Notwithstanding media coverage predicting New York’s “latest budget ever,” it’s worth noting that all of the state’s 2010-11 budget appropriations already have been adopted.   What’s left hanging is a revenue bill encompassing $828 million in additional tax increases.

Assuming the pending legislation is adopted, New York’s per-capita state tax hikes over the past two years will come to $414 per capita — far more than any state including California, which has raised taxes by $312 per capita, according to this estimate. In fact, New York alone accounts for fully 29 percent of all the state tax increases proposed and enacted since 2009.   This may qualify New York politicians for yet another dubious achievement award.

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Albany likes to tax bad things, like cigarettes and, maybe soon, soda. But one State Senator’s new idea of a sin tax — on the defaulted sovereign nation of Argentina — would harm the state’s main cash cow, Wall Street. (more…)

New York State entities continue to scrape the bottom of the barrel to scare up a few dollars. The Metropolitan Transportation Authority (MTA) will issue $475 million in short-term notes this week. The MTA pledges to repay the debt as soon as it gets some more revenue from the new downstate payroll tax on employers that the state collects on its behalf. The cash scramble likely will cost the MTA several million dollars in underwriting costs.

Meanwhile, MTA chief Jay Walder’s budget-balancing plans are beginning to look just as flimsy as New York State’s plans for its own budget. A few months ago, Walder proposed that the MTA start charging public-school students half-fares this year and full fares next year to raise $214 million, But after a meeting with the kids yesterday, he said he’d hold off on a vote on the issue.

It doesn’t much matter, anyway. Practically speaking, the MTA isn’t going to get much money from students one way or the other. Aggressive fare-beating action against back-packing toting kids this fall would be a nightmare for police-community relations and for Mayor Bloomberg and would consume valuable police resources.

These are all just diversions meant to keep the people who create and monitor New York’s budgets in a state of suspended disbelief.

State entities can still raise money for their fantasies, though, in part because investors expect taxes to go up, spurring their demand for tax-exempt debt.

Governor David Paterson began his tenure in the spring of 2008 on a promising note by embracing a broad, no-exceptions cap on school property taxes, almost exactly as proposed by the Suozzi Commission on Real Property Tax Relief.  But when the Senate actually passed his bill a few months later, he backed off and dropped the issue.

Last year, Paterson quietly reintroduced the cap — but added a massive exception that would destroy its effectiveness.  A few months later, he switched gears and began advocating a property tax circuit breaker–i.e., no limit on property tax levies, but subsidized tax credits for some homeowners.  The circuit breaker would begin flowing if the state budget ended a year in surplus under a separately proposed statutory spending cap.  This byzantine proposal has attracted no interest in the Legislature.

Today, the governor backed even further away from the property tax cap recommended by the Suozzi Commission.  His latest tax cap proposal would extend to all local governments, but adds a further carve-out that makes the exercise virtually pointless.

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The outlook for a timely and fiscally responsible New York State budget is as poor as it has ever been at this point in a fiscal year that ends March 31.

We like NY's proactive stance!

The lame-duck governor is thoroughly discredited and distrusted by lawmakers (Don Imus vote of confidence notwithstanding).

The deficit financing plan offered by Lt. Gov. Richard Ravitch raises novel and troubling questions, and a key lawmaker says it is unlikely to be taken up this year.

There’s little sign that anyone around the state Capitol is seriously intent on enacting a budget that will close next year’s projected $9 billion deficit, much less make a down payment on closing the longer-term gaps that overhang the future.

Somehow, however, this message has not penetrated the downtown Manhattan offices of Standard & Poors.  S&P just issued an updated report on the state’s creditworthiness — concluding that New York deserves an unchanged AA/Stable for general obligation debt and a top-notch AAA/Stable for personal income tax (PIT) bonds of the sort Ravitch wants to tap for deficit financing.

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“Changes in the timing and structure of financial services sector compensation, which have resulted in lower than expected personal income tax [PIT] revenues” led to a $1 billion state PIT shortfall in January, which in turn has helped add $750 million to the projected state budget gap for fiscal 2010-11, Governor David Paterson announced today.

In other words, Wall Street has not come to Albany’s rescue.

Opponents of Governor Paterson’s proposed mid-year budget cuts last fall were buoyed by hopes that financial sector bonuses would prop up the state’s finances for at least a while longer.  They were wrong.  Firms like Goldman Sachs decided to award some bonuses this year in the form of stock options, which won’t be fully exercised (and thus taxed by Albany) for years.

Paterson was already planning to push $500 million of the current year deficit into next year, contributing to a $7.4 billion budget gap that his 2010-11 Executive Budget was designed to close with a mix of spending restraint and tax increases.  Now that gap has grown to $8.2 billion.  Paterson said his 21-day budget amendments, to be released next Tursday, will include proposals for closing the additional hole.

The net added 2010-11 shortfall of $750 million consists of these elements:

• A revenue drop of $550 million through the end of 2010-11, including the recurring elements of a $1 billion shortfall in PIT collections in January, which was expected to be the biggest bonus payment month.
• Additional Medicaid expenditures of $400 million due to higher-than-expected Medicaid enrollments.
• Offsetting savings of $200 million in “areas outside Medicaid.”

In testimony today to Albany’s Joint Legislative Fiscal Committees, E.J. reminded lawmakers why he’s giving them the following counsel: “First, do not add any more to the state’s tax burden.”

A excerpt to remind Albany that we’ve already been there, done that, and still are there follows: (more…)

Governor Paterson’s 2010-11 Executive Budget carries a hidden New York City personal income tax (PIT) increase for the city’s wealthiest households.

The increase would result from adoption of Paterson’s proposed changes to the state School Tax Relief program, or STAR.   Eighty percent of the $3.1 billion state STAR allocation underwrites property tax breaks, with the lion’s share going to homeowners outside New York City.  The remaining 20 percent pays for New York City income tax breaks–principally, a six percent across-the-board reduction in the city’s PIT rates, which now reach 3.65 percent on taxable incomes over $90,000.

Paterson’s budget would disallow the use of STAR money to finance a city PIT rate reduction for taxable incomes above $250,000.  In effect, this would create a new 3.88 3.85 percent city PIT bracket starting at $250,000. The result: a $143 million budget savings for the state.  Of course, unless the city makes up the difference out of its own funds, that also translates into a $143 million tax increase for high-income New York City residents.

The governor also has proposed eliminating the STAR homestead exemption for residences worth $1.5 million or more. The total state budget savings from Paterson’s STAR changes would come to $213 million, with two-thirds of that amount coming from the New York City PIT adjustment.

A more detailed description of Governor Paterson’s STAR proposals begins on page 33 of the Executive Budget Briefing Book. The legislative language begins on page 221 of the Education, Labor and Family Assistance Article VII Bill.

Producers of films made principally in New York will receive another $420 million a year in state tax subsidies under Gov. Paterson’s 2010-11 Executive Budget.  The proposed allocation of $2.1 billion for the film production credit over the next five years would come on top of more than $1 billion that the state has funnelled through the tax credit program over the last five years.

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Daily News columnist Bill Hammond says that the Empire Center’s new Blueprint for a Better Budget, which proposes $30 billion in savings over three years, should be “required reading for Gov. Paterson and all 212 members of the Legislature,” and that “the pols could do a lot worse than following this blueprint to the letter.”

The report notes that Albany could save $8.5 billion over its targeted time period — nearly 30 percent of the total — by cutting the state’s school aid payments to localities by 7.5 percent now and then capping growth for two years. (more…)