Good morning from Albany, New York…
The New York Senate and Assembly released their One-House Budget proposals, offering their official response to Governor Hochul’s Executive Budget Proposal. For those wondering about the timeline of the budget process, Majority Leader Andrea Stewart-Cousins laid it out quite simply, “this is the beginning of the middle.”
The top-line figure of the Governor’s budget is $227 billion while the Senate and Assembly both proposed $7 billion in additional funding, bringing their totals closer to $233 billion. As a reminder, consensus revenue forecasting reached a two year figure on revenue that was 800 million above the Executive Budget. Nonetheless, even with significant funds to play with, both Houses of the Legislature differed significantly with the Governor and you can expect some large scale fights through the April 1 start of State Fiscal Year 2024 (and perhaps even later).
Here are some of the areas where the two sides differ:
- Bail Reform—Unsurprisingly, both Houses of the Legislature rejected the Governor’s proposals on bail reform, which would give judges more discretion when setting bail. Expect this fight to escalate and play the biggest role in determining if we will have an on-time budget.
- Primary Education & Charter Schools—Both Houses agreed with—and commended— the Governor’s proposal to “fully fund” foundation aid at $2.7 billion, but rejected the proposal on charter schools. Beyond fully funding foundation aid—which earned her praise from many public education advocates, her plan controversially would lift the regional cap on charter schools in New York City and reissue “zombie” charters to reopen shuttered charter schools, which is largely a nonstarter for the Legislature.
- Higher Education—Both Houses of the Legislature rejected the Governor’s proposals on differential tuition increases at the four SUNY University Centers and an across the board 3-6% tuition increase for SUNY and CUNY campuses while largely maintaining—and in some instances augmenting—the Governor’s proposals for capital and operating support for campuses across the State, including $100 million in capital for both the University at Buffalo and Stony Brook as part of Flagship Designations, as well as a $500 million endowment matching fund.
- Housing—The Senate and Assembly proposed a $500 million incentive package for communities to build new housing and rejected many parts of Hochul’s proposed New York Housing Compact, a multifaceted policy proposal to create 800,000 housing units over the next decade that most controversially would allow the state to override local zoning laws for municipalities that did not achieve new housing goals.
- Minimum Wage—Both Houses of the Legislature omitted the Governor’s plan to index the minimum wage to inflation, saying it does not go far enough. The Senate Resolution says “the Senate supports raising the minimum wage and then indexing the minimum wage to inflation after a sufficient increase to ensure that New Yorkers earn a living wage to support their basic needs and the needs of their families,” while the Assembly resolution says “indexation of the minimum wage, following such increases, should not be subject to exceptions which would prevent employees from getting an annual increase, thus further diminishing the value of the minimum wage rate going forward.” As they outlined in their resolutions, we expect both Houses of the Legislature will push a more aggressive plan on minimum wage at the negotiating table.
- Climate Change—Overall, the One Houses—much like the Executive Budget Proposal—were light on “follow up policies” to January’s final Climate Action Council Scoping Plan. However, one major—and controversial—CLCPA related issue, the gas phaseout/ban, was advanced in both One-House bills—albeit in different iterations between the Houses. The Assembly advanced language that would require new buildings under seven stories to be fully electrified by 2026, and buildings over seven stories to be electrified by 2029. The Senate advanced its own slightly different language that a municipality may only issue a permit for new construction under seven stories that is an all-electric building by 2025, and may only issue a permit for new construction seven stories or more that is an all-electric building by 2028. Both proposals direct the New York Power Authority to establish a program to fully decarbonize and achieve zero on-site emissions for State-owned campuses and facilities by 2040, with immediate funding for decarbonization projects at the highest-emitting campuses and facilities, subject to labor protections and standards. Overall, these proposals have some serious opposition, particularly throughout the regions of Upstate New York.
- Taxes & Revenue Raises—The Governor had been adamant in the lead-up to her budget that there would be no new taxes, but both Houses of the Legislature included language to raise taxes on wealthy New Yorkers from 10.3% to 10.8% for those making more than $5 million per year and from 10.9% to 11.4% for those making more than $25 million.
- Transit—The discussion on public transit this year will largely come down to dedicated revenues and how best to fund desperately needed capital and operational improvements both at the MTA and at non-MTA transit authorities Upstate and Downstate. Both Houses of the Legislature opposed Governor Hochul’s plan to fund the MTA by increasing the payroll tax in NYC and instead, proposed a number of smaller measures such as generating revenue through residential city parking permits. Both sides agree that the MTA needs roughly $1.3 billion to remain solvent, they just disagree over how to fund it. Outside of the MTA’s service area, both Houses of the Legislature also included dedicated revenues specific to Non-MTA Transit Authorities, which are essential in meeting the larger goal Upstate of a 20% increase in State Mass Transportation Operating Assistance (STOA) over the 2022-23 Enacted Budget. The Senate included a surcharge on transportation network company rides that occur in New York City and outside the City of New York which would be dedicated to both the MTA and to Upstate and Downstate non-MTA transit funding, while the Assembly included language to apply the four percent State and four percent local sales tax to certain digital streaming products; the revenue would be directed to transit systems across the State—as well as a 2% increase in the current business income tax rate to 9.25% for businesses with an income base over $5 million, generating revenue for both the MTA and non-MTA transit authorities.
- Healthcare—both Houses of the Legislature largely rejected a few of the Governor’s main proposals. Both Houses of the Legislature rejected the Governor’s proposed Fee for Service Carve-out of the Medicaid Drug Benefit, which would cost safety net covered entities millions of dollars of critical revenue from the Federal 340B Drug Pricing Program. The Senate offered a compromise proposal that would carve the benefit back into Managed Care—allowing covered entities in safety net healthcare to continue to utilize the federal 340B drug pricing program—while creating key reforms like a single Preferred Drug List and enhanced negotiating power for the Department, while the Assembly offered an outright repeal of the Carve Out. Both Houses of the Legislature outright rejected the Governor’s proposal on “Pay & Pursue”— a long sought after priority of hospitals throughout the State which would require health insurers to immediately pay hospital billing claims with a retroactive review on whether the treatment was medically necessary. Both Houses of the Legislature also largely modified the Governor’s proposals to reform the Managed Long Term Care program, most notably removing provisions allowing the state to eventually competitively procure MLTC plans.
- Mental Health and Substance Use Disorders—Both Houses included large parts of the Governor’s proposal to pump $1 billion into the State’s mental health continuum over the next several years, but they also proposed some changes: the Senate advanced language to create a workgroup to study and issue recommendations on implementing Daniel’s Law, and create a pilot program to support non-police, trauma-informed, community-led responses to mental health, alcohol, and substance use crises; as well as new language to allow for the expansion of treatment services provided at the Office of Addiction Services and Supports treatment centers to include treatment for mental health and physical health care needs of the individual. The Assembly added a proposal that would establish a task force to provide recommendations that aim to remove barriers for aging residents in mental health housing programs to receive both medical and mental health care. Both Houses rejected an Executive Proposal to create a new title in licensing of Qualified Mental Health Associate.
Amidst the fighting, there were some areas the Governor and the Legislature were able to agree:
- Belmont Race Track—Both houses of the legislature are in relative agreement on a proposal to loan Belmont Race Track $455 million to bulldoze and reconstruct the grandstand and the clubhouse at the historic third leg of the triple crown. A coalition of labor, small business, and other organizations, We are NY Horse Racing, has descended on the Capitol over the past few weeks to drive the proposal. The Senate modified the language slightly to include provisions ensuring commitments to renovations are upheld, labor protections, and clarification on Franchise Oversight Board and Division of Budget oversight, as well as a requirement for an affordable housing component, and a requirement on the transfer of Aqueduct Racetrack land once the franchise corporation’s lease on the property reverts back to the State. The Assembly also modified the Executive proposal, among other things, to ensure the renovations are subject to a project labor agreement.
- Supporting New York’s Film Industry—As New York’s Film industry tries to climb out of a post-Pandemic slump, both Houses concurred with the Executive proposal to increase the Film Tax Credit from $425 million to $700 million, something that industry stakeholders say is essential to win back business from places like Georgia, though the both Houses of the Legislature want additional fiscal guardrails on both of those measures.
Republicans in the Legislature, who are largely powerless in the budget process given Democratic supermajorities in both chambers, have voiced their concerns with their colleagues proposals, particularly when it comes to spending and tax increases on high income New Yorkers. Addressing Senate Finance Chair Liz Krueger, Republican Senator Tom O’Mara pushed back on the proposal to raise taxes, saying “I certainly don’t share your lack of concern over losing those high earners.” Krueger and her Democratic colleagues offered that the need to raise taxes on the wealthy, which was also proposed in the Assembly, is driven by the need to provide increased services and aid to vulnerable New Yorkers.
The two women and a man in a room (formerly known as “three men in a room”) will begin negotiating through the differences in their respective proposals to enact a final budget, but the odds that happens before the April 1st deadline are slim to none. The next step will be General Budget Conference Committee meetings, which start today, click here for the full list of the General Conference Committee Appointments made Friday.
Fresh on the heels of the feud over the failed nomination of Judge Hector LaSalle, some in the press have portrayed the budget negotiations as an all out war between the Executive branch and the Legislature. The release of One-House budgets showed that, in reality, there is broad agreement between the Governor and Legislature other than a few high-profile issues including charter schools and bail reform. Speaking on that topic, the Governor offered, I’ve been called an iron fist in a velvet glove, I have a lot of respect for the legislators. They are representing their views in their districts. I represent the entire state of New York, and we’ll work it out.”
The New York Republican Party found a replacement for Chair Nick Langworthy following his election to Congress. Republicans coalesced around Ed Cox, a son-in-law of former President Richard Nixon who previously served as state GOP Chairman from 2009-2019. As The Who put it in a song written during the Nixon presidency, “meet the new boss…same as the old boss.” Speaking to reporters, Cox said, “We need to build the party to a place where we can challenge the Democrats who have supermajorities in both Houses of the Legislature and elect the officials we need so we’re a strong second party and stand up for the things we believe in.”
Cox will be tasked with not only defeating Democrats in New York, but keeping his own party in line was well. The New York Young Republican Club, which boasts well-known allies like Roger Stone and Steve Bannon, is not content to sit back and let what they view as the establishment wing of the party set the agenda for the GOP in New York. Visha Burra, a member of the Young Republican Club and coincidentally the director of operations for Rep. George Santos, said “The leadership is simply not complying with the grass-roots energy,” he said. “They’re doing everything they can to kill it.” The fight is emblematic of the larger struggle among national Republicans between those who prefer to see the party continue to tack to the right, and those who want a more moderate, forwarding looking approach heading into 2024.
In Washington, D.C., lawmakers and financial regulators were left scrambling to prevent an all out collapse of the broader financial system after the rapid failure of Silicon Valley Bank. Last Sunday, shortly before the markets opened in Asia, a joint statement was issued by the Department of Treasury, Federal Reserve, and FDIC, stating “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
President Biden, who had a front-row seat to the 2008 bank bail-out and subsequent political cost for President Obama, gave a speech the following Monday where he emphasized the detrimental effect the collapse of SVB would have had on working men and women had the government not intervened, offering that his administration’s actions protected “small businesses across the country that banked there and need to make payroll, pay their bills, and stay open for business.” Biden also reiterated that no taxpayer money would be used to make depositors whole, the bank’s executives will be fired, and the bank’s investors would not be bailed out.
While Silicon Valley Bank got all the press, the bigger New York story was the collapse of Signature Bank, a regional bank that had focused on real estate lending and digital assets. The release of financial data last Thursday, paired with the broader economic precarity caused by SVB just days earlier, resulted in a high volume of customer withdrawals and a rapidly falling stock price that caused trading to be briefly halted. The New York State Department of Financial Services (DFS) announced that they would be taking possession of Signature Bank “in order to protect depositors,” and the FDIC announced that deposits at Signature would also be protected by the federal government.
Barney Frank, the former Massachusetts congressman who authored the Dodd-Frank act following the 2008 financial crisis, sat on the board of directors at Signature Bank and was heavily involved in their lending programs for affordable housing development. Frank said, “What had attracted me to it, and still does, is its role as a multifamily housing lender.” Former Governor Andrew Cuomo, who is reportedly still mulling a return to politics, has used Signature Bank for one of his main campaign accounts and had up to $70,000 in “interest and dividends” from Signature according to his latest campaign filing from 2022.
SVB and Signature’s demise marked the second and third largest bank failures in U.S. history, and they happened in the same week. The ordeal has brought renewed attention to the regulatory systems and oversight of large financial institutions and has prompted calls to reexamine how these banks protect customer deposits. Democrats have pointed to the 2018 regulatory rollbacks during the Trump administration as a good starting point for reimplementing checks and balances that would prevent future bank failures.
New to the NYS Legislature
Assembly Member Sam Pirozzolo was elected to the New York State Assembly on November 8, 2022 in the race to replace longtime Staten Island Assembly Member Michael Cusick. Pirozzolo’s win flipped the seat red, which had been held by the Democratic Assembly Member Cusick since 2003. The 63rd Assembly District includes parts of Staten Island, including the western and central neighborhoods of Todt Hill, Chelsea, and New Springville.
Some of Assembly Member Pirozzolo’s prior experience in public office includes a seven year stint as the president of Community Education Council 31 where his most notable accomplishments included the creation of a Gifted and Talented program for middle school students, the recommendation for the NYC Department of Education to hire retired police officers as school resource officers, and the successful fight for the immediate cleanup of toxic PCBs leaking from the light fixtures in school classrooms.
As an education advocate, Assembly Member Pirozzolo has participated in historic litigation that led to the return of more than $4 billion to New York public schools. He also fought to ensure that co-located charter schools receive the same capital funding as their host public schools.
While serving in the Legislature, Assembly Member Pirozzolo will work to support law enforcement officers with proper funding, fix broken bail and parole policies, and help small businesses grow and thrive in a stronger, more resilient economy.
Assembly Member Pirozzolo a native Staten Islander and has successfully operated his family’s optical practice for 33 years.
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