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STATE

Key Issues to Watch as New State Budget is Finalized


Cuomo state budget briefing

Gov. Cuomo and top aides (photo: governor's office)


The deadline for the state’s 2020 fiscal year budget is midnight on Sunday and state legislators are expected to work through the weekend as they negotiate a variety of thorny issues with Governor Andrew Cuomo, finalizing the details of policies that have been agreed to in principle, fighting over other issues that are less settled, and determining exactly how much to spend on what in the new fiscal year that begins Monday.

Some of the budget bills are already public, with key details emerging, while the final of the series of bills, together commonly referred to as “the budget,” is likely to hold many of the major policy compromises that may come together in the final hours. Some high-profile deals already appear in place, including a ban on plastic bags (with some carve-outs) and an accompanying fee on paper bags. Ultimately, “the budget” will be a long list of compromises on spending, taxing, and policy priorities.

The new budget is expected to come in at roughly $175 billion.

The governor has been touting his top priorities -- congestion pricing, criminal justice reform, and a permanent property tax cap -- but there are a slew of other issues he cares about and those being pushed by the Senate and Assembly majorities, and even with Democratic control of both houses and the governor’s office, it’s hard to predict which ones will be included in the final budget bills.

If the governor does not get his way, he has threatened to let the deadline pass without signing a budget, though legislative leaders have said they’re committed to ensuring they will get it done on time. (The first pay raises for legislators in roughly two decades hang in the balance, though it’s not exactly clear how on time the budget needs to be for those pay raises to stay on track.)

In the mix are also several cost shifts and funding cuts to New York City, which Mayor Bill de Blasio has warned about and is lobbying against. As has been the case over the years, it’s not likely that he’ll be successful in pushing back each and every one.

Cuomo’s Priorities
The governor has made it clear that the Legislature must agree to his three top priorities, without which he says he won’t sign a budget before the deadline. He has been rallying to make the 2 percent cap on annual property tax increases permanent -- the cap is in place in counties outside New York City and will expire next year. He also says he fears that the Legislature will punt on criminal justice reforms -- changes to bail, speedy trial, and open discovery laws -- and believes the budget provides the right pressure to get to a deal, especially on the contentious and complicated details of bail.

On congestion pricing, Cuomo has attempted to corral all the stakeholders, even winning the support of Mayor de Blasio, who had been a long-time opponent of the policy. Like with others, the details must be worked out and there are a variety of stakeholders who want a say. Long-term funding of the MTA is at stake, not to mention trying to reduce traffic in Manhattan.

Cost Shifts to New York City and Education Aid
De Blasio warned in his own preliminary budget proposal in February that the governor’s budget would impose a $600 million burden on the city in cost shifts and cuts to existing programs. A large part of that total stems from $300 million in less-than-expected education funding, with the governor proposing a new school funding formula to reach the poorest schools in the neediest districts. The details of that formula remain a mystery.

Education aid across the state is the largest portion of the budget and always one of the most contentious issues. State legislators, advocates, and local officials always want a larger increase in aid than Cuomo believes is necessary, with data largely supporting the governor. This year, Cuomo is attempting to change the system, but it’s unclear whether legislators will go along, even with tweaks.

Campaign finance and ethics reforms
The governor has called for public financing of elections, aiming to create a system similar to the one currently used in New York City where small dollar contributions are matched with public funds. Despite Democrats in both the state Senate and Assembly having supported legislation in the past to create such a system -- the Assembly has even voted it through its chamber -- there isn’t agreement on a final bill, and the possibility that it will either not make it into the budget or there will be a somewhat vague passage in the budget language that is a commitment to create a system at a later date, perhaps through a new commission.

Assembly Speaker Carl Heastie recently raised several unfounded and some more legitimate concerns about the proposal and indicated that there weren’t enough votes in his chamber to approve it. But then his chamber had support for a public campaign finance system in its one-house budget resolution. Senate Majority Leader Andrea Stewart-Cousins and her members have been more steadfast in their commitment to campaign finance reform, with several senators loudly pushing for it along with a massive coalition of advocates representing more than 200 organizations across the state.

Some long-sought campaign finance reform did pass earlier this year, with the significant narrowing of the infamous LLC loophole.

Less talked about in the budget debate have been the governor’s proposals to tackle independent expenditures, which includes new disclosure requirements for 501(c)(3) and 501(c)(4) organizations, as well as Cuomo’s proposal to require any entity that spends at least $500 in a year to register as a lobbyist. Nonprofits, advocates, and activists have pushed back against the ideas, saying the governor is attempting to stifle his critics.

Cuomo has also called for banning campaign contributions from corporations and limited liability companies, and a code of conduct for lobbyists, which Cuomo said he would implement for the executive branch if lawmakers do not approve it. The Legislature has already approved lowering LLC contributions to $5,000, in line with corporate donations.

Advocates have also urged the passage of clean contracting bills that reduce conflicts of interest and prevent corruption in the state’s contract bidding processes. Cuomo has promised unilateral action on creating a so-called ‘database of deals’ which would detail projects receiving state benefits and make them accessible to the public. He’s also proposed strengthening the oversight powers of the comptroller and the state attorney general. It’s unclear if those provisions will also be passed into law.

Voting reforms
Republicans who controlled the state Senate for years were loathe to approve several voting reforms that Democrats repeatedly proposed in vain. This year, advocates were buoyed in their hopes that reforms would sail through. Some already have as the Legislature passed early voting and began the process of amending the state constitution to allow same-day voter registration and no-excuse absentee ballots by mail.

The Senate has moved ahead on allowing the use of electronic poll books but there has yet to be a three-way agreement with the Assembly and governor’s office, though there have been rumors that a deal is imminent. There also isn’t consensus on how many days of early voting the state will allow or how much funding the budget will include to implement it locally. It's also unclear if a system of automatic voter registration may be implemented.

Criminal Justice Reforms
The three big reforms that advocates have long called for include banning cash bail and making other changes to pre-trial detention rules to keep far fewer people incarcerated, and implementing speedy trial and open discovery legislation. Cuomo has insisted the proposals must be in the budget and has even that he will “take the blame” for their passage if suburban legislators are worried about approving them.

But there has been pushback against the proposals from the state district attorneys association, other law enforcement, and more conservative legislators. There has also been disagreement among progressive Democrats about where to draw certain lines, including around what discretion judges will have to determine the accused’s “dangerousness.” The Senate and Assembly nearly reached a deal a few weeks ago on the package of bills but it failed at the last minute. Given the focus on these issues, especially from the governor, a deal is likely.

MTA Restructuring, Congestion Pricing, E-Scooters and E-Bikes
Transit issues have been front and center in this year’s budget negotiations with New York City’s subway crisis lending added urgency to the need to find a sustainable revenue source for the Metropolitan Transportation Authority (MTA). Cuomo has made a big push for congestion pricing as one of the main funding sources and has also called for restructuring the MTA board to give him more control, though he already appoints a plurality of board members and its top leadership, and the board rarely, if ever, goes against his wishes.

Though the Legislature seems close to an agreement on a congestion pricing program, which would toll cars entering Manhattan’s Central Business District, the specifics haven’t been ironed out yet, including around exemptions to the fees, changes in bridge tolls, and investments in other MTA branches, like LIRR and Metro North.

Cuomo has also called for the state and New York City to split 50-50 any MTA capital costs that aren't covered by dedicated funding streams. It's unclear if state legislators will allow that language to be part of a final budget deal or if the process around negotiating the MTA capital budget will be left to a later date as it typically is.

Speaker Heastie indicated the Assembly is willing to advance the proposal in principle while Senate Majority Leader Andrea Stewart-Cousins has been less definitive. The governor’s proposals for the MTA’s structure also remain uncertain.

The governor has also proposed allowing municipalities to legalize the use of electronic scooters and bicycles, and big firms that offer those services have been expending significant resources lobbying state lawmakers, regulators and the governor’s office to push that policy through. Legalization would be particularly impactful in New York City, where the NYPD and Mayor de Blasio are facing criticism from the City Council and advocates over a crackdown on e-bike use that has been particularly impactful on immigrant delivery workers.   

Marijuana Legalization
Cuomo has proposed legalizing the recreational use of marijuana for adults, which the state estimates would raise about $300 million in revenue annually. He had hoped to use that revenue to fill the MTA’s budget gaps.

But earlier this month, Cuomo raised doubts about whether marijuana legalization would be included in the state budget and said if it was not, then it most likely would not happen at all this year. However, the Assembly and Senate leaders have indicated that they are willing to advance it. As the budget negotiations moved ahead, it appeared a marijuana legalization deal would not come together in the budget, but nothing at all in play is ever fully in or out until the budget is done.

Census Funding
The New York Counts 2020 coalition of nonprofit organizations, business groups, and community service providers have been pushing the state to include at least $40 million in the budget to fund outreach efforts for the decennial population count next year. This census, where New York has a great deal on the line in terms of congressional representation and federal funds, will be particularly challenging, with the federal government underfunding the Census Bureau and primarily relying on a digital methodology, which is a departure from previous years, not to mention the push for a citizenship question.

New York already faces its own unique issues with reaching hard-to-count communities, particularly because of the state’s large immigrant population, much of which is concentrated in New York City. And though the state created a commission to examine the issues around the Census, it was not named until after its initial deadline for submitting a report had already lapsed. That report is not expected until after the budget. Indications on Thursday, including from the city’s Census leader, Julie Menin, pointed to the $40 million being included in the state budget, but that had not been finalized.

Education Aid, Mayoral Control and Charter Cap
In past years, Governor Cuomo and Senate Republicans repeatedly dangled mayoral control of New York City schools over Mayor de Blasio to extract concessions such as increasing funding for charter schools and more transparency from the Department of Education. This year was less contentious but Democratic legislators still wanted adjustments to approve an extension.

The mayor is expected to receive a three-year extension on mayoral control, up from a two-year renewal last time and multiple single years before that, but will nonetheless have to commit to certain demands made by legislators from his own party, including improvements in parent engagement.

New York City this year reached a statutory cap on the number of charter schools in the five boroughs, which Cuomo and Republicans had increased in previous legislative sessions. Charter school advocates have continued to push for eliminating or increasing the cap but lack powerful allies in the Legislature. If there is an increase in the charter cap snuck into the budget, it will all but certainly be because Cuomo made it a priority.

Cuomo proposed an increase of several hundred million dollars in education funding, for a total of $27.7 billion, and spoke of a new “Education Equity” formula to replace the Foundation Aid formula currently used to provide additional funding to school districts. But he hasn’t released details of the proposal, which the state education department is meant to outline. That has incensed education advocates and New York City elected officials who say the governor is not living up to the Campaign for Fiscal Equity court decision which would means billions more in education funding. The two legislative majorities outlined increases in education aid of more than $1 billion in total, with the final number likely somewhere between theirs and Cuomo's.

Revenue Raisers and Taxes
Besides congestion pricing, budget negotiations have also involved other possible revenue raising measures including a pied-a-terre tax, a real estate transfer tax, an internet sales tax, and the extension of the state’s so-called millionaires tax.

After talks of marijuana legalization seemed to stall, the Senate had floated the idea of a pied-a-terre tax on people’s second homes worth more than $5 million in New York City to replace the revenue that would have come in for the MTA from marijuana taxes. The pied-a-terre tax could raise an estimated $650 million each year. Cuomo was on board with the proposal as well, but the Assembly shot down the idea, citing difficulties in navigating the complicated property tax system in the city. Speaker Heastie said instead that the state should do a simpler one-time tax on expensive real estate transfers above $5 million. The discussion appeared to stall.

Cuomo has additionally proposed eliminating a loophole that allows third-party online retailers to avoid collecting sales taxes -- which could bring in nearly $400 million in revenue.

On the millionaires tax, there reportedly seems to be three-way agreement on a five-year extension of the current rates, though an Assembly proposal to increase the tax, and the number of people it applies to, did not get much support.

A previously-scheduled middle class tax cut appears to be staying as designed.

Healthcare and Medicaid
Cuomo had proposed as much as $550 million in additional state Medicaid funding in his budget proposal but he pulled back in February as the prospect of federal cuts to healthcare loomed and tax revenues came in lower than expected. Both the Assembly and Senate pushed to restore that funding and Cuomo appeared to backtrack.  

Environmental Policy
After he and the Legislature overrode a New York City law to impose a fee on single-use plastic and paper bags at retail stores two years ago, Cuomo introduced legislation last year to pursue a statewide plastic bag ban. The bill failed in the Republican-led state Senate but Cuomo reintroduced the proposal this year and it appears on the verge of passage, with a variety of carve-outs and other specifications, like a fee on paper bags and opt-out provisions for localities. Legislative leaders indicated on Wednesday that they had reached an agreement on the bill and that it will likely be passed with the budget.

There’s also a concerted effort this year by environmental advocates to advance the Climate and Community Protection Act, which would transition the entire state economy to renewable sources of energy by 2050. The bill has passed in the Assembly three years in a row but there isn’t consensus this year with the governor’s office or the Senate. Cuomo introduced his own Climate Leadership Act, which is similar in ways to the CCPA but would only mandate that the state’s electricity sector be renewable by 2040. Advocates say his proposal doesn’t go far enough and it’s hard to see what compromise he may reach with the Legislature. This legislation has been little discussed by Cuomo or legislative leaders as the budget deadline approaches.

Pay Raises
If the state Legislature fails to pass an on-time budget, which would technically mean by the April 1 deadline, senators and Assembly members will lose out on a $10,000 annual raise (from $110,000 to $120,000) in their base pay which is meant to go into effect on January 1, 2020. The raises were put into motion by a state commission last year, which set a schedule to bump up legislator salaries over a three-year period. The raises also apply to the comptroller, state attorney general and certain state agency commissioners. Cuomo has seemed to use the raises as leverage over the Legislature to ensure that the budget is not late and that it includes his priorities.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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