As if a second wave of Covid-19 infections weren’t enough, New York’s prospects for economic recovery will face new headwinds—from Albany.
When most of the state’s record 1.9 million mail-in ballots were finally counted this week, it became clear that the New York State Senate’s existing 40-member Democratic majority would grow by at least two seats—giving them their first-ever two-thirds supermajority of the 63-member chamber, enough to override gubernatorial vetoes.
The landmark comes two years after Democrats took control of the legislature’s upper house for only the third time since World War II. Combined with their long-standing supermajority in the 150-member assembly, legislative Democrats now are positioned to have the final word on New York State’s response to enormous state and local budget gaps created by the instant pandemic recession last spring.
As of November, Albany faced a budget shortfall of about $8 billion for the current fiscal year and $16.7 billion for 2022, which begins April 1. Allowing for Governor Cuomo’s habitual inflation of budget numbers, reduce those projected deficits by one-third and the outlook for Albany remains as difficult and challenging as it’s ever been. Federal aid, if and when it flows, will be only a temporary stopgap.
Over the past 25 years, the state government has become increasingly dependent on revenues generated in Manhattan offices and trading floors that remain largely vacant. Government spending, now running far ahead of even the most optimistic revenue projections, must adjust to new economic realities.
But economic reality doesn’t factor into the rising Albany worldview. On average, the state’s incoming class of legislators are more inclined to tax, spend, and regulate—and far from hesitating to impose more restrictions on a shaky economy, they see the pandemic-driven crisis as an opportunity to be exploited.
Months before the election, responding to Cuomo’s early warnings of major budget reductions, most incumbent Democrats in both houses had signed onto a union-backed call to “minimize devastating budget cuts” by “rais[ing] taxes on high wealth”—notwithstanding the already-disproportionate share of state and city taxes generated by the highest-earning 1 percent. Senate and Assembly rank-and-filers have introduced more than a dozen tax-hike proposals aimed at both individuals and corporations, starting with three bills raising the state’s 8.82 percent marginal tax on millionaire earners to as high as 10.32 percent (more than 14 percent in New York City) for “ultra-millionaires.” A one-house version of this measure has been passed repeatedly by Assembly Democrats in recent years.
Other tax proposals included a revived stock-transfer tax, higher property taxes on non-primary “pied-à-terre” homes valued at $5 million or more, and a “Billionaire Mark to Market” wealth tax, which its proponents claim would raise a whopping $23 billion in its first year. (The wealth tax would clearly violate New York’s Depression-era state constitutional prohibition of taxes on intangible property—which hasn’t stopped it from winning the support of New York’s most prominent urban progressive, Rep. Alexandria Ocasio-Cortez of Queens.)
Then there’s the ultimate article of faith of among a now-larger number of legislative Democrats: a state-run single-payer health plan, which would require massive tax increases all by itself.
So far, Governor Cuomo has resisted the call for tax hikes, pointing out that high earners could respond by moving away. Instead, he’s delayed significant budget cuts while continuing to demand federal aid to the state, New York City, other localities and, not least, the deficit-ridden Metropolitan Transportation Authority. By the same token, Cuomo warned again this week that if federal aid doesn’t materialize soon, he’ll resort to a combination of spending cuts, borrowing—and income-tax increases.
Asked how the Democrats’ Senate gains would change the balance of power in Albany, the governor replied, “supermajority or not, it doesn’t really make a difference.” He knows better, though. When legislators are in a position to neutralize gubernatorial vetoes, it makes a huge difference.
Just ask George Pataki, New York’s last Republican governor. During his third and final term, from 2003 through 2006, hundreds of Pataki’s line-item budget vetoes were overridden by an alliance of Assembly Democrats and Senate Republicans. In a bipartisan revolt led by Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno, lawmakers added billions of dollars in spending to Pataki’s budget proposals (which weren’t exactly lean to begin with). They also raised New York State and New York City taxes by billions of dollars (temporarily, it turned out).
As Pataki’s experience shows, in a fiscal pinch, party labels and regional preferences matter much less than practical politics. New York legislators invariably have more incentive to spend without worrying about the long-term consequences, while governors, regardless of party, see an institutional self-interest in keeping a lid on the budget.
In 2020-21, members from New York City will continue to control a critical mass of votes in both houses, including seven new Assembly members who won primaries against senior members in Brooklyn, Queens, and the Bronx. Like their New York City colleagues, most incumbent and newly elected members of the Senate Democrats’ enlarged upstate contingent also lean left on fiscal issues, in particular. Resistance to a soak-the-rich tax agenda might come from members representing highly taxed, affluent downstate suburbs—although, like their Republican predecessors, these senators also will fight cuts in state aid to their lavishly well-funded school districts. In suburbs and upstate rural areas alike, it won’t be particularly hard even for moderates to resist spending cuts under the pretense that it’s better to stick “millionaires and billionaires” on Park Avenue with the bill.
New York owes its sky-high state and local tax burdens largely to the power of organized labor—and not just in the government sector. Unions representing health-care workers (and the nonprofit hospitals that employ them) are a huge obstacle to reining in the state’s bloated Medicaid budget, and the state building trades unions continually push for expansion of the misnamed “prevailing wage” law that drives up the cost of capital construction. In the next legislative session, those unions will have more clout than ever. Topping the list, as usual, will be New York State United Teachers (NYSUT), which has an obvious stake in preventing reductions to education spending, the largest category of the state budget and the driver of local taxes.
NYSUT and other unions provide logistical and financial backbone for a cluster of research and advocacy groups pushing for higher taxes. And labor’s influence isn’t confined to the Democratic Party: Senate Republicans for years nurtured their own cozy relationship with unions representing teachers, police, and municipal employees outside New York City, a big reason for their break with Pataki in the early 2000s. The much-diminished GOP will be counting more than ever on support from police unions, whose lavish contracts are a major factor in high suburban property taxes.
Millions of campaign dollars from NYSUT and other unions provided a counterbalance to a $5 million independent-expenditure campaign, backed by Ronald Lauder, that targeted first-term Senate Democrats for their support of criminal-justice reform measures including bail reform linked to New York’s recent crime wave. Breaking with the rest of public-sector organized labor, a coalition of police unions flanked Lauder’s campaign with endorsements of 15 Republican Senate candidates over members of what the cops termed the “anti-police, pro-criminal Democratic conference.” The New York City PBA alone spent $1 million in a campaign targeting the most vulnerable of Long Island’s first-term Senate Democrats.
Those efforts initially appeared to have yielded fruit for the GOP, based on Election Day results showing that Republicans had big enough leads to flip three Democrat-held seats on Long Island and another in Brooklyn. But Republican victory declarations were premature, failing to reckon with the impact of a new state law that vastly expanded mail-in balloting by adding fear of Covid to the list of permissible excuses for absentee voting. Normally averaging 2 percent of the total, absentees ended up accounting for 20 percent of the votes in most of the state—with Democrats capturing 70 percent or more of those votes in contested Senate districts.
As the absentee ballots were counted in the two weeks following Election Day, Republican Senate candidates saw their leads dwindle and disappear—culminating this week in the confirmed reelection of a first-term Westchester County senator who had faced a vigorous challenge from Rob Astorino, the former county executive and 2014 gubernatorial candidate. (A still-outstanding result in Onondaga County, where ballot-counting was delayed until Nov. 30 due to a Covid outbreak among election workers, could further bolster the Democratic majority to 43 members.)
The Democrats’ record numbers don’t necessarily mean that they’ll have the will or the discipline to unite behind a common agenda. Assembly Speaker Carl Heastie of the Bronx and Senator Majority Leader Andrea Stewart-Cousins, who represents a mixed urban-suburban cluster in lower Westchester County, aren’t nearly as entrenched or powerful as Silver or Bruno were in their heydays. And Cuomo continues to wield considerable executive power through his control of executive agencies and appointments and his constitutional authority to shape the terms of spending through budget appropriations language.
How strongly Cuomo pushes back against the progressive fiscal agenda remains to be seen. After taking office in 2011 as a fiscal centrist, at least by New York standards, he began in his second term to move steadily leftward on a range of fiscal and economic issues, advocating a $15 minimum wage, imposing one of the nation’s most costly zero-emission energy regulations, and, in 2019, baiting Democratic lawmakers into passing a broad statewide expansion of rent regulation.
Rather than fight any pitched budget-cutting battles that he might lose, Cuomo has behaved recently in ways suggesting that he’ll bend further left. His options will become clearer after the January 5 Georgia runoffs decide whether Republicans hold their U.S. Senate majority, which would mean less federal money and a more immediate fiscal crisis in New York.
Immediate fiscal challenges aside, there’s no understating the longer-term significance of New York’s new legislative supermajorities. For the first time in the federal Voting Rights Act era, Democrats will completely control the decennial redrawing of New York’s congressional and legislative district lines—which inevitably will move New York State further along the path to a New York City-style political monoculture.
When a blue wave flipped New York’s Senate two years ago, Senator Brad Hoylman of Manhattan made a prediction that increasingly looks clairvoyant.
“We’re going to be testing the limits of progressive possibilities,” he said. “I hope we look a lot more like California.”
Brace yourself, New Yorkers.
© 2020 City Journal