This article I wrote appeared on the Newsmax.com website on Friday, May 31, 2024.
Archive for May 2024
DiNapoli’s State Budget Analysis – By George J. Marlin
May 28, 2024The following appeared on Monday, May 27, 2024, in the Blank Slate Media newspaper chain and on its website, theisland360.com:
My last two columns were devoted to scrutinizing the state’s unsustainable and irresponsible $237 billion tax-and-spend budget that projects a structural deficit of at least $16 billion.
On May 17, state Comptroller Tom DiNapoli released his analysis of New York’s Fiscal Year 2024-2025, which not only confirms some of my observations but raises additional concerns.
“At the state level,” DiNapoli explained, “certain revenue streams that have been critical to maintaining budget balance are either scheduled to expire or to be depleted in the years ahead, including temporary higher Personal Income Tax, Corporate Franchise Tax rates, and one-time COVID-19 financial assistance from the federal government.”
When these revenue streams dry up, the comptroller concluded, “Current spending levels will be difficult to sustain.”
No surprises there. However, it’s a sure bet leftists in Albany will extend the PIT and franchise taxes—they rarely let temporary taxes expire. But dried-up COVID money hurts. It will only pump up the structural deficit.
The next red flag: “All Funds” revenues are projected to decline by $7.3 billion. “This decrease is primarily attributable to projected reductions in investment and gaming receipts. In addition, receipts from the American Rescue Plan are expected to be depleted.
Growth in PIT, which is three-quarters of total tax revenue, is projected to grow a mere 1%.
DiNapoli goes on to warn that the state’s financial plan is too reliant on a “volatile PIT that depends on a small number of filers.”
Sound familiar? I have been preaching that for years in On the Right columns.
For taxpayer year 2021, DiNapoli noted, “Those with incomes over $1,000,000 comprised 1.6% of the PIT filers but paid 44.5% of the total PIT liability.”
And since 2021, a significant number of that 1.6% of PIT filers have moved to—a drum roll please—Florida. (A newly released Census Bureau report indicated that between 2020 and 2023, the Empire State lost 561,164 residents.)
As for “rainy day” reserve funds: “Despite greater revenues than originally anticipated by the Department of Budget, no additional deposits were made to the statutory reserves in 2023-2024,” the comptroller said. Instead, so-called “reserve” funds are being deposited in informal reserves, such as the “Economic Uncertainties Fund” that can be used by the executive for any appropriated purpose, without requirements for replenishment.”
In other words, the “Economic Uncertainties Fund” is the governor’s personal slush fund to spend at any time on favored projects.
To give the appearance of “containing costs” in Medicaid, the state is utilizing fiscal sleight of hand tactics that go back to the days when Nelson Rockefeller was governor. The state deferred Medicaid payments “across state fiscal years, pushing $1.4 billion that was due to be paid in March 2024 to April 2024,” according to the analysis.
The comptroller also pointed out that the governor’s budget continues to utilize “back door” borrowing to fund capital spending.
To avoid voter rejection of new borrowing on Election Day, billions of new debt will be issued by public authorities, “further adding to the state’s already high debt burden and utilizing limited remaining capacity under the state’s debt cap,” Di Napoli said.
Then there is the lack of transparency and oversight: “In the enacted budget, at least $367.6 million is exempt from the Office of Comptroller’s oversight and normal competitive procurement requirements. An additional $1.5 billion is exempt from normal competitive procurement requirements; and another $1.9 billion may allow funds to be distributed at the discretion of the Executive/DOB without following the normal competitive requirements,” the report said.
Apparently, the governor does not want the state comptroller’s independent pre-review of contracts, which “serves as an important deterrent to waste, fraud and abuse,” to reward cronies and contributors.
There’s more: “The budget continues to include problematic provisions with respect to accounting standards that have the potential to distort the appearance of reported receipts, disbursements, and liabilities, and obscure the picture of true spending growth,” according to the report.
Once again, the governor and her pals in the state Legislature are abusing power and are overspending. And the only people that will be punished for their shenanigans will be the taxpayers.
High-Tech, Social Media Destroying Teen Mental Health – By George J. Marlin
May 20, 2024This article I wrote appeared on the Newsmax.com website on Monday, May 20, 2024.
Gov. Hochul’s ‘Big Ugly’ Budget – By George J. Marlin
May 17, 2024The following appeared on Monday, May 13, 2024, in the Blank Slate Media newspaper chain and on its website, theisland360.com:
In my last column, I noted that Gov. Hochul’s $237 billion spending plan—which is up 35% since 2019—is unsustainable due to anemic economic growth.
The state’s economy, which grew by only 0.7% last year vs. 2.5% nationally, is not expected to grow much this year and the state’s monstrous $16 billion structural deficit will escalate.
Adding to the bleak economic picture is the never-ending exodus of Wall Street firms to Florida, which unlike New York does not have a state income tax or estate tax.
The New York Post reported May 8 that “160 Wall Street firms have moved out of the Big Apple in recent years—56 of which took their business to Florida, sucking a whopping $1 trillion in financial assets under management out of Manhattan.” That shift, according to Bloomberg News, “has paved the way for a ‘Wall Street South.’”
Financial moguls who ditched New York included Carl Ichan and hedge fund giant Paul Singer of Elliott Management.
While New York’s commercial real estate 20% vacancy rate is at an all-time high, Florida’s office rentals are booming, particularly in Palm Beach, West Palm Beach, and Boca Raton.
If the wealthiest continue to rush to the exit doors, New York’s income tax collection will take a major hit. Why? Because 1% of households—76,000 out of 7,600,000—pay nearly 50% of the state’s total income tax revenue.
Think about it. If another 10,000 to 15,000 of those households move out in the next couple of years, New York will be in even deeper financial trouble.
Its tax base will be shattered.
The state’s share of Medicaid costs, which have spiraled from $22 billion in 2021 to $36 billion in 2023, is budgeted to increase by only $900 million. However, estimated costs in recent budgets have consistently been wrong. And there is no reason to think that this budget year will be any different. Cost overruns will further exacerbate the structural deficit. (To cover themselves, Albany pols buried in the budget a new $4 billion tax on Managed Care Organization health insurance plans.)
There’s more bad budget news.
The resurrection of the 421-a tax break, that incentivizes the construction of new apartment rentals, is a shadow of its former self.
To keep that item in the budget, the governor surrendered to the radical leftists in her party.
The new program has two flaws that will be construction project killers.
First, it significantly lowers the income threshold for eligible tenants of “affordable” apartments in any new development. This policy will make it more difficult for new housing projects to be profitable.
Next, according to Two Trees Management, a major apartment building developer, the program imposes “certain wages that are consistently higher than the past, whether with union or non-union labor.” Newsday, stating the program increases wages and benefits to be at least $40 per hour, called it a “boon for unions.”
Real estate journalist Steve Cuozzo at the Post has reported “that the misbegotten measure has killed plans for River Ring, a $1 billion four-acre complex on Brooklyn’s East River Waterfront” that was to be built by developer Two Trees management.
The budget’s “Squatter” law is more hype than substance.
The Empire Center’s Cam Macdonald, in an analysis titled “A Squatter ‘Fix’ That May Fix Squat,” concluded, “The new provision that makes it certain in statute that squatters are not tenants may reduce confusion about the rights of persons who occupy property for more than 30 days. And such clarification may give property owners greater confidence to enlist assistance from police in self-help evictions, but it didn’t change the rights they already had prior to this month.”
In other words, Macdonald wrote, “property owners unwilling or unable to use self-help must endure the same expenses and delays in eviction proceedings that a clearer definition of squatting does not help.”
So, despite all the claims by Hochul and her legislative confreres that they passed a responsible budget, it appears it is another “smoke and mirrors” plan that panders to special interests while increasing spending, taxes, and pork.
Gov. Hochul’s Budget Giveaways – By George J. Marlin
May 1, 2024The following appeared on Monday, April 29, 2024, in the Blank Slate Media newspaper chain and on its website, theisland360.com:
After announcing a $237 billion budget deal had been reached with the state Legislature’s radical leftists, Gov. Kathy Hochul made this statement: “Each of us came to the table with really strongly held beliefs, but in the interest of our state, we pulled it together to deliver in a really collaborative way. And I will say we don’t always see that here.”
What a lot of baloney.
The only interests accommodated were those of the Public Employee Unions.
As for spending, the budget has grown by an astonishing 35% since the 2019 pre-COVID $175 billion spending plan. The state’s structural budget is now projected to be north of $16 billion.
Hochul has permitted spending to grow at an unsustainable rate despite an anemic economy that grew by only 0.7% last year—vs. 2.5% nationally — and declining revenue from the biggest source of taxes: Wall Street.
Financial services tax revenues have declined due to 5,000 industry jobs moving to low-tax states and bonus payouts dropping from $42.7 billion in 2020 to $33.8 billion in 2023.
But the scary economic trends didn’t matter to Albany power brokers. As Nicole Gelinas, of the Manhattan Institute, quipped, Albany has been “obviously preparing their next round of milking, while the cow is already part way out of the barn door.”
The budget also sticks it to New York City’s taxpayers.
Mayor Eric Adams’ request that Albany pick up half the tab of the projected $12 billion in migrant costs was rejected. The budget throws him a measly bone—$2.4 billion to house, feed, and clothe over 180,000 migrants.
With commercial property and Wall Street taxes falling out of bed, the city will probably have to cut essential services to cover the costs of onerous “Sanctuary City” laws.
Albany also surrendered to NYC’s United Federation of Teachers.
While Mayor Adams’ control of NYC’s public schools has been extended for two years, his authority has been severely curtailed.
The Board of Regents—which is controlled by the state Legislature—will now run the city’s Panel for Education, not the mayor. (The panel is empowered to approve or reject union contracts.)
There’s more.
Even though the city’s school enrollment has declined by 200,000, to protect UFT jobs the Legislature has directed the city to spend an additional $1.9 billion annually to procure more classroom space and to hire more teachers to accommodate the mandated smaller class size.
Former Mayor Michael Bloomberg, who convinced the Legislature in 2002 to establish mayoral control of schools, had this reaction to Albany’s actions: “It’s a shameless betrayal of the city’s nearly 1 million students that will undermine the progress the city’s schools have made and harm the next generation, leaving them without the skills they need to succeed in future careers—and leaving too many trapped in poverty and tempted by crime.”
Hochul’s budget plan to cut education aid statewide due to declining school enrollment got nowhere.
After the UFT balked, the governor not only stripped the proposal out of the budget but agreed to additional school spending. (Long Island school aid will increase by over $200 million.)
Reacting to the education budget, Ken Girardin, of the Empire Center for Public Policy noted, “The decision to keep filling empty classrooms with state money reflects lawmakers’ commitment to pouring cash instead of scrutiny into the system that’s spending more than any other state….”
Another costly item buried in the budget is the pension giveaway to the public employee unions.
The “Tier 6” reform—championed by Gov. Andrew Cuomo in 2012—that shored up the pension system and included benefit changes that would save state and municipal governments $113 billion over 30 years, was emasculated.
“There is no justifying this giveaway, which will cost over $4 billion,” the Empire Center has noted. “It is a heist from current and future taxpayers that will push property taxes higher and diminish public services. New York employees already get more generous benefits (on top of collecting Social Security) than any private sector group.”
The budget abuses and giveaways I have described are only the tip of the fiscal iceberg.
More on Gov. Hochul’s egregious tax and spend budget in my next column.
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