Pretending not to smell the stench (from l.): Assembly Speaker Sheldon Silver, Gov. Cuomo and Senate leader Dean Skelos. (AP)
Echoing the bayou hunters in the reality show “Duck Dynasty,” Gov. Cuomo said last week that he’s “hap, hap happy” with his new budget. But there are at least five reasons for New Yorkers in general to be less cheerful about the state spending plan for fiscal 2013-14, which starts today.
First, while Cuomo and legislative leaders are touting provisions that waddle and quack like tax cuts, the budget will pay for them by squeezing more tightly on the relatively small number of geese that lay New York’s biggest golden eggs.
Result: Over the next five years, various “temporary” taxes will rise by a maximum of over $2 billion annually, including three more years of a 29 percent income-tax increase on incomes above $1 million for singles and $2 million for couples, which was previously due to expire at the end of 2014. The budget also extends, for three more years, a utility tax that was supposed to end next year.
These tax hikes were only partly offset by an array of smaller tax breaks for businesses and families, notably the temporary “family tax credit,” designed to put $350 checks in the mailboxes of about a million New York households in October 2014 — just weeks before Election Day.
Small businesses will be offered “reimbursement credit” to partly offset the cost of a new minimum-wage increase. Taxpayers will spend $20 million to $40 million a year to subsidize the higher wages for student workers aged 16 to 19 — in the process creating disincentives for businesses to hire older workers or raise pay above the minimum for valued teen employees.
A second rotten egg in the budget is the $1.75 billion raid on the reserves of the State Insurance Fund, a government-sponsored nonprofit that controls the largest share of the market for worker’s compensation insurance, which all employers must purchase. The SIF exists to help hold down New York’s worker’s-comp rates, now among the nation’s highest. Instead, over the next four years, its reserves will be tapped to help pay state operating expenses.
Third, the budget will boost the state’s bonded indebtedness by hundreds of millions of dollars. More than $400 million in new capital spending was earmarked to “economic development” projects — including $54 million in stadium improvements for the Buffalo Bills, part of a 10-year, $124 million package of taxpayer subsidies for a profitable pro-football team.
Fourth, the budget carries with it a five-year, $2 billion extension of the state Film Production Credit — continuing a massive tax-funded giveaway to a well-connected industry, including at least $5 million to help NBC bring “The Tonight Show” back to New York.
Finally, the budget will give local governments and school districts outside New York City the option of borrowing from state pension funds, pushing their likely pension cost increases over the next few years further into a murky future.
Some silver linings in the final budget deal involve issues where the governor didn’t get what he wanted. For example, Cuomo proposed a 2 percent cap on any pay hikes awarded to police and fire unions via binding arbitration. But the cap would have applied only to “distressed” municipalities, while preserving automatic “step” pay increases and doing nothing to help employers restructure the work rules that drive up overtime costs. With the arbitration law due to expire at the end of June, the governor was positioned to demand more reform in exchange for extending it — and now he still can, since the Legislature wouldn’t accept his proposal as part of the budget.
Cuomo has put his third on-time budget behind him, but clouds remain on the fiscal horizon. Despite his overall spending restraint, along with all those tax hikes and the insurance-fund raid, the state appears likely to face budget gaps of at least $1 billion to $1.5 billion in the fiscal years ending in 2015 and 2016.
Those aren’t big compared to the $10 billion gap Cuomo closed three years ago. But, as this year shows, he’s finding it harder and harder to wring major savings out of the budget without more fundamental, structural reform of government at every level.
To his credit, Cuomo decisively tackled some tough issues in his first two budgets. Yet now Albany appears to be drifting back into a familiar rut — tax, spend and spin the results.
E.J. McMahon is a senior fellow at the Manhattan Institute’s Empire Center for New York State Policy.