show that in fact that is probably a big part of the picture,” he said, while acknowledging that several other factors, including volatility in the financial markets were to blame for the recent revenue decrease.

In a March 13 interview on WBAI radio with Gotham Gazette’s Ben Max and City Limits’ Jarrett Murphy, DiNapoli continued that line of reasoning while maintaining that he would need to examine months of data from the Department of Taxation and Finance before coming to a firm conclusion. “I do think that is a piece and probably a very significant piece, of what’s happening,” he said of the alleged SALT cap impact on taxpayer behavior and state revenue. “We’re gonna need more months of data....My instinct tells me the governor was on the right track, that the biggest piece of the shortfall was the response to the adjustment in federal tax reform.”

[LISTEN: Max & Murphy Podcast: Comptroller Tom DiNapoli (March 2019)]

The Moody’s report, however, points out using Census Bureau data that migration rates between 2012 and 2017 in the five states where “the SALT deduction represents the largest share of total federal adjusted gross income” -- California, Connecticut, Maryland, New Jersey and New York -- “are below pre-recession levels and generally follow the US as a whole.” The report notes that it is too early to gauge if the federal tax law has affected migration, contrary to what Cuomo and, to a lesser degree, DiNapoli have said. The report also said that people are generally moving from one high-tax state to another.

“In 2017, 25%-30% of people who moved out of New York, Connecticut and New Jersey moved to another one of the five high-tax states,” the report reads. “The most popular destination for people moving out of New Jersey and Connecticut was New York.”

The report does confirm long-running concerns from Cuomo and others about migration of New Yorkers to Florida, a state with far lower taxes. Moody’s noted that 14% of people who moved out of New York in 2017 went to the Sunshine State. But, those who moved were not primarily driven by lower taxes but rather by job opportunities, climate, and housing costs, the report said. The trend of New Yorkers moving to Florida is nothing new, however. Overall, New Yorkers have consistently been leaving the state since at least 1961, according to the Empire Center, a think tank, and the state saw a net loss of more than 1 million people between 2010 and July 2017.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Report Undercuts Cuomo and DiNapoli Claims of Outmigration Because of Federal Tax Law Tue, 09 Apr 2019 04:00:00 +0000