New York State Coffers Swell, Riding Covid-19 Recovery

A better-than-forecast economic recovery and a massive inflow of federal aid have crammed New York State’s once-empty coffers into earners.

Governor Andrew Cuomo and Democrats, who control the State Assembly and Senate, approved a $ 212 billion budget inclusive in April $ 4.3 billion in new annual sales through increases in income and corporate taxes. The state also received $ 30 billion from the U.S. bailout bill approved in March, including $ 12.7 billion in general aid that lawmakers intend to use over the next four fiscal years.

In late May, Mr. Cuomo’s budget bureau released a financial plan that raised the state’s income tax projections by $ 4.1 billion from initial estimates in January – a revision that excluded the effects of the new, higher tax rates and reflected a better economic forecast.

And last week, auditor Tom DiNapoli released a monthly cash report that found that the state’s actual revenues are around $ 4 billion above those rosier projections due to robust sales and income tax surveys.

“It’s just amazing,” said EJ McMahon, director of research for the Empire Center, a fiscal conservative think tank. “I think of the governor’s home office like a drug dealer’s kitchen, with bricks of $ 100 bills tucked in the microwave, under the sink, in the back of the freezer.”

Both Mr. McMahon and Andrew Rein, president of the impartial watchdog Citizens Budget Commission, said earlier this year that federal aid eliminated the need for income tax increases. Mr Rein said in an interview last week that the governor’s tax advisors had enough information in March to know that the economic situation would lead to better collection of income taxes, which are the state’s largest source of income.

Mr Rein said he was stunned when he saw the updated financial plan in May.

“Do we really need the money? No. Would we be more competitive if we cut or cut this tax hike? Sure, ”he said.

The Democratic governor proposed the first income tax hike of his three terms this year, saying Covid-19 had hit the economy. Mr Cuomo has been arguing against tax increases for years, saying he feared increases would encourage wealthy New Yorkers to move to other states. The governor initially proposed that a robust federal package would eliminate the need for a tax hike.

But when he faced multiple investigations and asked for his resignation, he agreed Legislative requirements for a multi-year increase in the funds for the “foundation grant” of the public school as well as the income tax increase to be paid for it.

“The state plans to invest long-term revenue in communities that suffered long before Covid,” said Michael Kink, executive director of Strong Economy for All, a coalition of unions that supported the tax hike. “I think lawmakers recognized at this session that tax policy was not about a short-term crisis, but about long-term investments for a broader, stronger recovery that also includes directly and directly combating racial justice.”

The governor’s budget manager Robert Mujica said Mr Cuomo’s position was consistent. He said the administration will now redouble its efforts to ensure that government funds are distributed fairly among schools now that “the revenue issue is off the table”.

Messrs. Mujica and DiNapoli said in interviews that it was too early to say if last week’s cash register report was anything other than a temporary bump. They said it could take more months for the full effects of remote working and potential taxpayer migration to be reflected in government revenues.

Mr DiNapoli urged his former colleagues in the state legislature to use extra money to add to reserves. But 2022 is an election year for the governor and all 213 state lawmakers, so the temptation will be great to add initiatives that target specific political segments.

“We saw that during the budget process this year,” said the Democratic auditor. “They said, ‘You know what? We want to spend that money and more. ‘ That is their prerogative. “

THE QUESTION: Who Was the Only New York Auditor to Become President?

– Do you know the answer? Write me an email!

THE LAST ANSWER: Former New York Governor Mario Cuomo was the only other governor to appoint all seven members of the state’s appeals court

Write to Jimmy Vielkind at Jimmy.Vielkind@wsj.com

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