Behind Andrew Cuomo’s stall on slashing spending to balance NY’s budget
On April 2, with New York’s COVID-19 curve still rising ominously, state lawmakers wrapped up a budget almost unchanged from Gov. Andrew Cuomo’s pre-pandemic January proposal. With the economy in a coma and revenues crashing, the plan obviously was awash in red ink.
“We can’t spend what we don’t have,” Cuomo said, implying he would do what was necessary to restore balance. Armed with unusual enhanced power to bring spending into line with revenues, he has repeatedly warned he might slash some programs by 20 percent.
But so far, two months into the fiscal year, the governor hasn’t pulled the trigger on any cuts — or even released a list of what he is aiming at. Instead, Cuomo has been playing for time and snowplowing bigger problems into the future.
The governor assumes that Republicans and Democrats in Washington will agree to a fourth huge stimulus bill, including general budget relief for states and localities. That’s probably a safe bet, although the final deal may not come until late June.
Meanwhile, egged on by the state’s teachers’ unions, the Legislature’s income-redistribution fantasists have introduced bills they claim can balance the budget with massive tax hikes on “millionaires and billionaires.”
Cuomo knows better. In the past, he has warned: “God forbid the rich leave” — and now, fleeing COVID-19, many have done just that. Fear of a resurgent virus, or the prospect of tax hikes, or both, could prompt more than a few to stay away.
He can boast all he wants about past spending restraint, but a look at the post-pandemic fiscal trend lines is all Cuomo needs to remind himself that budgets at every level of government in New York are simply unsustainable. However, bringing spending back in line with greatly reduced tax dollars can’t be done without taking on entrenched special interests — especially government labor unions.
And so, for now, Cuomo would rather dial up his demands on the feds. An inveterate fudger of numbers, the governor has variously described the state’s budget shortfall as $10 billion, $13 billion and $61 billion — the last figure calculated by combining four years of revenue and spending projections. The real figure is closer to $8 billion, but whatever Cuomo gets, it will be a mere stopgap.
The latest state financial plan projects it will take four long years for the Empire State’s tax revenues to recover to last year’s levels. Without more federal aid extending beyond the current fiscal year, the governor would need to make unprecedented nominal cuts in spending to balance the budget without tax hikes starting in 2021.
To the extent Cuomo has any alternative plan for dealing with the long-term fiscal challenge, it probably rests on the assumption that next year will bring a Joe Biden presidency and a Democratic Senate majority. With Democrats in control of both Congress and the White House in 2021 and 2022, Cuomo could hope the feds keep the bailouts flowing for another year or two.
This also explains why the governor has renewed his public complaints about the federal cap on state and local tax (SALT) deductions, enacted as part of the Republicans’ 2017 federal tax reform. Cuomo’s gripes weren’t aimed at President Trump or Majority Leader Mitch McConnell, who couldn’t care less about the issue. Rather, looking ahead to 2021, Cuomo has been making his case to Biden, House Speaker Nancy Pelosi and the aspiring Senate majority leader, New York’s own Chuck Schumer.
If the Democrats sweep in November, the all-but-inevitable federal tax hike in 2021 will be especially large — and aimed squarely at the kind of high earners who form an outsized chunk of New York’s tax base, whose tax bills were raised by the loss of SALT breaks.
And so while other states plan cuts, Cuomo keeps stalling, taking some minimal steps to prop up his sagging cash flow.
To cope with the federally imposed three-month delay in income-tax filings, the governor plans to issue $4.5 billion in short-term bonds. He is saving another $1 billion by indefinitely suspending some scheduled state aid payments, including $357 million due in May and June to a dozen cities now staggering to the end of their fiscal years.
Shifting a cash-flow problem to smaller downstream entities with fewer resources, in the teeth of a recession, is just the sort of thing Cuomo would complain about if the feds were doing it to him. But like the man said, you can’t spend what you don’t have.
E.J. McMahon is research director at the Empire Center for Public Policy and a Manhattan Institute adjunct fellow. Twitter: @EJMEJ
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