Some thoughts on Governor Paterson’s announcement today that he expects his forthcoming 2010-11 Executive Budget to result in a 2011-12 “surplus” of $1 billion that he will propose using for “property tax relief” in the form of a new “circuit-breaker” income tax credit:

  1. The state’s 2011-12 General Fund budget gap was last projected at $14.3 billion.  This reflects, in part, the scheduled expiration of some $5.7 billion in temporary federal stimulus aid that will be used to help balance the state’s 2010-11 budget.  If the governor is saying that the four-year financial plan to be issued with his 2010-11 Executive Budget next week will make up for lost stimulus money, wipe out the entire projected gap and hold recurring spending a full $1 billion below recurring revenues in 2011-12, that’s really something to celebrate.  Applause should be held, though, until we know whether he intends to achieve structural balance solely through recurring savings and spending reductions, and not through another round of increases in state taxes and fees.
  2. If a 2011-12 budget surplus is really in sight, the Governor’s highest priority should be to roll back some of the (all-time record) $6 billion in new statewide taxes and fees he agreed to as part of the 2009-10 budget.  He should start by ensuring the scheduled end-of-2011 sunset of the state’s $4 billion, job-killing temporary personal income tax (PIT) hike, which has taken New York’s marginal PIT rate to its highest level in a quarter-century (and New York City’s resident rate to the highest level in the nation) on the eve of what is likely to be the largest federal marginal rate increase in nearly 20 years.
  3. The state already spends more than $3 billion a year on the STAR (School Tax Relief) property tax homestead exemption. Under the circumstances, Paterson’s proposed billion-dollar circuit-breaker is reminiscent of the now-repealed 2006 STAR “rebate”: election-year gimmickry at its worst, again.
  4. “Property tax relief” implies an actual reduction in rates or levies that results in lower property tax bills.  A circuit breaker income tax credit is not tax relief.  It can best be described as a transfer payment.
  5. Real and lasting property tax relief could be generated by reform of state mandates and laws that drive up the cost of operating schools, as proposed in the Empire Center’s Blueprint for a Better Budget (see pp 13-14).  If Paterson’s budget proposes such changes, that would be great, too.
  6. The best way to protect property owners from the impact of likely cuts in state school aid is through adoption of the school property tax cap that Paterson proposed in 2008 and then abandoned in the face of teacher union opposition, after the Senate’s then-Republican majority had adopted it. The case for the cap over the circuit-breaker is further explained here.
  7. Paterson’s boast today that his proposed budget will “not only meet, but exceed” (sic) his proposed spending cap is another way of saying he won’t allow the state operating funds budget to grow by more than $1.6 billion next year.  Which is not greatly encouraging in itself, although it could be (see #1).

P.S. — The governor’s tax credit proposal includes a mechanism supposedly designed to encourage school spending restraint.  To quote from his press release: “Under Governor Paterson’s proposal, the size of the [circuit-breaker] credit is reduced if property taxes grow by more than 1.2 times the rate of inflation or four percent (whichever is less) from a specified base year. For example, if in 2012 a family’s property tax bill increased five percent and the inflation rate was four percent, then the credit would be multiplied by a factor equaling (104/105), or credit would be one percent less. If the property owner’s tax bill rises by only three percent, then the credit would be increased by a factor equaling (104/103), or one percent more.”

Did you follow that?  I didn’t think so.

You may also like

How Washington’s Budget Bill Will Affect Health Care in New York

UPDATE: The final version of the federal budget bill omitted a handful of provisions that had been included in earlier drafts. One would have penalized states that use their own money to provide coverage for undocumente Read More

New York’s K-12 Problem

New York has an education problem that no one really likes to talk about: it spends more than any other state or country in the world yet achieves mediocre results at best. This might come as a surprise, especially since some politicians and pundits tout Read More

Two Dozen School Districts Are Returning to the Polls for Budget Revotes

Voters in 24 New York school districts return to the polls on Tuesday for school budget revotes. Last month, voters in 96 percent of school districts outside New York City conducting votes approved their school budgets for the upcoming year. The 683 sc Read More

Even With Federal Cuts, New York’s Health Funding Would Remain High

New York's health-care industry stands to lose billions of dollars in federal funding under the major budget bill being debated in Washington – a rare and jarring turn of events for a sector accustomed to steadily increas Read More

Highlights of Albany’s Bloated and Belated Budget

The state Legislature approved the last of nine budget bills Thursday evening, 38 days after the start of the fiscal year. Here are some highlights of the fiscal impact of final spending plan: Top lines Read More

Forcing Homes to Switch to Electric Heat is not a Good Policy

  New York has some of the most ambitious climate goals in the country: electric school buses by 2035, zero emissions electricity by 2040, etc. Why New Yorkers, who already consume less energy per capita than any state (other than Rhode Island), s Read More

After Tariff Shock, Albany Should Face its New Fiscal Reality

This year, for once, state lawmakers' failure to pass a timely budget could prove to be a stroke of luck. When President Trump rolled out his on April 2, Albany leaders had not agreed on a spending plan for the f Read More

New York’s Proposed ‘MCO Tax’ Would Generate a Fraction of What Lawmakers Expected

The Hochul administration's proposed "MCO tax" would generate far less than the $4 billion in extra federal aid anticipated by state lawmakers when they approved the concept this spring, according to documents obtained by t Read More