New York’s $220B budget is stuffed with tax breaks

New York Governor Kathy Hochul and legislative leaders on Thursday struck a $220 billion budget deal that promises a little less pain at the pump, help for working parents, and new tax breaks.

Buoyed by more than $26 billion in pandemic recovery money and higher-than-anticipated tax collections, the Democratic leaders agreed to forgo $162 million in revenue by accelerating a scheduled reduction in personal income tax rates.

They also decided on a $2.2 billion homeowner tax rebate; a six-month suspension of the state’s fuel tax that will save New Yorkers 16 cents a gallon; and $287 million in child tax credits. In addition, the deal calls for letting cannabis operations qualify for tax deductions.

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Kathy Hochul, governor of New York

State spending would grow by more than 3% over the prior year under the budget deal, which combines money decisions with policy changes such as drinks to go, allowing New York City-area casinos and letting judges require cash bail under more circumstances.

“It is worth the time to get this right for New Yorkers,” Hochul said Thursday afternoon as she announced a “conceptual agreement” on the spending plan. “This budget will put more money back into people’s pockets.”

Late budget

The budget is the largest-ever state spending plan. It came a week late, calling into question Hochul’s command of the process and the effectiveness of the friendlier tone the governor tried to strike with lawmakers. After missing an April 1 deadline, lawmakers had to pass a temporary extension to ensure state employees got paid. Also notable during the announcement: The governor stood alone at the dais to announce a deal, instead of being flanked by the Senate President and Assembly Majority Leader.

Legislators and lobbyists said the delays ensued, in part, because the negotiations had been among the messiest in recent memory. For one, some of the most significant policy proposals, such as bail reform, hundreds of millions of dollars for a new Buffalo Bills stadium, and a gas tax holiday, weren’t included in Hochul’s January executive budget proposal and didn’t emerge until the final weeks of negotiations. Hochul on Thursday said the timing was unintentional.

A leak of Hochul’s plans to enact major changes to the state’s bail, discovery and mental health laws less than two weeks before the budget deadline suggested to her critics that the governor was trying to ram major policy changes through without public debate. The bulk of Hochul’s negotiating team came down with COVID-19 in the 11th hour of budget negotiations, and the governor remained holed up in her second-floor office at the Capitol for more than a week with limited public appearances.

Thanks to a surplus of cash, New York’s budget didn’t require any major cuts to be balanced, but lawmakers said that sometimes having too much money can be as big of a logistical headache as having too little.

“This is the first year in a long time where there is some new money to fight over,” Democratic State Senator Liz Krueger said.

The Assembly and Senate were to vote on some of the budget bills later Thursday. Hochul said she and legislative leaders would continue to work on final language in the next few hours and pushed back on criticism that her negotiating team was inexperienced or didn’t know how to get things done.

“We had some very complicated issues to resolve. They are worth the slight delay,” she said. “I know how to be combative. I did not need to be combative to achieve this.”

Focus on crime, taxes

The deal is an election-year starting point for Hochul, who’s running at the top of the ticket for the first time since taking over for Governor Andrew Cuomo following his resignation over sexual harassment allegations.

Similar to other Democrats running for office this year, public safety became a high priority for the governor. Budget negotiations were hung up over disagreements over changing the state’s cash bail and criminal court discovery procedures.

The budget legislation will include language making more alleged offenses bail-eligible, including gun and hate crimes. The governor and legislative leaders also agreed to give judges more discretion over whether cases should be dismissed because of prosecutors’ failure to meet discovery deadlines.

The budget deal also calls for a new property-tax credit for 2.5 million eligible residents earning less than $250,000. Middle-class tax cuts scheduled to be fully phased in through 2025 would instead take effect by 2023 — decreasing tax receipts by $162 million in that year while lowering the tax bite for about 6.1 million New Yorkers.

About 195,000 small businesses would together pay $100 million less under the budget, which would allow less gross income to be counted as taxable net income.

To help families cover child-care expenses, the budget would allot $7 billion over four years to make more families eligible for subsidies — more than double the current spending level.

“Through our investments, we’ll be able to open the door to more than half of the young people in New York,” said Hochul.

Now that adult marijuana use has been legalized, cannabis producers and distributors would be eligible under the budget legislation for the same state tax breaks in place for other types of businesses. Cannabis businesses aren’t allowed to take federal tax deductions.

Suspending the 16 cents-a-gallon fuel tax for six months would let New Yorkers keep $585 million. Average prices in the state have risen by more than 50 cents per gallon in a month, according to data compiled by AAA.

Pandemic recovery, ethics

For hospitals, clinics, and mental health facilities struggling with staffing shortages, $1.2 billion would be devoted to covering bonuses of as much as $3,000 per eligible worker. Employees would get the bonuses after one year of work, and the money would be pro-rated for part-timers.

The deal also calls for creating a higher minimum wage for people who provide home health care. They would get a $3-per-hour bump, to $16.20 statewide and $18 in New York City, Long Island and Westchester.

The measure would put $5 billion in the state’s rainy-day fund in anticipation of federal COVID-19 aid coming to an end.

The budget deal, the first major legislative agreement since Cuomo departed under an ethical cloud, would also jettison New York’s system for dealing with complaints against politicians.

A Commission on Ethics and Lobbying in Government would be replaced with a new panel that’s indirectly appointed by elected officials, with law school deans vetting the proposed members.

The ethics plan “unfortunately falls short of creating an appointment process with true independence,” said state Senator Alessandra Biaggi, who chairs the Assembly Committee on Ethics and Internal Governance.

Bloomberg News
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