ALBANY—In the midst of the Coronavirus crisis, state lawmakers approved and Gov. Andrew Cuomo signed a $177-billion 2021 State Budget.
The governor signed the budget on April 3 that includes no new taxes, and continues to phase in middle class tax cuts. However, it does impose a number of controversial provisions that will certainly impact the business community.
In order to deal with expected revenue shortfalls, the budget authorizes borrowing an extra $11 billion to help cover the state’s costs and lost revenues, including $8 billion to account for the state and federal government pushing its income-tax filing deadline from April to July, according to the Empire Center, an Albany-based think tank.
The report published in the Middletown Times-Herald Record also states that the budget relies, in part, on several billion dollars from the federal coronavirus stimulus bills, including $1.2 billion to help schools and higher-education institutions.
Due to the ongoing COVID-19 pandemic and its unparalleled negative impact on the global economy, the Enacted Budget authorizes a reduction in spending by $10 billion and empowers the State Budget Director to develop a plan for across the board reductions and implement that plan as necessary over the course of the year.
The budget also puts in place mechanisms to control spending through the year if revenues fall even further, and raise spending if either revenues come in higher than expected or the federal government delivers support that offsets the state's revenue losses. All funds spending is estimated to total approximately $177 billion and state operating spending is authorized up to $105.8 billion, however in the absence of additional federal assistance or a faster than anticipated economic recovery, spending will initially total $95.8 billion, state officials noted.
“That the legislature and the Executive got this budget done with all of these policy initiatives is an extraordinary feat, and I praise Speaker Heastie, Leader Stewart-Cousins and every member of the legislature,” Gov. Cuomo said. “It would have been very easy to say, 'Oh, this is an extraordinary year; let's just do the bare minimum and go home.' We did the opposite. We said there is a lot of need and there are a lot of issues that need to be addressed, and we stepped up to the plate and we got it done.”
The budget authorized the creation of a $3-billion “Restore Mother Nature Bond Act” to fund critical environmental restoration and climate mitigation projects to ensure New York is able to adapt to the intensifying impacts of climate change, and reduce emissions, while creating jobs and local economic development. As part of the larger Restore Mother Nature Initiative, the Bond Act will be a key source of funding for projects focused on reducing flood risk, investing in resilient infrastructure, restoring freshwater and tidal wetlands, preserving open space, conserving forest areas, and reducing pollution from agricultural and storm water runoff.
It will also fund up to $700 million in projects to fight climate change, including green buildings. It aims to spend 35% of the funds on projects to benefit underserved areas of the state. The Budget Director will assess the state's finances and the economic outlook later this year and make a determination as to whether to move forward with the Bond Act, state officials noted.
The FY 2021 Enacted Budget also enacts a paid sick leave program. Businesses with five to 99 employees will provide their employees at least five days of job-protected paid sick leave per year and businesses with 100 employees or more will provide at least seven days of paid sick leave per year. Smaller businesses, with four or fewer employees, will guarantee five days of job-protected unpaid sick leave to their employees every year.
A controversial prevailing wage provision was also included in the budget that requires workers on private projects receiving a significant public subsidy to be paid a prevailing wage. Private projects larger than $5 million where at least 30% of construction expenses are supported by public grants, tax credits, or certain other incentives will be required to pay prevailing wage.
The prevailing wage proposal has been supported by organized labor and opposed by many business advocacy organizations, including the Business Council of New York State.
Other notable components of the budget included:
Banning hydrofracking in New York State—the budget codifies Gov. Cuomo's ban on the Department of Environmental Conservation approving permits that would authorize an applicant to drill, deepen, plug back or convert wells that use high-volume hydraulic fracturing as a means to complete or recomplete a well. In addition, it places a moratorium on future gelled propane hydrofracking applications until the DEC can conduct an analysis of the impacts of this completion method.
Commenting on the prevailing wage and hydrofracking components of the budget, Maureen Halahan, president and CEO of Orange County Partnership, said, “As an economic developer, we have to make sure that while we are doling out billions to shore up the economy, we also must consider ways in which we can generate revenue safely, employ local workers, while at the same time not over-regulate the construction industry.”
Continuing Middle Class Tax Cuts: This year's Enacted Budget continues to lower Personal Income Tax rates for middle-class New Yorkers. In 2020, the third year of the multi-year tax cuts enacted in 2016, income tax rates have been lowered from 6.85% to 6.09% for taxpayers in the $43,000-$161,550 income bracket, and to 6.41% in the $161,550-$323,200 income bracket. These cuts are expected to save 4.7 million New Yorkers more than $1.8 billion this year. Furthermore, income tax rates will continue to drop to 5.5% for taxpayers in the $27,900-$161,550 tax bracket and 6% in the $161,550-$323,200 bracket. When the cuts are fully phased in, middle class taxpayers will have received an income tax rate cut up to 20%, amounting to a projected $4.2 billion in annual savings for six million filers by 2025. As the new rates phase in, they will be the state's lowest middle-class tax rates in more than 70 years.
Accelerating Renewable Energy Projects: The Enacted Budget includes the Accelerated Renewable Energy Growth and Community Benefit Act, which will dramatically speed up the permitting and construction of renewable energy projects, combat climate change and grow the state's green economy. The state will also accelerate renewable transmission delivery.
Creating a Green Economy Tax Credit: The budget creates a new refundable, discretionary Green Jobs Tax Credit totaling up to 7.5% of wages for each net new job created fostering the expansion of green economy businesses. The state will also create a refundable, discretionary Green Investment Tax Credit totaling up to 5% of qualifying new capital investments in connection with qualifying green economy projects and increasing to up to 8% of eligible investment for research and development in qualifying green economy projects.
Developing a Strategy to Build High Speed Rail in New York: Gov. Cuomo will convene a team of forward-thinking experts and engineers to reexamine past high-speed rail plans, question and rethink every assumption and method and recommend a new plan for how to build faster, greener, more reliable high-speed rail in New York.
Investing in Roads and Bridges: The FY 2021 Enacted Budget supports $6 billion for the Department of Transportation capital plan in FY 2021, including $2.6 billion for upstate roads and bridges.
Making the "New York Buy American" Act Permanent: The FY 2021 Enacted Budget makes the Buy American Act, which is set to expire in April 2020, a permanent fixture in New York State. The Buy American Act requires state agencies to use high-quality American-made structural iron and steel, continuing to support the state's steel and iron industry, create union jobs and ensure the state’s infrastructure projects will last long into the future.
