Good budget news for New York: The pandemic hasn’t driven down tax revenues by as much as feared, while the feds have been far more generous with pandemic relief than local pols want to admit. The bad news: Neither Mayor de Blasio nor Gov. Cuomo has done anywhere close to enough to align spending plans with New York’s new long-term reality — which leaves both state and city on shaky financial ground.
Start with state tax revenue, which has done better than predicted after the pandemic began. Receipts in November totaled $807 million more than projected, state Comptroller Tom DiNapoli reports. From the start of the fiscal year in April through last month, the intake has been a net $375 million above expectations.
On top of that, the $900 billion COVID relief package Congress just passed directs $54 billion to New York. Much of that will go to residents, via “stimulus” checks and enhanced unemployment benefits, and to businesses, but it also includes:
- $5.8 billion for schools
- $4.2 billion for the MTA
- $810 million for vaccine distribution
- $810 million for the city’s Health Department
- $1 billion in disaster-relief funds from the Federal Emergency Management Agency.
That’s a lot of cash. And New York was given even more (about $112 billion in total) in the spring via the CARES Act, which directed:
- $7.5 billion in state and local coronavirus-relief aid
- $7.5 billion for the disaster relief fund
- $4.1 billion for transit
- $1 billion for schools
As for the city, DiNapoli says its finances “have remained resilient,” too — largely “as a result of tax revenue from the financial-services sector.”
Yes, revenues are off for the year: The comptroller notes, for instance, that state tax receipts since April total $3 billion less than over the same period last year. But the big problem clearly isn’t a lack of revenue so much as an addiction to spending.
All pandemic long, de Blasio and Cuomo have both pinned their budgeting on the fantasy that Washington would ship up a big enough handout — if not immediately, then after Joe Biden takes office — to essentially let New York keep spending as if COVID never existed.
Aid in the latest relief package falls far short of that, and it’s doubtful sufficient funds from Washington will ever materialize, since the Senate is likely to remain in Republican hands: Democrats would have to win both runoff elections for Georgia’s two Senate seats to gain control — and even then, moderate Dems won’t go along with feeding New York’s addiction.
Meanwhile, New York’s two “leaders” have waited — and, if anything, made the situation worse: De Blasio, for example, pushed some of this year’s payments to unionized city workers into next year and never got the $1 billion in recurring “labor savings” he promised. That puts enormous strain on future budgets.
Worse, neither acknowledges that, post-pandemic, the New York City government “business model” has to change.
Think about it: Hundreds of thousands of New Yorkers have left the city; a good number won’t be returning to offices here. Financial firms are fleeing. And all that means real estate has lost value.
Until those trends reverse (if ever), Albany and City Hall will likely face a slower-growing (or even shrinking) tax base. Many of the taxpayers who foot the bill for all the goodies — the generous labor perks, bloated public-employee headcounts, wasteful contracts, ineffective programs — will be gone.
New York’s budgets will have to be restructured, one way or another. And, no, not by raising taxes, as progressives are racing to do. That will only send more taxpayers fleeing, while also slowing an economic recovery so essential to ginning up new revenue.
Rather, city and state politicians must re-think what New York can afford. They’ll need to be frank with labor leaders: structural changes — to pension plans, work rules, overtime practices, etc. — are now simply unavoidable.
Let’s face it: The pandemic appears to have triggered a long-brewing fiscal reckoning. New York’s leaders will have to deal with it realistically — or drown in a sea of red ink.
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