2016 NEW YORK STATE BUDGET SHENANIGANS

New York State government is almost totally dysfunctional. This is clearly demonstrated by the 2016 State Budget that was adopted on April 1st. For example, Governor Andrew Cuomo issued “messages of necessity” (to get around pre-filing deadlines) to allow the Legislature to ram through budget bills that almost no one had actually read. This was done so that the Governor and Legislature could claim that they had delivered an “on-time budget” that, in the end, wasn’t actually on time.

The Governor and Legislature cut some outrageous deals. One example was a sales tax exemption for the portion of the cost of luxury yachts that exceeds $230,000. Not surprisingly, there was no similar exemption for family automobiles, washing machines, or vacuum cleaners. Why did Albany think it was necessary to give a sales tax exemption for luxury yachts? Can someone please explain this to me?

The Budget bill also established an “Independent Commission” to study and propose increases in salaries for State officials including the Governor, Legislators, and others. This ploy will allow salary increases to be automatically approved without the Legislature or Governor ever actually voting on those increases. This will give them what they refer to as “plausible deniability.” Another irony involved the ethics provisions that are intended to increase ethics and “transparency” in State government. These were developed in secret, and only released hours before being voted upon and approved under the “messages of necessity.”

Here are some of the specifics of this year’s Budget. The total Budget is $155 billion. It includes $24.8 billion in School Aid, which is an increase of $1.5 billion. It also includes $18.5 billion for Medicaid. It includes a five year capital plan for the MTA (Metropolitan Transit Authority) for $24.5 billion, and a five year capital plan for roads and bridges worth $27.18 billion. It includes an income tax rate reduction plan that will be implemented through 2024.

The biggest news regarding this Budget related to the increase in minimum wage rates. Governor Cuomo has trumpeted the increase to “$15 per hour.” However, that is misleading and an over-simplification. There are different minimum wage rates for “large employers” in NYC; for “small employers” in NYC; for employers in Nassau, Suffolk and Westchester counties; and for employers Upstate. The Upstate counties new minimum wage rate increases will be as follows:

  • $9.70 on/after December 31, 2016;
  • $10.40 on/after December 31, 2017;
  • $11.10 on/after December 31, 2018;
  • $11.80 on/after December 31, 2019;
  • $12.50 on/after December 31, 2020; and
  • thereafter on each December 31st the Commissioner of Labor and Director of the Budget will establish a minimum wage rate (but not more than $15.00) that is deemed appropriate dependent upon economic circumstances.

It is clear that Upstate workers will not benefit from a $15/hour minimum wage rate for at least the next 5 years. Workers in NYC may achieve that rate by December 2018 if they work for a “large employer.” Time will tell how this impacts employment levels. California recently enacted similar minimum wage rate increases. Governor Jerry Brown (who supported the rate increases) has stated that he expects those increases to result in the loss of more than $4 billion in tax revenue, and loss of several hundred thousand jobs. Will NYS experience the same?

The Budget also mandated “Twelve Weeks of Paid Family Leave.” The reality of this program is somewhat different from the headlines. The program doesn’t begin until 1/1/2018. Then it phases in over 4 years, starting at 8 weeks of leave at 40% of the employee’s wages, to 12 weeks at 67% of the employee’s wages, subject to certain capped amounts. The leave can be used to care for sick family members, for bonding with a newborn/adopted child, or absences related to military service. It defines who is a qualified family member. The program will be administered by Workers’ Compensation Board, It will supposedly be paid for by contributions from participating employees’ wages. Contributions are capped at $0.70/week. It is a very complex program, and I don’t see how the contributions will be sufficient to fund it. Time will tell.

. . . and that’s the news from Albany.

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