New York State's $168 billion budget takes short view
A $168.3 billion New York State budget approved over the weekend fails to address long-term fiscal challenges, according to analysts.
The 2019 fiscal year spending plan closed a $4 billion budget gap largely by using bank settlement funds along with a new plan to collect revenue from fees earned by nonprofit health insurance companies. Democratic Gov. Andrew Cuomo initially sought $1 billion of new taxes and fees that met with resistance by many Republican lawmakers.
“The budget is not going to improve the state’s long-term position,” said David Friedfel, director of state studies for the Citizens Budget Commission. “They added close to a billion in education funding without changing the funding formula that drives too much to wealthy districts.”
The largest revenue-raiser in the new budget is $1.5 billion of proceeds the state will receive from the pending sale of Fidelis to Centene Corp., which has agreed to chip in an additional $500 million. The state is also utilizing $577 million of available bank settlement funds.
“There are one-shots in the budget rather than recurring revenues, which you hate to see,” said Howard Cure, director of municipal bond research at Evercore Wealth Management. “The budget will be balanced, but there will be bigger problems for next year.”
State lawmakers defeated Cuomo’s plan to defer tax breaks on a one-year basis for corporations that receive $2 million or more in credits, which would have raised an estimated $300 million in new state revenue. A new tax on opioid manufacturers was approved, which is projected to raise $100 million annually for anti-addiction efforts.
E.J. McMahon, research director at the conservative-leaning Empire Center for Public Policy, said the budget fails to tackle fiscal obstacles such as rising school spending levels and creating a healthy fund balance. A February report from New York State Comptroller Thomas DiNapoli projected that the state's general fund balance would decline to $5.1 billion by March 31, 2019 from $9.2 billion at the close of 2018. DiNapoli projects reserves at less than $2.5 billion when not factoring in bank settlement funds.
“They have no concept of the long-term view or the financial consequences of what they do,” said McMahon.
The budget includes a provision to seize New York City revenues to fund half of the Metropolitan Transportation Authority’s $836 million phase 1 subway improvement plan.
State lawmakers agreed under the new spending plan to begin imposing fees on taxis and ride-hailing vehicles south of 96th Street in Manhattan. The surcharges of $2.75 for Uber and Lyft and $2.50 for cabs are estimated to raise $415 million for subway repairs. Friedfel said he would have preferred a “fuller congestion pricing plan” that would provide “a significant” long-term revenue source.
“I am not convinced that taxing hard working middle class New Yorkers is the answer to solving the MTA’s long term budget issues,” said Anthony Figliola, vice president of Uniondale, N.Y.-based consulting firm Empire Government Strategies. “The State and City must get on the same page about funding levels.”
New York general obligation bonds are rated Aa1 by Moody's Investors Service, and AA-plus from S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency.