Hochul’s $216 Billion N.Y. Budget Offers Property-Tax Relief
The spending plan is Hochul’s first since taking over as governor in August after Andrew Cuomo resigned.
(Bloomberg) -- New York Governor Kathy Hochul unveiled a $216.3 billion budget on Tuesday, a 3.1% spending increase that would boost funding for schools, health care and property-tax relief.
The spending plan is Hochul’s first since taking over as governor in August after Andrew Cuomo resigned amid a sexual-harassment scandal. Armed with a healthy supply of cash, Hochul called for accelerating tax cuts instituted under her predecessor. Middle-class families would get full, phased-in credits of $1.2 billion as soon as 2023 rather than a yearly break through 2025.
The Democratic governor’s budget proposal for fiscal 2023, which begins April 1, aims to help heal a state scarred from the pandemic. New York was the center of the health crisis in the U.S. in 2020, and its economy still suffers as the coronavirus plagues businesses and discourages tourism.
In a speech on Tuesday, Hochul highlighted a focus on “the realistic and achievable.” She called for an additional $2 billion in pandemic recovery initiatives, $1 billion for infrastructure, $1.2 billion in bonuses for health-care workers and a $25 billion, five-year housing plan.
Hochul also proposed putting $3.3 billion in the state’s rainy-day fund in anticipation of federal Covid-19 aid coming to an end, a $2.2 billion middle-class property tax rebate for 2.5 million homeowners, and a $1 billion allocation to pave potholes.
“We know that the federal funds will eventually run out and that’s why we’re not banking on them for the future,” said Hochul, 63, who is seeking election to her first full term in November. “We’re not creating recurring expenses or new programs we can’t pay for.”
New York Budget Director Robert Mujica said in a briefing that the governor’s proposal aims to set aside 15% of the budget in reserve funds, and represents the first time the state has published a financial plan without any projected gaps, due in part to larger-than-expected revenues.
The state plans to use the $12.75 billion received in federal funds through the American Rescue Plan in 2021 over the next four years to avoid a fiscal cliff, he said.
Spending Turnaround
The plan marks a turnaround from last year’s budget under Cuomo, who enacted new taxes on the wealthiest New Yorkers. Hochul has said she opposed increasing taxes that would deter wealthy people and businesses from moving to or returning to the state.
Instead, she’s called for a $1.2 billion tax cut for middle-class taxpayers, as well as tax relief for small businesses.
She has the added benefit of billions of dollars in federal aid, a soaring stock market, better-than-expected revenue, and the increased funds from the millionaires tax. New York had spent only $10 billion of more than $26 billion in federal aid it received as of November, according to the state comptroller’s office.
Politically, Hochul has enjoyed a honeymoon period with legislative leaders who say they expect to work more collaboratively with her compared to the typically contentious negotiations with Cuomo.
Hochul will have 30 days to file amendments to her spending plan and lawmakers will release their own budgets in the coming weeks. A final deal is due by March 31.
Democrats, who hold a super majority in both the state Senate and Assembly, could be more amenable to tax cuts and other programs that curry voter favor ahead of the November elections.
Tax Relief
Hochul proposed accelerating the middle-class tax-cut program, which was scheduled to be fully phased in through 2025. Lower rates would instead be fully phased in by 2023, decreasing tax receipts by $162 million in that year.
The budget also creates a property-tax credit for low- and middle-income households as well as eligible seniors. The benefits would be in the form of a credit starting this fall instead of a claim later when taxpayers file returns.
Outside of New York City, nearly 2 million residents would get an average benefit of $970, while nearly 479,000 city property owners would receive $425.
Hochul also suggested up to $250 million in tax relief for nearly 200,000 small businesses, from benefit eligibility changes and a one-time credit for Covid-19 expenses.
New York projects revenue from adult-use cannabis sales to grow at a strong clip, from $56 million in fiscal 2023 to $363 million in 2028. The state legalized recreational use last year, and is expected to be the nation’s second-largest legal cannabis market. The state is still in the process of creating regulations, but sales could begin as soon as this summer.
Affordable Housing
The governor also laid out a five-year, $25 billion plan to address the state’s affordable housing supply, and described her proposed overhaul of the controversial, soon-to-be-expiring $1.7 billion property tax abatement program, known as 421-a, to prioritize greater housing affordability.
Mujica told reporters that details of a “successor program” would be included in a series of bills that are expected to be released later Tuesday.
The governor also has proposed allowing single-family homeowners to build “granny flats” in backyards, attics, and basements to ease the affordable-housing shortage.
The budget earmarks $4 billion for wages and retention bonuses of as much as $3,000 for health-care workers, whose ranks were decimated in the pandemic, along with $2 billion in capital spending for facilities and laboratories. It’s part of a $10 billion multiyear investment in healthcare that Hochul called the largest in state history.
The plan lays out measures to expand the number of workers, including free tuition and other costs for those in “high-demand health occupations” who remain in New York for a certain period, and as much as $120,000 in loan forgiveness to doctors who work in under-served areas for three years.
The state would add a $150 million tuition assistance program that expands to include incarcerated individuals, and commit to $1.5 billion over the next five years to fund the state university and city university systems.
Hochul called for $224 million to reduce gun violence and $400 million over several years to help the opioid epidemic.
©2022 Bloomberg L.P.