Kathy Clown's budget plan for the MTA is based on payroll taxes and funding speculations

THE CITY 

Gov. Kathy Hochul presents her fiscal year 2024 executive budget proposal in the Red Room at the state Capitol.

Mike Groll/Office of Gov. Kathy Hochul

Gov. Kathy Hochul unveiled a $227 billion budget Wednesday that has something for everyone, and something almost everyone will dislike — especially the progressives who dominate the Democratic majorities in Albany.

The plan increases spending across the board but puts much of the $8 billion in unexpected tax revenue from the current year into reserves and tries to convince legislators that economic headwinds are likely to bring revenue growth to a halt.

Hochul proposes to bail out the Metropolitan Transportation Authority with an increase in payroll taxes paid by employers in the New York City commuter region (the city and suburbs that Metro-North and LIRR cover) and licensing fees to be paid by new gambling casinos in the city. She’s also demanding $500 million more per year from the city, while offering $300 million in new state aid.

She also urges raising the state’s minimum wage, currently $15 an hour in most of New York, by indexing it to inflation, and seeks to extend an expiring increase in corporate taxes for three years — but ignored proposals from progressive and tenant groups for big increases in state spending.

Acting Budget Director Sandra L. Beattie said caution is needed to deal with the grim forecast for the coming fiscal year, which begins April 1.

“Tax collections are expected to peak in the current year and fall in fiscal 2024, and we are harvesting the gains to prepare for the uncertainties ahead,” Beattie warned.

The entire budget includes both state revenues and federal aid, with state-funded programs increasing by 2.4%, or $327 million, from this year’s budget, and would be balanced.

It puts half the unexpected revenue increase into the state’s major reserve funds, and another $1 billion into a debt reserve fund. The rainy-day funds will reach 15% of spending in the next fiscal year — two years earlier than the governor had previously proposed.

At the same time, the budget reduces expected revenues for fiscal 2025-2027 by almost $20 billion, opening gaps in those future budgets to $22 billion. Leading fiscal experts warn of the risks of increased spending, as Hochul’s proposal goes to state lawmakers angling to increase spending.

“The governor’s proposal usually sets the floor in negotiations with the legislature,” said Andrew Rein, president of the nonprofit Citizens Budget Commission. “All New York State leaders should focus not just on today, but on protecting generations of New Yorkers from a future downturn and self-made fiscal crises arising from unaffordable spending or counter-productive taxes.”

The MTA bailout plan, designed to close an expected $3 billion budget deficit in 2025, illustrates the governor’s on-the-one-hand, on-the-other-hand-strategy.

Both the Riders Alliance and the Permanent Citizens Advisory Committee to the MTA hailed the governor’s proposals to boost transit funding. But while city Comptroller Brad Lander praised the tax increase and diversion of casino revenues, he also strongly objected to the request for an additional $500 million in city aid to the agency. 

Mayor Eric Adams said he intended to study the implications of the budget.

In an emailed statement, Adams said, “While we are reviewing the details of Governor Hochul’s budget proposal, it is clear that there are many victories worth celebrating, particularly in the areas of [addressing] serious mental illnesses, addressing our housing crisis, and strengthening the entire ecosystem of public safety.

“There are also areas of uncertainty that will require deeper review,” he said.

 

Lots of new taxes being considered to save MTA

From NBC:

A state panel is advising Governor Andrew Cuomo to consider a bundle of new taxes after revelations that the price for fixing the beleaguered Metropolitan Transportation Authority has doubled.

As it turns out, officials say a controversial plan for congestion pricing won’t raise enough money to cover the difference.

The task of finding solutions for raising the dough has been left to a city-state sustainability task force. Sources tell CBS2 that in addition to congestion pricing, the task force is exploring other options including:

- raising the payroll tax
- increasing the real estate transfer tax on sales of property over $5 million
- ending the sales tax exemption on clothing purchases under $110

Mitchell Moss, head of the Rudin Center for Transportation at New York University, has other suggestions including raising the gas tax.

“We should be using the gas tax and other broad-based revenues,” Moss said. “We might even want to consider getting revenue from cannabis to be earmarked for riders.”

A marijuana tax is a real possibility if pot is legalized in New York, sources say. Other revenue streams could come from new taxes on casinos and sports betting.

City Council's TransitChek mandate a burden for small businesses

From Crains:

The New York City Council passed a bill Tuesday afternoon to require businesses with 20 or more full-time employees to provide access to a transit tax benefit. The heretofore optional program enables employees to pay for monthly train and bus fares with pretax earnings, potentially saving them hundreds of dollars on annual payroll and income taxes.

Companies, which can also save on payroll taxes but must bear the cost of administering the program, will face fines starting in 2016 unless they can prove hardship.

The transit benefits, typically provided via TransitChek in New York City, are currently used by roughly 1 million New Yorkers. According to its proponents, the new legislation, which now awaits Mayor Bill de Blasio's signature, will provide 450,000 more New Yorkers with access, saving them an average of $443 a year and injecting $50 million into the city economy.

While the savings on pretax income are real for employees, the argument that small businesses will save money as well is less certain. A report by transportation group Riders Alliance estimated that the legislation would save businesses $103 a year in taxes for every employee at the median wage level. But that doesn't take into account that administration of the program must be provided by the businesses, many of which may have to outsource the work.

The legislation creates additional costs in the form of fines for those that fail to abide by the bill. The legislation does allow the city's Department of Consumer Affairs to exempt businesses that demonstrate that compliance will be a financial hardship.

For critics of the bill, the idea of fining companies for failure to provide a costly program that was created by Congress as an option for businesses is yet another example of de Blasio-era legislation that burdens businesses.

Should we want higher taxes?

Andrew Hevesi/Marcia Bystryn op-ed From the Daily News:

State Supreme Court Justice Bruce Cozzens’ recent ruling that the Metropolitan Commuter Transportation Mobility Tax was unconstitutional is a dangerous decision that cannot be allowed to stand.

This tax — sometimes known as the payroll tax — was enacted by the Legislature in 2009 for the 12 counties in the Metropolitan Transportation Authority region to close a $1.8 billion dollar operating budget shortfall. We are pleased that Gov. Cuomo and the MTA have decided to appeal this decision, and by doing so have shown that they understand the gravity of this potential loss for all New Yorkers. Their efforts, which we fully support, must be successful.

While we understand that this particular tax is imposed on small and large businesses in the midst of an extremely difficult economic cycle and can appreciate why there are some who were glad to see the judge’s ruling, the unfortunate reality is that the potential loss of this revenue stream will lead our system into massive disrepair and significantly decrease service.

There are only three potential outcomes if the payroll tax is eliminated: Steep fare hikes, deep service cuts with dirtier trains and less maintenance and the elimination of desperately needed upgrades that are in the MTA’s current capital construction plan. None of these scenarios are acceptable.

Maybe instead, Andy and his pals in Albany should stop looting the MTA's funding for tweeding projects.

Judge's decision may hurt straphangers

From AM-NY:

Transit officials and advocates on Thursday blasted a state judge's ruling that an MTA tax is unconstitutional, saying it could lead to "devastating" service cuts and "radical" fare hikes if it is not reversed.

MTA chief Joe Lhota called Judge R. Bruce Cozzens Jr.'s decision to strike down a payroll tax "flawed," saying he expected it to be overturned on appeal. But he warned that if the state's appeals court upheld the ruling, it could lead to an annual $1.8 billion hole -- a 15% reduction -- in the fiscally challenged agency's budget, requiring service cuts and larger than anticipated hikes.

On Wednesday, Cozzens said the Payroll Mobility Tax, which charges employers 34 cents for every $100 of payroll, was unconstitutional because it "does not serve a substantial state interest." He said state legislators should have gotten the OK of local municipalities to pass the law, or get two-thirds approval, which didn't happen.

On Thursday, Gov. Andrew Cuomo said, "we believe the ruling is wrong and we believe the ruling is going to be reversed."

The decision was received warmly by businesses in counties, towns and villages in suburbs outside of New York City, which had argued that they did not directly benefit from MTA services.