The “state and local recovery” piece of the $1.9 trillion stimulus bill now being drafted by House Democrats in Washington would not by itself give Governor Cuomo the $15 billion in added federal aid he’s been loudly demanding—but would come very, very close.

In fact, combined with extended “emergency” Medicaid reimbursements from the feds, and not even counting categorical funding streams that will pop up in other stimulus bill sections, it seems likely Cuomo’s target would not only be met but exceeded if the House draft were ever adopted.

Since the governor’s claim of a $15 billion budget gap wildly exaggerates the state’s actual current and prospective shortfalls, it would give him considerably more than twice as much as he needs to balance his next budget —on top of $27 billion in federal COVID-19 relief the state government has already received, excluding funding directed to localities, public authorities and individuals (as detailed in the “Federal Funding” section of the FY 2022 Executive Budget Briefing Book).

Where the House stands

Consistent with President Biden’s more general stimulus outline, draft bill language that emerged from yesterday’s mark-up by the House Committee on Oversight and Reform would set aside a total of roughly $350 billion in aid to states, territories and local governments on the city and county level. New York’s state government share alone would come to $12.7 billion, according to an estimate by U.S. Rep. Brian Higgins, D-Buffalo, as first reported by Jerry Zremski of ThBuffalo News.

The draft committee print entitled “Coronavirus State and Local Recovery Funds” would allocate $195.3 billion to the 50 states and the District of Columbia. Of that amount, $25.5 billion would be allocated proportionate to population, and nearly all the rest would be distributed according to each state’s share of the nation’s total seasonally adjusted unemployment during the last three months of 2020. Quoting from a provision on pages 6 and 7 of the draft, states must use their funding to:

(A) respond to or mitigate the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts;
(B) cover costs incurred as a result of such emergency;
(C) replace revenue that was lost, delayed, or decreased [based on January 2020 revenue projection] as a result of such emergency; or
(D) address the negative economic impacts of such emergency.

Taken together, this language equates to the no-strings-attached budget bailout of Andrew Cuomo’s (or any governor’s) dreams. By contrast, earlier COVID-19 relief and stimulus bills awarded funding through increased Medicaid reimbursements or aid to education, which has tied the state’s hands to some extent.

In either situation—strings or no strings—federal largesse will only create bigger holes to be filled once this (likely) last and largest hunk of federal aid is spent. But an amount as large as the House is considering would allow him to put off tough decisions until fiscal year 2024, the first budget of his hoped-for fourth term.

Speaking of Medicaid, as Empire Center’s Bill Hammond reported here last week:

In a letter to governors on Jan. 22—two days after President Biden’s inauguration—the U.S. Department of Health and Human Services said that the pandemic-related federal public health emergency “will likely remain in place for the entirety of 2021.”

That has the effect of extending an increase in Medicaid funding that was part of the Families First Coronavirus Response Act, a relief package enacted in March 2020. The bill added 6.2 percentage points to federal matching aid for the program, worth about $1 billion per fiscal quarter to state coffers, until after the pandemic emergency declaration is ended.

In the House bill draft, the local government shares of the “recovery funds” are distributed by a more complicated formula, and a full rundown of aid to New York cities and counties was not immediately available. However, Zremski’s regionally focused Buffalo News report said “Erie and Niagara counties and their municipalities would receive more than $792 million in federal aid … with the City of Buffalo getting the biggest share: an estimated $324 million.” Extrapolating from those amounts, other New York counties and cities would also reap a rich harvest under the initial House formula.

So, what next? The various House committee mark-ups will be massaged into a single bill, and then the whole packaged will be conference with the U.S. Senate. No timetable is still up in the air, but President Biden and congressional leaders have said they want it to be a priority, so the money is likely to be settled before the state’s new fiscal year begins April 1.

In all likelihood, New York won’t receive the full $12.7 billion in the initial House draft. Instead, total state and local funding will whittled down at least a bit and redistributed to meet the preferences of moderate Democrats in the Senate, whose support will be needed to pass any bill.  But stimulus negotiations are starting just where Cuomo would like: with a sky-high number.

Cuomo’s Executive Budget financial plan, presented last month, assumed what he described as a “worst case scenario” of $6 billion in additional federal aid to the state, to be spent in equal $3 billion chunks in fiscal years 2022 and 2023. How the governor would spend more than twice as much—with no restrictions on use—is a very big question, but defining allowable uses to include “address[ing] the negative economic impacts” of the pandemic would cover a wealth of economic development and infrastructure projects Cuomo already has in the pipeline.

The actual bottom line, to repeat: while pandemic revenue losses were real and severe by historical standards, the state doesn’t actually need $15 billion to balance its next budget.  For example, assuming total federal aid of $6 billion over the next two years, the Citizens Budget Commission today issued an updated version of its proposals for balancing the budget without tax hikes by “reasonably shifting more capital financing to long-term debt and reducing unproductive economic development and low priority capital spending.”

 

 

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

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