Gov. Andrew Cuomo unveiled a $168 billion budget plan that would close an over $4 billion gap by reducing some spending and imposing tax increases on health insurers, big businesses and prescription opioid users, among others. Cuomo said he also wants to look into legalizing marijuana in New York.
“This is going to be challenging, my friends,” Cuomo told lawmakers gathered at the state museum for the budget presentation.
He said he’s holding the line on state agency spending, and he’s eyeing additional revenues by taxing health insurance plans and deferring corporate tax credits. He said both received big tax breaks in the federal tax overhaul, so can afford it.
Cuomo also wants to impose a fee on prescription opioid drugs and products related to electronic cigarettes, and make a better effort to collect sales taxes on products purchased online.
He also would close the carried interest loophole, which benefits hedge funds, but only if the neighboring states of New Jersey and Connecticut also change their laws. And he’d rein in increases planned for the property tax rebate program known as STAR.
The governor said the budget gap, combined with uncertainties in funding from Washington, leaves him with little choice than to raise some taxes.
“You can’t possibly get anywhere near where you want to be on education and health care unless you raise revenues,” Cuomo said. “It’s just too big a deficit.”
Cuomo is proposing a $769 million increase for school aid, about half of the increase schools received last year. He is not making any cuts to health care, but his budget does assume that President Donald Trump and Congress eventually will fund the Child Health Plus and the Disproportionate Share Hospital programs again. The two programs have been held up in wrangling over the federal budget.
The governor also is relying on some one-time revenues from bank settlements after the financial crisis to pay for improving the New York City subways, funding hospitals and other health care providers, and paying for some day-to-day state operating expenses.
Cuomo outlined plans to deal with the federal tax changes that result in the loss of the state and local tax deductions, which hits New York and other relatively high-tax states hard. He said a study will be released soon that explores converting the state income tax to a payroll tax and substituting charitable donations for local property taxes.
“We’re doing everything we can to thwart the effects of the federal plan,” the governor said.
The governor’s presentation was interrupted briefly by Assemblyman Charles Barron, who heckled the governor for the second time since 2016. Barron shouted that more money is needed for schools in poor neighborhoods.
Cuomo asked Barron to “listen” to the presentation first and then offer his views.
Barron was escorted from the auditorium as other lawmakers applauded to drown him out.
Others who disagreed with some of the governor’s proposals expressed themselves in a more polite manner.
Senate Deputy Majority Leader John DeFrancisco, who is considering a run for governor against Cuomo, said the governor spent too much time making the federal government “the whipping boy” for the state’s problems, and he called the payroll tax proposal a “gimmick.”
“There’s another concept, and that is cut spending and cut taxes,” DeFrancisco said. “That was the problem even before the federal tax code was changed.”
The state’s education commissioner, Mary Ellen Elia, said she knows it’s a tough year, but is disappointed that Cuomo did not agree with the State Board of Regents’ recommendation to add $1.6 billion in funding for schools.
“I am concerned about the governor’s budget, there’s no question,” Elia said. “The issue is, how do we work together to address what’s necessary for our students?”
Assembly Speaker Carl Heastie, who called the governor’s presentation “sobering”, did not object to plans to raise taxes on health insurers, electronic cigarette users and prescription opioid patients. And he opened the door to increasing school aid funding beyond the governor’s $769 million dollar proposal.
“We are in a tough time,” Heastie said “We’re going to try to do the best we can.”
Heastie says he agrees with Cuomo’s plan to create a pay roll tax to make up for the loss of some state and local tax deductions, in the federal tax overhaul.
Senate Majority Leader John Flanagan, says he’s concerned about converting the state income tax to a payroll tax.
“The concept of a payroll tax is very challenging,” Flanagan said.
Flanagan who previously rejected the idea altogether, now says the Senate’s financial experts will take a look.
Cuomo is also, for the first time, proposing a study on making marijuana legal in New York. Cuomo has previously backed only a limited medical marijuana program.