Gov. Andrew M. Cuomo’s budget office is projecting strong revenue figures in the state’s updated financial plan, despite his warnings about the negative ramifications from changes to the federal tax code.
Since 2017, the governor has been making the case that the adoption of a $10,000 cap on state and local tax deductions (SALT) will adversely impact high-tax states, like New York. In January, he blamed the cap for a $2.3 billion revenue shortfall.
But E.J. McMahon, research director for the fiscally conservative Empire Center for Public Policy, says the revenue and economic outlook for the fiscal year is “pretty optimistic” for a governor “who hasn’t stopped predicting we’re doomed as a result of the SALT cap.”
“The financial plan assumes the SALT cap will have no effect at all on the state’s highest earners,” McMahon said.
Division of Budget spokesman Freeman Klopott said New York is “just in the first inning when it comes to the impacts of the cap on SALT deductions.”
Klopot said New York’s fiscal discipline will provide any flexibility that is needed during the fiscal year, which began in April. He also reiterated Cuomo’s claims that the SALT cap is unconstitutional and unfair.
The financial plan also indicates the state is still planing on depositing $428 million into its official rainy day reserves this year and is also putting aside $829 million from financial settlements into an economic uncertainty fund.
“He’s added to reserves, but not nearly enough to avoid serious problems when, not if, the next economic downturn comes,” McMahon said.
This sentiment was echoed by Citizens Budget Commission state studies director David Friedfel.
Friedfel also took note of the governor’s decision to back off a planned $500 million prepayment on the principal of a pension amortization maneuver from the recession. The money was committed in the financial plan accompanying the governor’s budget amendments, but it was missing from the updated version that came out this week.
“There would have been a real benefit to prepaying this cost,” Friedfel said.
Eliminating this payment may have helped Cuomo and state lawmakers avoid hundreds of millions in health care cuts that were proposed.
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