Takeaways from the final 2018-19 state budget

Gov. Andrew Cuomo announcing the 2018-19 budget.
Gov. Andrew Cuomo announcing the 2018-19 budget.
Mike Groll/Office of the Governor
Gov. Andrew Cuomo announces the highlights of the fiscal year 2019 budget.

Takeaways from the final 2018-19 state budget

Federal tax workarounds, congestion pricing and more.
March 31, 2018

Call it the Good Friday agreement.

Gov. Andrew Cuomo on Friday evening announced a deal on a $168.3 billion state budget. Hours earlier, the spending plan had been in doubt, due to standoffs over such issues as state oversight of yeshivas and the early departure of state lawmakers for Passover, which began on Friday, and for Easter Sunday – which is also the start of the new fiscal year.

“I don’t know why you guys look so tired,” Cuomo quipped at the start of his press conference in the state Capitol. “We’re two days early!”

On a more serious note, the governor called it the “most difficult budget we’ve ever done,” due to a $4.4 billion budget gap as well as "attacks" from Washington, in particular the reduction of the state and local tax deduction.

Here are some takeaways from the spending plan, from spending in education and health care – the two biggest parts of the budget – to the policy items and political ramifications.

Fighting Washington

A major theme all year for Cuomo has been pushing back against federal policies that affect New York, most notably the reduction to the state and local tax deduction in President Donald Trump’s sweeping tax overhaul. New York is a high-tax state, and the changes are expected to increase the tax burden of many state residents and even encourage some to move away.

In response, Cuomo said the state budget would do several things to blunt the impact. First, it creates two new state “charitable contribution funds” for health care and education. In a workaround to lessen the impact of the federal tax law changes, taxpayers could divert some of what they owe to these state funds and claim a credit on their tax returns. Local governments and school districts will be authorized to take the same steps.

Additionally, the budget authorizes an “alternative employer compensation expense program” to take advantage of the fact that businesses were not affected by the state and local tax deduction changes. It gives employers the option of implementing a payroll tax for employees that would be offset by a state tax credit for workers.

"It moves from an income tax, primarily, to a payroll tax," Cuomo said. "Property taxes move to a charitable donation tax. Again, it's optional. Some employers will do it, some local governments will do it, but it's our best attempt to avoid the federal assault. The real answer is to repeal SALT."

The five boroughs

One of the biggest policy changes the governor had called for was a congestion pricing plan in Manhattan, and while many of the proposed changes were blocked – at least for now – lawmakers did agree to a $2.75 surcharge on for-hire vehicles booked through apps like Lyft and Uber. The fee will be assessed below 96th Street in Manhattan – which is further north than the original congestion pricing zone that was contemplated – and the funds would go into an MTA “lock box” to help repair the city’s aging subway system. A $2.50 fee on yellow cabs would also go into effect.

The budget also fully funds the $836 million MTA Subway Action Plan that had been on hold while the state pushed New York City to fund cover half the cost. The short-term plan, which will address some of the most pressing repairs and upgrades, will ultimately have half, or $418 million, paid for by the city, Cuomo said. "Basically, its retained from the city, but now the Subway Action Plan is fully funded, and it can actually move full speed ahead," he said. 

The budget also includes $250 million for repairs at the New York City Housing Authority and install a NYCHA independent monitor that will be selected by the New York City Council and a committee of tenants and will work with the city comptroller. Authorized along with the new NYCHA funding is design-build, a project delivery method that can speed up the construction process. New York City has called for blanket authority to use design-build, which is only allowed to be used by certain state agencies and authorities in New York. This year the state is allowing design-build on a project-by-project basis, including for the construction of new jails to replace the Rikers Island and the reconstruction of the Brooklyn Queens Expressway.

School aid

The budget adds $1 billion in education spending, slightly less than the $1.1 billion increase a year ago as the state faced a tougher fiscal situation this year. The state Board of Regents had initially requested a $1.6 billion increase in state education funding, while the governor proposed a $769 million increase. The increase brings state education funding to $26.7 billion, a major portion of the total 168 billion budget.

Apart from school funding, advocates pushed for a more fair distribution of funding among wealthier and poorer school districts. The Cuomo administration instead emphasized the need for more transparency. As part of the budget deal, New York City and other school districts will be required to share how much they plan to spend on each school starting in the 2018-19 school year.

On the yeshiva issue that delayed the budget talks, a compromise was reached that allows for the Jewish religious schools and other private schools to cite long hours of instruction meet state educational requirements, The New York Times reported. Critics have charged the some yeshivas fail provide instruction in basic areas such as mathematics. 

Health care funding

The budget puts state Medicaid funding at $18.9 billion, the second biggest portion of the spending plan after education.

But many of the health care tax hikes proposed by Cuomo in his January budget address as “revenue raisers” were rejected by Senate Republicans, although a tax on opioid manufacturers was included. A so-called “opioid stewardship program” will use a $100 million fund, with revenue coming from manufacturers, to be used for prevention, treatment and recovery services for people struggling with opioid addiction. The original proposal was for a surcharge of two cents per milligram on active opioid ingredients in prescription drugs would have raised $127 million per year.

The controversial proposal to tax the sale of Fidelis, a Catholic-run nonprofit health plan, to the for-profit Centene also went through, State of Politics reported

What dropped out

Several ethics reform measures were left off the table, including addressing the LLC loophole, which allows donors to circumvent campaign contribution limits by donating through limited liability companies. Cuomo rejected a bailout request from the del Lago Resort & Casino, which asked for state funding after it made less than its projected revenues during its first year. Early voting and bail reform also dropped out, as did the state Dream Act.

Political response

Legislative leaders applauded the final plan. Assembly Speaker Carl Heastie said his conference had “crafted a spending plan that makes the necessary investments to strengthen our economy, support working people and preserve essential services that are important to so many citizens.”

State Senate Majority Leader John Flanagan touted the defeat of a number of proposed tax increases. “This budget invests in the shared priorities of hard-working New Yorkers – affordability, opportunity and security,” he said. “It is a solid and fiscally responsible budget that protects taxpayers, creates jobs and supports many other quality-of-life issues important to middle-class families across the state.”

But with elections coming up later this year – for every state lawmaker as well as Cuomo – gubernatorial challengers seized the opportunity to take a shot at the governor. Dutchess County Executive Marc Molinaro, a Republican who is expected to officially announce his challenge on Monday, blasted Cuomo for ramming the spending bills through at the last minute with little time for review. Cynthia Nixon, the actress and activist, continued to criticize Cuomo over the distribution of school aid across the state. 

But the one Cuomo adversary who had a direct role in the budget negotiations had a more upbeat message from the Senate floor.

Jon Lentz
is City & State’s editor-in-chief.
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