NY budget priority: Fiscal balance for risks ahead

New York’s political leaders are facing serious election-year pressure. They soon must balance revenues and expenses in a budget plan that is expected to exceed $260 billion in the new fiscal year that begins Wednesday.

There is tension in the task ahead. Officials project a cumulative three-year deficit of nearly $14 billion, so negotiations among Gov. Kathy Hochul, State Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie will require compromising their plans into an agreement.

Annual budgets are based on crucial professional estimates of how much the state will collect and how much it will spend. Numbers could change depending on global events including the new instability in the Mideast.

Hochul, who has resisted tax increases until now, is facing strident political demands from both Democratic-controlled legislative chambers to raise taxes.

All three sides’ sets of proposals on key issues are currently on the menu.

TAXES

Hochul has logically enough proposed to extend the temporary 7.25% top corporate franchise tax rate, first imposed during the pandemic in 2021, through 2029. It applies to general business corporations with net taxable incomes of more than $5 million.

But beyond that, majority lawmakers are seeking to boost the state’s revenues with a higher rate on corporate taxes and add sources of state income. Proposals include levies on purchases of gold bullion and on crypto mining, and ending a sales tax exemption for boats worth $230,000 or more. Taxing crypto’s growth and gold’s big boom are among the more appealing proposals being considered. But these do not comprise a golden goose and New York’s already high taxes, if raised, still mean spending should be slowed.

The Senate leadership has predictably proposed hiking the taxes of those in the two top income brackets, which are from $5 million to $25 million and over $25 million. Their rates would reach 10.8% and 11.4% respectively, according to the liberal Fiscal Policy Institute.

A smattering of tax changes and rebates being considered are worthwhile for helping middle and lower income individuals, such as utility rebates.

TIER 6

Efforts to again “fix” Tier 6, the retirement level for anyone who was hired into state and local government after April 1, 2012, are gaining momentum, as even Hochul and state Comptroller Thomas DiNapoli participated in a rally pushing for the changes earlier this month. Proposals range from adjusting employee contributions and changing when workers can retire and still maintain full benefits to changing overtime calculations in police and fire worker pensions.

Every proposal would cost significant sums — and ultimately local employers, like schools, villages and towns, will foot the bill. So, taxpayers would pay for public workers’ more lucrative pensions. If affordability is the goal, fixing Tier 6 isn’t how to get there.

Unfortunately, it seems the question isn’t whether another Tier 6 change is coming, but just how significant change will be. Hochul and state lawmakers would be wise to recognize the price tag, and limit the shifts they make.

GREEN ENERGY

The state’s landmark Climate Leadership and Community Protection Act is imperiled by some of the very lawmakers who voted for it in 2019.

Hochul wants the State Legislature to delay ambitious deadlines and/or relax emissions standards, the most stringent in the country along with California’s, in the name of affordability. Some Democratic lawmakers have balked while others are open to compromise. Republicans are embracing the strife as evidence that green energy is, as President Donald Trump says, a scam.

Environmental groups sued when the state missed the Jan. 1, 2024, deadline to create a final plan to meet the CLCPA’s goals. If the state loses, the 2030 deadline for reducing emissions will likely remain. Hochul said she doesn’t want to scrap the CLCPA goals, just modify them.

Already energy prices are spiking, with costs expected to rise by the thousands per ratepayer. Hochul says modifying the CLCPA won’t lower energy costs — it will keep them from rising even higher because of the war in Iran and the federal government’s war on renewables.

This is a mess. The legislature must adjust the CLCPA to avoid multiplying rising energy costs caused by geopolitical events unforeseen back in 2019, while maintaining its commitment to green energy.

SEQRA

One Hochul proposal that should advance would ease regulations that govern environmental reviews for housing and other development.

The State Environmental Quality Review Act, or SEQRA, has long been used to delay or prevent new development. Hochul seeks to shorten and limit that review process for some projects.

The goal is proper — to eliminate clogs in the development pipeline without letting such considerations as water, traffic and sewers go unaddressed.

AUTO INSURANCE

Perhaps the biggest sticking point in budget talks involves auto insurance. Hochul wants to lower premiums by spotlighting fraud, like staged crashes, that bloats costs.

Broader criminal penalties for staging accidents and curbing payouts to drunken drivers as proposed could be a big help.

Unsurprisingly, trial attorneys are lobbying against the changes.

Lawmakers would be wise to pay more attention to constituents who have watched their insurance premiums skyrocket. But Assembly Speaker Heastie seems unconvinced.

In the push to close this budget season, Hochul, Heastie and Stewart-Cousins must put New Yorkers first — through careful balance.