Albany Prepares for Tomorrow's NYS Budget Proposal

NYAPRS Note: Here’re a few bytes taken from what the Capitol press corps are reporting as regards NYS Governor Cuomo’s 2018-19 budget proposal,, which will be presented tomorrow at 1pm.

Almost $2 Billion Deficit
The state faces a projected $4 billion budget deficit thanks in part to weaker than expected tax returns. Recent decisions by Washington Republicans to reduce spending on some health care programs will cost the state another $2 billion in lost revenue. The state's deficit is the largest since Cuomo's first year in office, but it will likely be whittled down to a $1.8 billion hole because the Democratic governor has vowed to limit state spending growth to 2 percent a year.

No Major Cuts, Some New Spending?
Lawmakers are also skeptical of Cuomo's promise to balance the budget while still funding many of the pricey proposals he laid out in his state of the state, which include upgrades to airports, big investments in economic development and increases in spending on education and workforce development. 
Strangely, there’s been no threats of major cuts coming from the Governor or Legislature. 
In fact, “Assembly Speaker Carl Heastie, said given the state’s financial picture, he doesn’t expect big increases in spending this year. ‘There might have to be, let’s say, some limiting expectations somewhat,’ Heastie said. “But I don’t believe that we have to do any cutting.”

Taxes: From Income to Payroll Tax, Higher Taxes on the Wealthy?
Cuomo is facing a pledge to figure out a way around the federal tax policy that limits state and local tax deductions to $10,000 a year. He has warned the limitation would hurt New Yorkers with high taxes, mainly those in New York City and its suburbs.
In his budget, Cuomo is expected to propose moving New York away from an income tax to a payroll tax — which could shield homeowners' tax deductions. 
Here, in theory, is how a state budget official and tax policy professors said it could work:

· An employee and an employer would have to agree to lower an employee’s annual wage by the amount that employee would normally pay in state income tax. For example, a $100,000 wage could be reduced by $6,000 to $94,000.
· The employer would then, in effect, pay the employee’s state income tax payment through an equal amount of state payroll tax.
· The employee would benefit from a lower annual taxable income — the $94,000 in the example — which will reduce the employee’s federal income tax and offset to some degree the amount that would be lost because of the cap on state and local tax deductions.
· The company would still pay out a total of $100,000 — $94,000 to the employee and $6,000 in a new payroll tax. For the company, wage and payroll tax payments are deductible on federal tax returns and the goal of the Cuomo administration would be to make the company whole.
· The state would still get its $6,000 in tax revenue.

The Governor has also said he is re-examining the carried interest loophole, which largely benefits hedge fund managers.
Heastie said he’s not averse to increasing taxes on some wealthier New Yorkers as part of tax restructuring.
“For those people who are going to benefit from this federal tax bill, they should be able to help out and contribute more,” Heastie said.
Flanagan said his Republican conference wants to cut taxes further in 2018, and speed up the timetable for some phased-in tax cuts for middle-class New Yorkers. “We actually want to accelerate the tax cuts,” Flanagan said. But they have not spelled out exactly how they would pay for that.

School Aid
The largest state piece of the budget is for school aid — which stands at $25.8 billion, by far the most per capita of any state in the nation. 
While school aid has increased 32 percent over the past six years, districts and the state Board of Regents are seeking $1.6 billion more. The current fiscal year's increase was $1.1 billion….