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NY Budget Moves Toward Borrowing $11B, No New Taxes

By James Nani · April 2, 2020, 8:22 PM EDT

New York lawmakers on Thursday were headed toward approving a budget that won't increase taxes on the wealthy, doesn't legalize and tax cannabis and would authorize $11 billion in borrowing because of projected revenue decreases caused by the coronavirus pandemic.

Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers, said the budget was highly affected by the coronavirus pandemic. (AP)

While some left-leaning advocates had pushed for Democratic Gov. Andrew Cuomo and state lawmakers to approve increased taxes on the wealthy and large corporations, the revenue elements of the state budget bill that emerged this week didn't include such proposals. Instead, the state Legislature, controlled by Democrats in both the Senate and the Assembly, handed the governor the power to make ongoing spending cuts in light of projected tax revenue drops of $10 billion to $15 billion caused by measures to prevent the spread of the novel coronavirus.

The $177 billion budget would authorize up to $105.8 billion in spending, but unless the federal government steps in with additional funding for New York or revenue comes in higher than projected, actual spending would total $95.8 billion, Cuomo's office said. The budget would authorize a $10 billion reduction in spending and allow state Budget Director Robert Mujica to enact across-the-board cuts over the year.

The Senate passed the revenue budget bill, S.B. 7509B, on Tuesday by a 37-24 vote, and the Assembly passed its companion, A.B. 9509B, on Wednesday by a 97-44 vote. Other budget bills were still getting final approval as of Thursday evening, despite the state fiscal year starting April 1.

S.B. 7506B, which passed the Senate by a 35-26 vote Thursday, includes language proposing borrowing up to $11 billion to deal with state revenue shortfalls and anticipated cash liquidity issues due to the coronavirus pandemic and the moving of the federal and state income tax deadlines. Of that $11 billion, the state Dormitory Authority would be allowed to issue up to $8 billion in short-term bonding not subject to the state's debt limit statutes. The bonds would temporarily finance budget needs because of the federal government's deferral of the federal income tax payment deadlines from April 15 to July 15, the bill said.

The budget doesn't include small-business tax rate cuts or adult-use cannabis legalization and taxation, proposals Cuomo made in his original budget proposal in January but were removed by the Senate during negotiations. Cuomo had proposed cutting the state's corporate tax rate for businesses with 100 employees or fewer and less than $390,000 in net income from 6.5% to 4%.

Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers, speaking on the Senate floor Thursday after passing the last of the budget bills, said the budget was highly affected by the COVID-19 pandemic. Both chambers changed their rules to allow legislators to vote remotely, leaving legislative chambers uncharacteristically depleted during important budget votes. Stewart-Cousins called the nearly empty chamber "surreal," "chilling" and "upsetting."

"I think all of us can agree that the budget we are passing is not the budget we had hoped to pass at the beginning of this session, or even the budget we had envisioned just a month ago," Stewart-Cousins said.

Cuomo, taking questions during a COVID-19-related press conference Thursday morning, said increasing taxes was something he didn't think was appropriate.

"Look, I don't know how you raise taxes on people who are out of work and their business is closed because government needs more funding," Cuomo said. "I don't know how you do that now."

The offices of Assembly Speaker Carl Heastie, D-Bronx, didn't respond to requests for comment.

The offices of Assembly and Senate Republican leadership didn't immediately respond to requests for comment 

In a press statement from Cuomo's office Thursday evening, the governor touted that the budget included no new taxes. And although the measure became law in 2016, he highlighted that personal income tax rates will be cut for middle-income earners this year, the last leg of a three-year phase-in. Income tax rates this year will drop to 6.09% for New Yorkers making $43,000 to $161,550 annually and to 6.41% for those making $161,550 to $323,200, Cuomo's office said. 

But some groups said the lack of an increase in taxes to help the state deal with the fallout of the coronavirus pandemic was a failure by state leaders.

In a statement Thursday, Deborah Axt and Javier H. Valdés, co-executive directors of advocacy group Make the Road New York, criticized Cuomo for pushing potential cuts to Medicaid and refusing to consider increased taxes on the wealthy and large corporations, arguing that Cuomo was siding with billionaires over working-class people.

"Faced with the federal government's inadequate response to support vulnerable communities, the governor and legislators faced a crucial test to step and lead. They have failed that test," the directors said.

Cuomo's office has said nearly half of the state's personal income tax revenue comes from the state's top 1% and one-quarter comes from the top 0.1%, about 9,000 people.

Rosemary Rivera, co-executive director of Citizen Action of New York, said despite Democrats being in control of the Legislature and the executive branch, the budget failed to deal with inequality by raising taxes on multimillionaires and billionaires.

"Cuomo and the state legislature refused to raise taxes on the ultra-rich — the 112 billionaires in New York whose mansions and offshore bank accounts are overflowing with wealth — while turning to cuts for school children and black, brown and low-income New Yorkers," Rivera said.

Other measures proposed by Cuomo didn't make it into the final budget bills. A proposal to require state lawmakers and other public officials to annually make public their income tax filings was omitted.

Despite anticipated revenue issues, the budget includes Cuomo's proposal to extend the state's $420 million annual film production tax credit program from 2024 to 2025. The measure would reduce the credit rate for production and post-production from 30% to 25%, require a minimum of $1 million in spending in the New York City region, except for pilots, and disallow variety shows to qualify for future credits.

Cuomo's office also highlighted several other measures within the budget bills, including making permanent a ban on hydrofracturing, a ban on the distribution and use of Styrofoam, a ban on flavored e-cigarettes and a cap on co-payments of insulin at $100 per month. 

--Editing by Neil Cohen.

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