It took seven years, but Mayor Bill de Blasio has finally done the unthinkable: propose a city budget whose spending only increases modestly, in line with inflation. Hizzoner isn’t wrong, then, to say that the city’s immediate fiscal woes stem from Gov. Andrew Cuomo, not from him. One problem, though: De Blasio’s first six years of budgeting have made Gotham vulnerable not only to a mild downturn, but to the governor’s antics.
The $95.3 billion budget that de Blasio unveiled last week would be an excellent tone to set — if this were the mayor’s first year. After adjusting the figure for state and federal contributions to the city, as well as technical factors, city taxpayers will spend about $73.9 billion in the fiscal year that starts this July 1, up from $72.8 billion last year. This $1.1 billion increase is lower than inflation, at about 1.5 percent.
The city benefits not just from de Blasio’s newfound pragmatism, but from happy surprises: Tax revenues are running about $1.2 billion higher than the city expected last November. Indeed, Wall Street banks almost uniformly reported a banner year.
So New York is on track for a balanced budget — and budget gaps for future years are narrowing, from a projected $3.3 billion to $2.7 billion by 2024.
So, what’s the problem? As de Blasio put it, “Our focus is in one place, and it is Albany.” Referring to Albany’s projected $6 billion gap, “this is by far the largest state deficit we have ever confronted.”
Well, so what? That’s the state’s problem, right? No: As de Blasio noted, Cuomo plans to “fix” some of this state deficit by simply taking some money from the city. How much? It isn’t clear, but there are clues.
As the Empire Center’s Bill Hammond notes, virtually all of the state’s budget deficit comes from above-inflation growth in its $80.6 billion Medicaid health program for poorer New Yorkers, which serves 7.5 million New Yorkers, including 3.5 million New York City residents.
Federal, state and local governments all pay for Medicaid, and New York City taxpayers’ direct share is about $5.9 billion annually. A few years ago, Cuomo agreed that the state, not local governments, would be responsible for future growth in Medicaid, reducing pressure on Gotham’s budget. But now, faced with a deficit, Cuomo has changed his mind. This week, during his own budget speech, he will say how much more New York City should pay.
Although de Blasio didn’t hazard a guess, it’s safe to say it will be high: Clawing back the amount Gotham has “saved” by transferring costs to the state over the past seven years would cost the city $2.5 billion a year, easily doubling future deficits.
Meanwhile, the state also wants the city to kick in a random $100 million for the MTA’s Access-a-Ride shuttle service for disabled riders. The mayor is right to assert that the city shouldn’t have to bail out a core MTA service, and it is debatable how big a share of Medicaid costs city taxpayers should fund.
Two things are for sure, though: If de Blasio had stuck to inflation-linked budgeting during his first six years, New York would have no problem with these extra costs. When the mayor came to office in 2014, he inherited a $56.3 billion city-funded budget, or $62.8 billion in today’s dollars, after accounting for inflation — $11 billion lower than the projected figure for next year.
That’s a lot of money, and if de Blasio worried that Cuomo would have simply taken the money earlier had the mayor been more responsible with it, he could have used it to enact citywide property-tax relief, particularly for residential rental buildings.
Second, city taxpayers are state taxpayers, too, and de Blasio does them no favors when he even hints that Cuomo should turn to tax hikes to fix his budget deficit.
Last Thursday, though, the mayor voiced support for Assembly Speaker Carl Heastie’s push to raise taxes, noting that “the wealthy are not paying their fair share. … Of course, that is another piece of the equation that should be looked at.”
Yet de Blasio should wonder: If the state Legislature is so happy to raise taxes in a record boom, what is it going to do in a recession — and what does that mean for New York City?
If the state and city can’t get along now, when there should be plenty of money to go around, city residents should worry about when the money dries up.
This piece originally appeared at New York Post
Photo by Stephen Maturen/Getty Images