Cuomo pushes legalized marijuana in 2020 budget address
A proposed legalization of recreational marijuana highlighted New York Gov. Andrew Cuomo’s first State of the State and budget address of his third term.
Cuomo proposed that New York join other states that have legalized cannabis while laying out a $175.2 billion spending plan for the 2020 fiscal year during his annual budget address Tuesday.
The Democratic governor said taxing marijuana sales, which would need legislative approval, could generate $300 million annually for the state. However, budget documents indicated that the state can’t expect to begin collecting the new taxes until 2021 even if lawmakers pass the measure early this year.
Cuomo did not reveal what the exact tax rate would be for marijuana purchases, but told reporters last week he would like to resemble nearby Massachusetts, which is at 17%. A bill co-sponsored by State Senate Finance Chair Liz Krueger, D-Manhattan, and Assembly Majority Leader Crystal Peoples-Stokes, D-Buffalo, would apply a 15% state excise tax on marijuana sales while also enabling municipalities to charge up to a 2% local sales tax.
Cuomo, who easily captured reelection in November, enters the budget process with his party in full control of the state legislature for the first time since assuming office in January 2011. Democrats, who have longed controlled the state Assembly, picked up eight Republican-held senate seats in November for a 39-24 advantage.
In addition to marijuana legalization, Cuomo said he will ask for legislative support to extend the current 8.82% millionaire’s tax beyond its Jan. 1, 2020 expiration. If the millionaire’s tax is not extended, the top marginal tax rate would drop from 8.82% to 6.85%
Cuomo pushed for series of new revenue raisers during his hour and a half-long speech to state lawmakers including legalized sports betting at the state’s casinos. He also proposed a congestion pricing tolling plan for drivers in midtown Manhattan that could funnel new funds to the Metropolitan Transportation Authority, although budget documents showed revenue wouldn’t be counted on until 2021 even if the concept receives legislative passage.
David Friedfel, director of state studies for the Citizens Budget Commission, said Cuomo’s budget should factor in the potential for a recession in the near future. The Empire State is already facing a $3.1 billion budget gap in 2020 and a $16.1 billion cumulative shortfall through the 2022 fiscal year, according to Friedfel.
“A recession equivalent to the average of the last three recessions would reduce revenues dramatically and increase the gaps by almost $44 billion over the three years,” said Friedfel.
To combat risks of an economic slowdown, Friedfel urges Cuomo to increase deposits into the state’s rainy day funds, which at $1.8 billion account for less than 3% of general fund tax revenues. He said that $800 million of legal settlements New York received after the 2019 budget was adopted provide an opportunity to build up reserves for the first time since 2015.
The 2019 New York budget included a new tax on opioid manufacturers to raise a projected $100 million annually for anti-addiction efforts, but a federal judge struck down the law on Dec. 19. Moody’s Investors Service called the legal decision a credit negative for the state as it struggles to contain a widening opioid-related health challenge. Cuomo’s 2020 budget proposal sets aside $200 million in comprehensive care funding to address opioids.
State lawmakers have until March 31 to approve a budget prior to the 2020 fiscal year commencing on April 1. New York State general obligation bonds are rated Aaa1 by Moody’s and AA-plus by S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency.