Even as he concedes New York State faces severe financial woes in 2021, Gov. Andrew Cuomo remains convinced that federal aid will solve this fiscal year’s $8 billion budget problem.
And he’s betting New York’s immediate fiscal future on Joe Biden becoming the next president.
If Cuomo is right, the state and the city will sidestep the need for layoffs or major service cuts this year.
If he’s wrong, he’ll have few options to close his pandemic-wrought deficit with less than five months left in the state’s fiscal year.
“With a Biden victory, we know there will be a state-and-local package which will go a long way toward handling New York’s economic problem,” Cuomo said Thursday morning during an interview on Albany radio station WAMC. “We don’t know how far, but it is a matter of time now.”
Some fiscal experts say the governor’s course is reckless. They note the combined budget deficits of the state, city and the MTA total $88 billion over four years and that federal aid will not come close to filling the hole — no matter who wins the presidential election.
Meanwhile, the specter of the Republicans retaining hold of the U.S. Senate spells more trouble for New York, the experts say.
“Federal aid’s a bridge and that bridge has to land somewhere solid,” said Andrew Rein, president of the Citizens Budget Commission.
Furloughs at CUNY
The state faces a budget deficit of up to $8 billion for the fiscal year ending March 31.
The actual gap is likely to be smaller since tax collections have been stronger than forecast — especially for state income taxes, which are now projected to increase by 2.3%, thanks to strong profits on Wall Street. Income tax revenues had been expected to drop by about 1%.
The Cuomo administration has also been withholding 20% of payments to local governments, except school districts, and has the option of not paying back $4.5 billion it borrowed earlier in the year to deal with delayed income tax payments. These factors have allowed Cuomo to delay dealing with the deficit.
Not everyone agrees with that approach.
On Wednesday, CUNY Chancellor Matos Rodriguez ordered five-day furloughs for top administrators and deans in a letter that said he could wait no longer for federal aid with the election resulting in uncertainty about the political situation in Washington.
Cuomo’s optimism on federal aid is also not shared by other experts.
“Senate Republicans, not President Trump, were the main obstacle to passage of a stimulus bill building on the CARES Act passed by Congress in March,” said E.J. McMahon of the Empire Center.
New York’s share of $300 billion in state and local aid approved by the Democratic House would have been between $10 billion to $15 billion. “But Senate Republicans were standing firm against providing any new state and local aid,” he added, echoing comments from a recent blog post.
The Citizens Budget Commission agrees, and notes it is possible no aid will arrive before the end of the fiscal year. The governor keeps sidestepping a requirement in the approved budget that he spell out what he will do if the deficit remains in the billions.
‘The state is going to be desperate for money next year, even with Biden.’
No matter what happens this year, Cuomo concedes the problem is going to get worse.
“The state is going to be desperate for money next year, even with Biden and even with stimulus,” he said on WAMC in explaining why he expects New York to legalize marijuana.
Meanwhile, the MTA needs $12 billion to avoid historic cutbacks in service and workforce. The comeback of public transit is widely considered crucial to New York’s prospects for an economic recovery.
Still, Rein said, “The MTA is unlikely to have a sympathetic ear in Washington.”
On Borrowed Time
The city, too, is benefitting from tax revenues that exceed expectations. And it may be helped if an infusion of federal funding means Cuomo releases the 20% in local aid being withheld.
But Mayor Bill de Blasio has failed to win any long-term savings as part of his demand to get $1 billion in labor savings from municipal unions.
Instead, he has struck deals to move more than $600 million in labor costs from this fiscal year to the next one, according to a tally by the CBC, which has already projected a $4 billion gap.
“I think the important thing to recognize is when our workforce is willing to make sacrifices to help us, that’s the kind of spirit we need in this city to get through,” de Blasio said this week during a news conference. “It’s real money that comes off the books now that we don’t have to pay now that helps us to weather the storm.”
In January, the mayor must propose a balanced budget for the 2021-2022 fiscal year.
While fiscal hawks like Rein and McMahon argue that reducing spending is the only way out of the fiscal mess, progressives oppose such steps.
“We need to keep in mind that the city’s budget problem is entirely due to the COVID-19 related business restrictions,” economist James Parrott of the Center for New York City at the New School said recently. “Since this is the result of a national public health crisis, the federal government has a responsibility to make up for lost state and local tax revenues.”
Like the mayor, Parrott’s preferred fallback position is to borrow money to fill the gaps.
“Time-limited borrowing authority to cover operating expenses is preferable to needlessly slashing expenditures and compromising essential service delivery,” he added.