There goes the windfall?

by E.J. McMahon |  | NY Torch

IMG_7229(0).JPGOne of the biggest questions heading into New York’s fiscal 2016 Executive Budget presentation was how Governor Andrew Cuomo would choose to allocate an unprecedented, one-shot $5.4 billion windfall “surplus” originating with fines and penalties collected from financial institutions.

Now we have the answer: under Cuomo’s proposal, less than one-third of the money—barely $1.6 billion—would be absolutely, positively committed to core transportation capital infrastructure purposes.

The rest would go to an assortment of stuff, only some of which would fit into even an extra-broad definition of “infrastructure.”

It’s good the governor avoided calls for spending some of the money on recurring operating expenditures, which would simply dig a future hole to be filled by tax hikes. Unfortunately, however, Cuomo’s proposal for allocating the windfall is a disappointment and a blown opportunity.

As first argued here last summer (when the amount involved was smaller), the cash most effectively could be used to fill holes in the state’s excessively debt-reliant, seriously underfunded highway, bridge and mass transit transportation capital budgets. Instead, the governor has scattered it in a fashion designed to touch multiple regional, political and programmatic bases, diluting the impact.

(See rundown at end of post.)

Budget overview

Windfall aside, the Budget Message book suggests a by-now familiar combination of positives and negatives in Cuomo’s fiscal approach.

On the positive side, the proposal as described by the governor continues to restrain spending, holding the core state operating funds budget growth to 1.7 percent with an (apparent) minimum of gimmickry. Crucially, his accompanying State of the State message promised to make his 2 percent property tax cap permanent. That’s great news for taxpayers.

On the negative side, Cuomo used the speech and budget presentation to again assert a vibrant upstate economic turnaround that simply has not occurred. Tax cap aside, his latest version of “property tax relief” is, in reality, a tax shift that fails to address the underlying problem of high spending. As usual, he’s offering no relief from state mandates that drive up local costs.

One silver lining: by seeking to convert the state-subsidized School Tax Relief (STAR) homestead exemption into a personal income tax credit when homes change hands, Cuomo will make the full school tax burden far more visible to a growing number of families—which can only be a good thing.

Parsing out the windfall

The breakdown from the budget message, which includes items revealed by the governor in a series of announcements over the past few weeks:

  • $1.5 billion for what he calls an “Upstate New York Economic Revitalization Competition”;
  • a $1.3 billion capital construction subsidy for the Thruway Authority (further details of which are as yet unavailable) and $250 million to open a new Metro North commuter rail link into Penn Station—the only traditional transportation infrastructure uses in the allocation plan;
  • $500 million to expand Internet broadband access, matching private outlays for increased fiber optic lines;
  • $150 million to build parking garages as a way of encouraging mixed-use development at train stations in Long Island and Westchester County;
  • $400 million for “debt restructuring and capital projects” for rural hospitals;
  • $150 million for emergency response and preparedness (think hurricanes) and also “to continue [the state’s] aggressive counter-terrorism efforts”;
  • $150 million for “municipal restructuring” grants and incentives to “encourage local government efficiencies”;
  • $115 million for “statewide infrastructure improvements …. including State Fair, transit, rail, port and aviation facilities that promote economic development”; and
  • $50 million for “strategic farming initiatives, including preservation of farmland” in the Southern Tier and Hudson Valley.

Another $850 million was reserved, int he governor’s words, as “the money that we owe the federal government for a discrepancy in past [Medicaid] billings.” The over-billings pre-date Cuomo’s tenure, and a one-shot repayment of the feds (if they will settle for as little as $850 million, that is) would not be an inappropriate use of the windfall money.

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.