The $2 trillion federal stimulus bill on its way to passage today does not actually shortchange New York in any general sense—but it does dash Governor Cuomo’s vain hopes for a budget bailout, which is why he is so unhappy about it.
To be sure, as the Wall Street Journal pointed out in an editorial this morning, the bill “will be loaded with waste and a lifetime supply of unintended consequences” and “Americans will pay for this for decades.” Which inevitably means New York residents will pay an outsized share.
This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.
Sen. Charles Schumer, leader of the Democratic minority in the upper house, has a point when he argues the Empire State is treated fairly when it comes to the broad major goals of the so-called Coronavirus Aid, Relief, and Economic Security (CARES) Act: covering direct public health-related costs arising from the pandemic (e.g., added hospital funding)**, sending aid to the unemployed and small businesses, and putting cash in the pockets of middle-class individuals and families. Schumer estimated New Yorkers’ direct cut at $40 billion. ** On those direct costs, Bill Hammond subsequently has explained the unfairness of the formula for distributing reimbursements.**
Cuomo’s beef arises from his own more direct concern: a state government revenue shortfall he now estimates at $10 billion to $15 billion—reflecting primarily an expected drop in personal income taxes and sales taxes. The CARES Act distributes a $150 billion “Coronavirus Relief Fund” to states and localities based mainly on population, but with a hefty minimum of $1.25 billion even for the tiniest states. This inevitably discriminates against New York and other populous states, giving New York an amount Cuomo estimated at $3.8 billion, with about $2 billion for localities, most of which will go to New York City.
(3/27 Update: The total figure for the state actually works out to $7.5 billion, of which roughly $5.5 billion will go to the state government.)
“If we don’t get more funding from the feds, I don’t know how we write the budget,” the governor complained Wednesday. “That’s why this Senate bill is so troublesome.”
Today, Cuomo acknowledged he had delayed making state budget adjustments while “waiting to see what the federal government would do”— a high-risk strategy, given New York’s early budget deadline of April 1.
But during a joint media conference call with Schumer Wednesday afternoon, Sen. Kirsten Gillibrand provided a crucial clarification:
“The purpose of this bill is not intended to make budgets whole for any state,” she said. “The purpose of this bill is short term funding for the urgent crisis that’s happening around the state.”
This is urgent money needed for hospitals, urgent money needed for paychecks. Urgent money needed for small businesses. And so all this bill purports to do is to get us through the next couple of months (“Exactly!” Schumer interjected) so that … we can keep the economy from collapsing and we can keep our hospitals running at top notch. This is absolutely essential, and that’s why we prioritize workers in this bill, health care in this bill. These are the life and death needs and death needs of any state or country.
It’s not about a state budget. It’s not about filling holes. It’s literally about putting two trillion dollars into the hands of the people who need it today. [emphasis added]
Schumer himself added:
It’s not just money for the state government. And that was one of our hardest fights because McConnell had zero in it [for direct grants to states and localities] as of yesterday. It’s for our businesses, it’s for our people, it’s for our hospitals. It’s for our subway riders. And so when you add all that up, New York does far better than the average state.
Translation: chill, Gov. You have to wait until the immediate crisis is over before he has another shot at getting unrestricted federal largesse to bail out his budget. What the two senators didn’t say is that this probably won’t be until after the November elections, at the earliest.
(3/27 Update: Speaker Pelosi reportedly wants to start work immediately on another coronavirus stimulus and rescue bill, which would include more direct aid to state and local governments. However, a federal bailout that completely makes up for New York’s revenue shortfalls seems highly unlikely–especially since those shortfalls are likely to persist for as long as it takes the economy to fully recover to pre-pandemic levels, which could take years.)
That’s small comfort to the governor, who clearly hoped against hope for a huge money drop from Washington, D.C., to minimize the deep cuts he needs to make in the state budget for the fiscal year starting April 1.
However, Cuomo has already received a separate large infusion of federal aid last week, in the form of last week’s Families First Coronavirus Relief Act, which will boost New York’s Medicaid funding by up to $6.7 billion. Add that to the $3.8 billion Cuomo expects from the CARES Act, and you’re looking at a sizable chunk of the deficit—with one big caveat.
The “use of funds” provisions (on page 607 of the final bill draft) stipulates that the money from the $150 billion pot can only be used to cover “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease.” Cuomo wants cash to cover normal business-as-usual costs of everything the state budget usually pays for—starting with aid to the nation’s best-funded public schools.
As it happens there is another $30 billion pot of funding in the CARES act for K-12 education and higher ed, with a complicated formula that would appear to yield at least $1.5 billion to $2 billion for New York.
Cuomo today was still pressing for more money to cover “governmental need,” complaining it was “irresponsible” and “reckless” for Congress not to provide it.
Time is running out on the state budget. It’s now clear there won’t be a big federal bailout of the state deficit.
Cuomo indicated today he was looking for a provision that would allow him to “adjust the budget through the years [sic]” to reflect available revenues. He’d better start “writing” it.
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