Where things landed in the New York state budget

Nearly two days after the budget deadline, the state Legislature finally wrapped up negotiations, stretching the meaning of what is a “timely” passage of the budget due by April 1. The state Senate finished first, with legislative leaders giving closing statements on Thursday afternoon in a mostly empty chamber. The Assembly wrapped things up Friday morning.

The $177 billion spending deal included provisions changing bail reform and overhauling Medicaid, while holding education funding flat. There is also a provision in the budget that allows the governor to cut state spending in the fiscal year that began April 1 on a quarterly basis if revenues fall below projections. Lawmakers would have 10 days to pass spending resolutions of their own, but it remains to be seen whether the state Legislature will continue to meet in the months ahead, given the ongoing coronavirus pandemic. 

"This is a moment in history unlike any other, and government needs to function and deliver results,” Gov. Andrew Cuomo said of the budget that contained many – but not all – of the policy proposals he unveiled in January. “That it was done this year is really extraordinary." A final budget deal came without some of the typical political pomp. Unlike past years, there was no joint press conference or release from Gov. Andrew Cuomo, Majority Leader Andrea Stewart-Cousins, and Assembly Speaker Carl Heastie. 

State Senate Minority Leader John Flanagan gave an emotional speech, perhaps the last of his career – he is retiring this year, and it’s unknown if the Legislature will meet again amid the coronavirus crisis. Stewart-Cousins struck a more upbeat tone, thanking her colleagues and Gov. Andrew Cuomo for his leadership during these unprecedented times. But she still acknowledged that the budget the chamber just passed was not perfect, saying it was not the one her conference wanted to pass even a month ago.

With COVID-19 pandemic leading the state Capitol to close to the public and lawmakers maintaining social distancing rules, the generally opaque budget process was shrouded even more in shadow than usual. Details trickled out a little bit at a time, and Cuomo, Stewart-Cousins and Assembly Speaker Carl Heastie broke with tradition and never officially announced a three-way agreement, although Cuomo said the day before that they had reached a “conceptual agreement.”

The budget generally consists of 10 bills, but this time around it only has nine. The content of the final – the health and mental hygiene bill – was included in other different bills instead. The education bill, introduced Thursday morning, functioned as this year’s “big ugly” – that is, it included many unrelated but outstanding issues that were all packed together into a single measure. Those included amendments to bail reform enacted on Jan. 1 and Medicaid reforms.

Despite warnings from Cuomo about drastic budget cuts, the final budget turned out to be not much smaller than the $178 billion spending plan that the governor had originally proposed. According to Citizens Budget Commission Director Director of State Studies David Friedfel, this makes it likely the state budget director will use new authority included in the budget to enact rolling cuts throughout the year. The budget also authorizes the state to issue $11 billion debt in order to address expected loss in revenue. That includes $8 billion in short term debt to account for the delay in receiving state taxes, after Cuomo postponed the filing date from April 15 to July 15. Friedfel warned against converting that into long-term debt, which the state could be left paying off for years or decades.

There had been hopes this year to pass the budget early while the state responds to the coronavirus pandemic, which has scrambled revenue projections and opened a deficit that appears to be in excess of $10 billion as state revenues falter. However, like many state budgets before, contentious issues like education and health care held things up into the new fiscal year.

Bail had been the biggest remaining sticking point between Cuomo, Heastie and Stewart-Cousins. Heastie ceded some changes, but the budget does not include a controversial provision that would allow judges to jail criminal defendants pretrial because of their predicted “dangerousness” to public safety. Lawmakers agreed to give prosecutors more time to turn over evidence to defendants, in particular if a defendant is released pretrial. 

While the governor has not gotten everything he wants in the budget, he got his way ona number of the policy proposals that he pitched in his State of the State address less than three months ago. This included legalization of paid gestational surrogacy, a new domestic terrorism law and authorization to expand Penn Station by using eminent domain.

All of this is being decided with minimal public discussion or input. The challenges have been particularly daunting for the two legislative leaders, who are negotiating with a governor whose formidable leverage in budget negotiations has only strengthened in recent weeks. 

A budget deficit can give any fiscally-minded governor a chance to deny lawmakers their funding priorities, whatever their merits, by pleading poverty. Cuomo has been arguably doing this for months, but he doubled down on it in recent days by claiming there is nothing easier than passing a budget when you have “no money.” Cuomo has suggested before that means lawmakers should give state Budget Director Robert Mujica the authority to unilaterally cut spending every fiscal quarter based on state revenues – which is what the budget bill for localities did. will do. So from a fiscal standpoint, what is decided in the state budget could ultimately be changed by the governor later on. 

Here’s a roundup of where things landed on some key issues.

Taxes

The revenue bills that have passed both houses did not include any new taxes on the wealthy despite the efforts of some lawmakers and activist. “You could if you had a governor who is willing,” Senate Finance Chair Liz Krueger said early Sunday morning of efforts to raise taxes on the wealthy.

Some lawmakers pushed in recent months to make the wealthy pay more in a variety of ways – including higher income taxes and new levies on things like stock transfers and luxury yachts. Heastie has said since December that he wants some “revenue raisers” Cuomo has said the opposite. Senate Democrats, however, appeared to be warming to the idea, given the economic situation. “I've said that this certainly is not my first priority,” Stewart-Cousins said in mid-March. “But we want to consider revenues for wherever we can.” But Cuomo pushed back against the idea of raising taxes all year long, and had his way on the matter in the state budget. 

Public school funding

Drastic cuts to school aid were averted, in part thanks to additional money from the federal stimulus, the aid to localities bill shows. Although the state is set to cut just shy of $400 million from school funding compared to the executive budget, the feds have chipped in an additional $1.3 billion. So the updated budget language actually represents about a $928 million increase in spending compared to Cuomor’s executive budget. It’s also about $1.4 billion more in total funding since last year’s enacted budget. 

However, Foundation Aid, the main source of public school state funding, was frozen at last year’s levels. The budget also drops Cuomo’s proposal to change how the state allocates money in a way that would supposedly end the longtime “shares” agreement that allocates a fixed share of total state education funding to New York City and Long Island. In addition to the Foundation Aid freeze, the budget also authorizes the state education commissioner to make “pandemic adjustments” to school district allocation based on how much additional aid a district received from coronavirus relief funds. All the spending comes with the caveat that the state budget director may withhold any appropriations if the budget becomes unbalanced throughout the year due to economic impacts of the coronavirus pandemic.

State lawmakers had big ambitions at the end of last year when it came to education funding. Democratic members of the Assembly and the state Senate were hoping to increase the amount of Foundation Aid part of a long-running feud with the governor over the meaning of a landmark 2006 legal settlement on education funding. But by the beginning of the week, it appeared that lawmakers were pushing for a freeze in the level of education funding in light of Cuomo’s warning of “drastic” cuts. Lawmakers also blocked a proposal by Cuomo to consolidate more than a half-dozen expense-based funding sources (money used to reimburse schools for things like textbooks and schoolbuses) and combining that with Foundation Aid, an arrangement that would make Foundation Aid appear to be more without increased total state aid overall.

Medicaid funding

Long before the first coronavirus case was diagnosed in New York, the state had a multibillion-dollar funding shortfall to deal with thanks to the state Medicaid program. Cuomo’s proposed solution was to appoint a Medicaid Redesign Team (somewhat stacked with political allies) to figure out the details of finding $2.5 billion in savings. Cuomo now wanted to stick with the findings of the MRT, which were released on March 19. 

In the end he was not able to change the share of costs that localities would have to pay, but he did get lawmakers to approve proposals that include tightening the eligibility rules for managed long-term care programs that help the elderly and disabled. While the state is also looking to make New York City and other localities contribute hundreds of millions to help ailing hospitals and nursing homes, the Cuomo administration is also looking for ways to delay some changes in order to receive some of the federal aid. “We have the ability to delay them in the budget, so the effective dates can be changed,” state Budget Director Robert Mujica told reporters at the state Capitol on Thursday.

Lawmakers and activists have criticized the MRT recommendations and the idea of cutting aid to hospitals during the ongoing pandemic. But the limited time meant that the recommendations are the basis of negotiations, with lawmakers aiming to either accept, reject or modify them, according to Assembly Health Committee Chair Richard Gottfried.

Criminal justice 

The budget contains significant changes to the bail and discovery reforms that took effect Jan. 1. While a “dangerousness” provision was not included, judges will have additional discretion to remand people who miss court appearance or are accused of additional crimes while they are released pre-trial. 

Judges also have additional leeway to jail someone pretrial if they violate court orders or are accused of committing offenses that were ineligible for cash bail before, including aggravated vehicular assault, assault in the third degree, various sex crimes and “any crime that is alleged to have caused the death of another person.” The state Senate approved the changes on Thursday morning, and the Assembly the following morning.

Prosecutors will now have 20 days post-arraignment to turn over evidence to defendants who are jailed pretrial and 35 days for people who are not. The budget also included updated legislative language to a proposal by the governor would require the Manhattan district attorney to turn over $40 million each year from state-sanctioned deferred prosecution agreements. That money would be used to create a state fund to help district attorneys implement the new discovery law that requires prosecutors to turn over within 15 days the evidence they have against criminal defendants.

Some Democratic lawmakers and the governor have pushed hard in recent months for changes to the reforms, which drew sharp criticism from law enforcement officials and conservatives. A draft proposal – dated March 19 but still in play as the final budget details were being hammered out this week – would have allowed judges to impose the “least restrictive conditions that will reasonably assure the principal’s return to court or prevent the principal from committing a crime involving serious physical injury to another person based on the facts of the instant case." That provision appears to be in line with what moderate Democrats were pushing for in the state Senate. Stewart-Cousins had defended a proposal floated by Democratic state senators in February by noting that it would completely eliminate cash bail, a talking point that the final legislative language did not substantiate.

Recreational marijuana

Recreational marijuana was not legalized in the state budget. “Too much, too little time,'' Cuomo said at a morning press conference, echoing similar comments from key lawmakers. Assembly Majority Leader Crystal Peoples-Stokes and state Sen. Liz Krueger have also said that a deal cannot be reached by the budget deadline.

A new version of the revenue bill, which originally included the recreational marijuana proposal, did not include pot. The proposal had been laid out in Part BB of that bill, but in the version introduced on Tuesday, Part BB has been “intentionally omitted,” underscoring the likely fact that marijuana is out of the budget for good.

The main sticking point in recent weeks on the issue between Cuomo and lawmakers has been what to do with the money. Peoples-Stokes and Krueger have sponsored legislation that would require that a certain percentage of future revenues be used to spur economic activity in communities, overwhelmingly populated by people of color, that were most affected by the war on drugs. Cuomo has wanted fewer constraints on how that money would be spent.

Renewable energy and the environment

State lawmakers approved a $3 billion environmental bond fund for flood mitigation and wildland restoration efforts – a headline issue for Cuomo at his January State of the State address – was included in new budget legislation submitted Wednesday afternoon. The bond act appears to have wide support, especially since it does not add to the state’s bottom line, and would go before voters in November if it is included in the budget. Polystyrene foam, a styrofoam-like substance used in packing and food containers, will also be banned in most circumstances per a provision in the new bill. There are also provisions within the bill to ban hydrofracking and “streamline” the process of siting renewable energy projects – or, as opponents argue, limit the ways that local communities can block renewable energy projects. 

Prevailing wage

The state Senate on Wednesday approved an expansion of prevailing wage requirements on projects (with costs above $5 million) that received more than 30% of their funding from public sources. Members of the Assembly were still debating the proposal Thursday afternoon as part of a bill dealing with transportation, economic development and environmental issues. Some affordable housing project and nonprofit developments would be carved out of the new requirements. A 13-member board appointed by the governor will study how this all works in practice and possibly recommend changes in the future.

Electric bikes and scooters

State Sen. Jessica Ramos and Assemblywoman Nily Rozic – sponsors of the overwhelmingly popular legislation last session to legalize e-bikes and e-scooters in New York – saw a disappointing end to 2019, with Cuomo’s veto of their bill. But alas, the governor just had to put his own spin on the legislation before endorsing the legalization of e-bikes and e-scooters. Cuomo’s budget proposal for legalizing the devices, which added a helmet requirement, was endorsed by Ramos and Rozic, signaling early consensus on the issue in January. New legislative language submitted Wednesday includes the provision legalizing e-bikes across the state, but allowing localities to set their own rules for operation, was included in the final state budget.

Gig economy workers

Since last spring, the question of how gig workers like Postmates delivery cyclists and Lyft drivers should be classified has been gaining momentum in Albany – a debate that picked up speed in the fall, when California enacted a controversial law that changes most gig workers’ classification from independent contractors to employees. Despite one observer claiming that gig workers could be the most important issue in Albany this year, the coronavirus pandemic has thrown that debate off course. City & State broke the news last week that legislation to propose changes to how gig workers are classified or to grant them new labor protections won’t be included in the state budget this year, in large part because of the focus on coronavirus. 

Cuomo’s budget proposal on this issue would have created a task force to study how to treat and classify gig workers, and then authorize the state Department of Labor to introduce its own policies if that task force failed to make recommendations by May. But for now, that proposal and other legislation aimed at the gig economy are on the backburner.

Gestational surrogacy

Paid gestational surrogacy got legalized. The state Senate gave its blessing Thursday morning and the Assembly approved the proposal Friday morning as part of a budget bill that also includes education funding and changes to cash bail.

The proposed legalization of paid gestational surrogacy affects relatively few people, but it has personal significance for some of the top people in state politics. Secretary to the Governor Melissa DeRosa has related the proposal to her own experience with fertility treatments. Cuomo has touted the issue as a matter of civil rights issues for the LGBTQ community. But state Senate Finance Chair Liz Krueger and Assembly Ways and Means Chair Helene Weinstein have qualms with the idea of someone paying a young, low-income woman to bear a child with another woman’s egg. State Sen. Brad Hoylman, the most high-profile lawmaker on the issue, has had two daughters with his husband through out-of-state surrogates. The politics were tricky indeed.

Penn Station

The governor wanted to expand Penn Station over a whole city block, but there was just one little problem – the state does not own the land. So Cuomo had a provision put into his budget proposal that will allow him to seize that land through eminent domain. 

Domestic terrorism act

In response to the anti-Semitic machete attack in Westchester County at the end of last year, Cuomo included a provision in his executive budget that would categorize some hate crimes as domestic terrorism. In a recent press conference, Cuomo suggested that the proposal was one of the budgetary “sticking points” between himself and state legislative leaders. In an updated version of the Public Protection and General Government bill, where that proposal was included, the provision has been renamed the Josef Neumann Hate Crimes Domestic Terrorism Act. The name honors Rabbi Josef Neumann, a victim of the stabbing attack who succumbed to his injuries and died on Sunday.

Public authorities

The governor appears to be leaning on public authorities, which are quasi-governmental agencies that can borrow money while keeping the debt off the state’s official books. 

Public authorities are effectively under the control of the governor who appoints their leaders, and Cuomo was leaning on them to help him get things done despite the budget deficit long before COVID-19 hit New York. Public authorities have their own ways of raising money, such as through fees and bonds, and Cuomo made use of them

The governor got a $3 billion line of credit from the Dormitory Authority of the State of New York and the Urban Development Corporation, which could be used to fund the state’s general operations. Lawmakers also approved a $300 million idea to have the New York Power Authority redevelop the Erie Canal. The Olympic Regional Development Authority is pursuing a $14 million project to rebuild a ski lodge in the North Country. Cuomo’s plans to promote electric vehicles and other green initiatives depend on the New York Energy Research and Development Agency and other agencies. A proposal to expand Penn Station (more on that below) includes the Metropolitan Transportation Authority. A proposed merger of the Bridge Authority into the New York State Thruway Authority was not included in an updated budget bill.

Rolling budget cuts

Both chambers approved a key demand from the governor for dealing with the state’s deteriorating finances. Cuomo said he wanted the authority to adjust the budget in a rolling fashion throughout the year. The updated Aid to Localities budget bill included language that authorizes the state budget director to make those changes if new revenue estimates make the budget unbalanced. The reassessments will take place at three points during 2020 – the first “Measurement Period” runs April 1-April 30, the next May 1-June 30 and the final from July 1-Dec. 31. If at any point the budget falls out of balance, the state budget director will be able to “withhold all some of the amounts appropriated” to localities within the bill. That includes school funding and the Aid and Incentives to Municipalities program. The bill language gives the state Legislature 10 days to respond to cuts from the executive branch. It also includes a provision that localities receiving direct federal aid for the coronavirus pandemic may need to submit a spending plan to the state before using that money.

Public financing

Per Cuomo’s request, lawmakers codified recommendations from a state public campaign finance commission after a state judge rejected the recommendations of the commission and other changes to election law, finding that the commission itself was unconstitutional, Cuomo began pushing to include the proposed changes as part of the state budget. Language doing so was included in the transportation, economic development and environmental conservation bill. It sets aside $100 million for the public financing of state elections through matching funds and sets the limits on how much public money a candidate can receive. Gubernatorial and statewide candidates could receive $3.5 million, state Senate candidates could receive $375,000 and Assembly candidates $175,000. Each amount can be received once during the primary election, and again during the general election. Donations of up to $250 will be matched under the proposed new program. In addition to the public financing limits, the bill would also change the requirements for a third party to gain ballot access, making it more difficult for parties like the Working Families Party to maintain their status.

Paid sick leave

Cuomo’s paid sick leave proposal made it into the final version of the budget. It would require nearly every business in the state to offer employees at least some paid sick days. Businesses with 100 or more employees will be required to offer seven days of paid sick leave per year. Businesses with five to 99 employees will have to provide four days of paid time off and businesses with fewer than four will need to provide four days of unpaid sick leave. The language was also updated to include a list of reasons that an employee could request a paid sick day. 

Miscellaneous 

The budget omitted Cuomo’s past proposal to reduce the corporate franchise tax rate for small businesses … does not have a proposal requiring lawmakers and other public officials to release tax returns … and does not include a proposal to expand alcohol sales at movie theaters … but there is legislative language extending the state film tax credit through 2025 with new minimum spending levels … as well as language expanding sports betting, but only at additional locations inside casinos … barring people who committed certain misdemeanors outside the state from purchasing firearms in New York … giving the governor the discretion to close additional upstate prisons … and requiring manual recounts in close elections. A proposed ban on repeat sex offenders in public transit was included … the Metropolitan Transportation Authority will have new authority to issue bonds and borrow money to offset lost revenue due to the pandemic, as well as tap into money collected under the state’s proposed congestion pricing plan, which still awaits final approval … and flavored vaping products, including menthol, will be banned throughout the state … there was no rent freeze, despite the efforts of some state lawmakers and activists in recent weeks.

With additional reporting by Annie McDonough.