Over the weekend, and about a week after it was due, New York State Governor Kathy Hochul signed into law a $220 billion budget for the 2023 fiscal year. The budget includes significant investments in sectors hit hard by the pandemic, such as healthcare, a full funding of foundation aid (the state’s public education funding formula), and $4.2 billion for the Clean Water, Clean Air, and Green Jobs Environmental Bond Act. On this episode of Policy Outsider, Rockefeller Institute researchers and fellows join to provide an overview of the enacted budget and put into context the investments made in specific areas, such as education, COVID recovery, local government, childcare, the forthcoming retail marijuana market, and the environment.

  • Transcript

    Transcript was generated using AI software and may contain errors.

    Alexander Morse  00:00

    Welcome to a special episode of Policy Outsider. I’m Alex Morse. Over the weekend, and about a week after it was due, New York State Governor Kathy Hochul signed into law a $220 billion budget for the 2023 fiscal year. The budget includes significant investments in sectors hit hard by the pandemic such as health care, a full funding of foundation aid, the state’s education funding formula, and $4.2 billion for the Clean Water Clean Air and Green Jobs environmental Bond Act. On this episode of Policy Outsider, we’ve invited Rockefeller Institute researchers and fellows to provide an overview of the enacted budget and put into context the investments made in specific areas such as education, local government, child care, the forthcoming retail marijuana market, and the environment. First up, we have Bob magnets, president of the Rockefeller Institute and former New York State Budget Director to provide an overview of the 2023 fiscal year state budget.

    Robert Megna  01:06

    Some short comments on the $220 billion dollar New York state budget, which represents $8 billion growth over last year. First, I would recommend to all budget novices that they visit the DOB website, as well as the websites for the Senate and Assembly majorities. This is a way to see the actual appropriation and language bills passed as part of the budget. Also look in the next few days for the budget division to put out the official statement of the state of New York a document prepared for those who purchased New York state bonds. It is a detailed but readable account of state finances reflecting the adopted budget. Next, I would direct folks to the press summary produced by DOB from the governor and the budget director. Before any discussion of what was in the budget. It begins with the discussion about continued deposits to the state rainy day funds in roughly $5 billion amounts over the next several years. You know that starting kind of the budget discussion by talking about what’s not being spent. Of course, this represents prudent fiscal planning, but also sends the message that despite appearances of large spending increases, we are as a state being thrifty. That of course, is part of what you want to make people understand when you are increasing spending by $8 billion. In many ways, this may be the most unique budget of the past 20 to 30 years given the unexpected impact of COVID. Despite the devastating impact of COVID on human life and in changing work habits and in a myriad of other ways. The economic and fiscal impact has been much less severe than was originally anticipated. The result is an unanticipated increase in tax revenues along with a tremendous increase in federal aid associated with COVID relief. So in the short space of 18 months, the state went from predicting a dire fiscal future to one with fiscal surpluses are projected for the next three years and more. This is an environment where we should expect the state government to spend more and to address long standing problems avoided for a long time because of scarce resources in prior years. It is also a time when the executive can be expected to try to increase reserves to cushion future downturns and use one time federal aid for one time uses. If we look at the budget that was just passed by the legislature, this is pretty much what has happened with this budget. The roughly $220 billion budget increases spending again by $8 billion over the prior year, a significant increase over budgets of the past several years. Billions of additional dollars for health care largely for homecare workers, significant increases in capital expenditures, especially for transportation infrastructure, and again significant reserve for the future. To me, the striking part of most budgets is the focus on non budget and marginally budget related issues. And that goes to this budget as well with a huge focus on issues like bail reform drinks to go. And other items which, as they impact the budget are relatively minor, but have significant policy implications. And we’ll talk a little bit more about that. Another item that received a lot of attention in the budget was the capital ad for the Buffalo Bills stadium. That’s an additional $600 million. Also the gas tax holiday, where that will cost an additional $580 million dollars in one time costs to trot by holding back on taxes at the pump, which is an attempt to reduce the pressure on gas prices. By the way, there’s no guarantees with that, that there will be a significant reduction in gas prices. So it’s often difficult to see if consumers will actually see the benefit. There are also large increases in child care funding and other areas of the budget. But let’s close by saying the focus of the media is often on issues relatively minor in the scope of a $220 billion budget. This happens because policies with relatively small budget impacts, but larger policy concerns are incorporated in the budget. We mentioned a few such as bail reform. You know, this is important in the wake. And this has occurred only relatively recent in budget history, in the wake of court cases that allow the governor an incredible amount of latitude to include policy language in the actual budget. It also aids both the legislature and the governor in trying to package all of the main budget and policy issues in one neat package that can be passed significantly before the end of the legislative session. However, this does obscure concentration on the bulk of the budget, which is dominated by spending on things like K through 12, education, Medicaid, state agency spending, and a myriad of other areas, which this year were almost never discussed in the context of passing the budget. The focus, of course, is usually on new spending, and that is appropriate, but we often lose focus on the bulk of the budget. And that’s an incredibly important chunk of that $220 billion is money that is being spent in those other issue areas with bail reform and alcohol to go and many of these other issues having a relatively minor if any impact on actual state spending.

    Alexander Morse  08:04

    That was Bob Megna president of the Rockefeller Institute. Next we have Laura Schultz, director of research at the Rockefeller Institute on how federal COVID bonds impacted programs and policies in this year’s budget.

    Laura Schultz  08:16

    To date, the federal government has enacted seven COVID-19 relief and recovery packages that have allocated over 357 billion in financial resources to the residents, businesses and governments in New York State. This is an extraordinary amount. The historic levels of federal funds spending to address the pandemic and its aftermath have had a positive impact in New York’s fiscal situation, which we see in this year’s enacted budget of the 357 billion in relief spending directly to the state about 48 billion of these funds will flow through New York state’s financial plan over the course of several years. The state also received an additional 12.7 5 billion from the American rescue plan that they expect to transfer to state funds over multiple years. Ultimately, the long term fiscal plan anticipates pandemic assistance in decreasing amounts through at least 2027. The largest portion of these relief funds were received over the past two fiscal years. The largest single year for pandemic assistance was last year, with the state receiving 14 billion in an additional 5 billion from Arp. The enacted 2023 budget assumes almost 8 billion and Pandemic assistance this year. Plus the plan spends 2.4 billion of their art funding. This represents almost 5% of the upcoming year spending. These pandemic funds support a number of initiatives that will address the continuing public health and economic fallout of the COVID 19 pandemic. The budget invests in health care Workers and hospitals that were critical during the pandemic. The study has provided a one time bonus of up to $3,000 to frontline health care workers earning less than $100,000 a year. The goal of this $1.2 billion program is to help employers retain these critical workers. The budget also designates 3.9 billion in funding for aid to hospitals still fiscally struggling in the aftermath of the pandemic. To help businesses the budget also includes a small business tax relief credits specifically for COVID-19 expenses for businesses with revenues less than $2.5 million. The credit will help them offset the costs incurred in 2021 and 2022. In order to comply with COVID-19 orders and to make their businesses safer to assist the art sector in their recovery. The budget includes an extension of the New York State musical and theatrical tax credit that was doubled to assist in the revitalization of tourism near city. The budget also includes an additional $50 million for the New York State Council on the Arts to provide pandemic relief. For schools. The budget includes the recover from COVID School Program, the state will match federal funding the district’s received to address the lingering effects of COVID-19. These funds can be used for summer learning after school extended day or extended year programs. They can also be used to hire mental health professionals budget allocates $100 million over two years into the state matching fund. The program will incentivize districts to take full advantage of the federal funds that they have been allocated. Finally, the budget includes an appropriation of $2 billion into a COVID-19 reserve account. This is a rainy day fund designated to address unanticipated expenses associated with future responses the COVID 19 pandemic. These funds include 800 million for the emergency Rental Assistance Program 100 million for hospitals still experiencing financial distress 250 million for utility arrears assistance and an additional 125 million and homeowner and landlord assistance. Overall, the unprecedented levels of relief spending, distributed by the federal government has created a very favorable fiscal situation for New York State. These funds will be used to continue to support the state’s recovery efforts. But it’s important to note that this windfall is not a permanent one. While New York will benefit from 11 billion in pandemic assistance in this year’s budget, the projections for next year less than 7 billion and fall to less than 1 billion by 2026. Given the temporary nature of this funding, it is appropriate that these monies are being used to support short term programs rather than long term commitments.

    Alexander Morse  13:02

    That was Laura Schultz, director of research at the Rockefeller Institute. Speaking on childcare investments here is Rockefeller Institute’s Senior Policy Analyst Leigh Wedenoja.

    Leigh Wedenoja  13:14

    The finalist New York budget includes a substantial increase in child care spending, which is intended to increase both access to and the affordability of childcare. The governor initially proposed spending $1.4 billion to expand eligibility for subsidized childcare from 200% of the federal poverty line to 300% of the federal poverty line. The assembly and senate called for an even more ambitious expansion of 400% and 500% of the federal poverty line respectively. The final budget includes $7 billion for childcare spread over four years, which would be an average of $1.75 billion per year and expands eligibility for subsidized childcare to 300% of the federal poverty line, which was in the Governor’s initial proposal, this would double available subsidy funding. In this plan, a family of four could make up to $83,250, or a single parent with one child up to $54,930. To put this income into context, a single parent with one child would need to make less than $26 per hour in order to qualify, more than half of young children in the state meet these income requirements. 343 million of child care funding will be available immediately for stabilization grants aimed at childcare providers with 75% of that funding aimed at improving worker wages. The median hourly wage for childcare worker in New York is less than $16 per hour. Beyond increasing access to subsidies. There’s also funding to expand childcare on SUNY and CUNY campuses as well as 25 million in tax breaks for companies that offer childcare in New York City. The budget also includes $125 million in education funding for all day pre kindergarten programs. AMS, which would additionally benefit parents of young children.

    Alexander Morse  15:04

    That was Leigh Wedenoja, senior policy analyst at the Rockefeller Institute. Transitioning from child care to K through 12 education, we have Brian Backstrom Director of Education Policy Studies at the Rockefeller Institute.

    Brian Backstrom  15:20

    Like many other parts of this year state budget, the debates about K 12 public education spending, we’re not really on whether to spend more, but really on how much more to spend. Governor local and the state assembly wanted to increase total K 12. spending by about 2.1 billion. And the Senate first proposed an increase more than double that each of these plans would have set a record new high end spending. But in the end, in the adopted state budget, a total K 12 spending plan of a record $31.2 billion was approved. That’s a 7% increase over last year. And importantly, there was a unanimous agreement among all the parties to continue the phasing plan to fully fund foundation aid. Now, that’s a state’s main program of aid, and it’s distributed based on student need and community wealth. This is the second year of a three year commitment to fully fund foundation aid. And then this year’s budget foundation aid totals 21 point 3 billion, which is also a 7% increase from last year. A couple of new education related spending programs were added in this year’s budget. First $100 million is included for new programs for K 12 students that are designed to remedy some of the mental health and other related impacts from COVID. And also for households eligible for the school tax relief or star benefit that have incomes below $250,000 a year. A one year property tax rebate credit is given. This was done with the hopes of providing a little temporary relief to families from rising prices, combined with $1.1 billion in funding for universal pre K, which is $125 million increase this year, and a commitment for a similar increase in each of the next two years. Record high k 12 public education spending is one of the most notable outcomes of this year’s state budget.

    Alexander Morse  17:31

    That was Brian Backstrom Director of Education Policy Studies. Next up we have Lisa Parshall Fellow at the Rockefeller Institute, and a professor at Daemen college to speak on what policy changes and funding local governments can expect from this year state budget.

    Lisa Parshall  17:46

    To appreciate the impact of the 2023 budget on local governments requires understanding two parallel storylines that shape the priorities for municipalities heading into this budget cycle. The first is a longer term story of flatter declining state aid and limits on the revenue raising capacity of municipalities. That is local governments have long been feeling the pressure of meeting the rising expenditure demands while trying to keep property taxes low, even as state and federal aid has been stagnant. The second is the shorter term pandemic picture wherein localities have been unevenly affected. At the height of the pandemic, the sharp decline in state revenues hit some localities harder than others, and we triggered the state to enact a 20% reduction and local government assistance and efforts to close the state budget gap. The fiscal picture changed with higher than anticipated tax receipts and the infusion of federal assistance allowing the state to cut the 20% reduction to justify percent. A new round of funding in 2021 with the American Recovery Plan Act provided an additional influx of federal assistance to states and localities giving many municipalities a short term windfall. Going into this budgeting year, one major priority for localities was to secure changes in the aid and incentives for municipalities or AIM Program, the state’s main program for sharing revenue with local governments. AIM funding for local governments, which includes cities, towns and villages has been flat in nominal dollars since 2009, when adjusted for inflation in funding has decreased 24% since 2011. Moreover, in 2019, the state had enacted changes that transition some 846 towns and 479 villages from direct or state and payments to aim related payments funded from the county share sales tax revenue. Municipalities lobbied hard for first the restoration of direct game funding from the state and second for an increase in aim dollars. The 2023 budget obliged on the first priority, shifting some 59 point 1 billion and aim related payments back to the state. And funding however, was left the same as the prior year for towns and villages now shifted back to direct aim. Their funding was restored at their 2018 levels. So there was no overall increase in aim Amounts received by localities, but that funding will once again come from the state. counties were also successful. in ending the use of the county sheriff’s sales tax revenue for the distressed hospitals fund, that was a 2021 budget enactment that rerouted $50 million from county government and $200 million from New York City to fund distressed medical facilities. Counties successfully argued that with the surplus of federal assistance, the state should sunset this program also held flat the aid to localities bill, where the Video Lottery gaming aid to eligible municipalities at 9.3 million and small government assistance funds for Essex, Franklin and Hamilton counties. In addition, the enacted budget restored the pre pandemic funding levels for the state’s various local government efficiency grant programs in the capital projects budget. This includes the local government efficiency grants program, citizens empowerment, reorganization grants, and the citizens reorganization tax credit to aid to localities Ville appropriated 225 million to continue the county wide shared services initiative, while the capital projects budget retained $20 million for the municipal consolidation competition, another $2.5 million in the state operating budget, we’ll continue the funding for the municipal financial restriction board. So overall, the various state grant opportunities to encourage local government reorganization and efficiencies are maintained at their pre pandemic funding levels. Other long sought victories for local governments and the approved budget included the repeal of the right of way for laying fiber optic cables along highways and the inclusion of new provisions allowing local volunteer fire departments to bill for their EMS services. The budget of course also contains numerous appropriation items that are of interest to specific localities. Among those highlights are $600 million in state funding for a new stadium for the Buffalo Bills with another 250 million that will be coming from Erie County. The money is provided in the state budget through two allocations. 418 million will come from the state settlement with the Seneca Nation and another 182 million was appropriated through the capital projects. There was a $350 million appropriation for the Long Island Investment Fund, and $101 billion in state funding was allocated for the interstate 81 project in Syracuse. The budget also authorizes expedited approval of casino licenses for three casinos in the New York City area. Among them any citing criteria or local economic development opportunities, including the maximization of revenues received by municipalities at localities is also provided through the various functional areas of spending, including education, human services, transportation, environment, infrastructure and public health. The Department of Budget analysis available in a few weeks will provide an overall assessment of the net increase or decrease in local government assistance across these various categories of spending. But we can say that the state increases in programmatic supports, combined with improvements in the overall economic picture will alleviate existing pressures on local governments in their direct provision of services by localities and their municipal associations are likely to be pleased with many aspects of the 2023. Budget. concerns, of course remain as to what the fiscal picture will look like for municipalities. When federal funding expires, we can then expect that local governments will continue to lobby hard for increases in aim and other local government assistance in future budgetary cycles.

    Alexander Morse  23:04

    That was Lisa Parshall Fellow at Rockefeller Institute and professor at gaming College, Director of Operations and fellow at the Rockefeller Institute, Heather Trela, who’s been tracking municipalities decisions whether to participate in the new marijuana industry speaks on updated regulations and guidelines from this year’s budget.

    Heather Trela  23:26

    Given the uncertainty regarding when the adult use marijuana dispensaries and consumption lounges will be ready to open in New York State. The new budget has relatively modest revenue projections for fiscal year 2022 23. Assuming that the bulk of these funds will come from licensing fees. Additional funds from the sale of marijuana are expected in subsequent fiscal years. The new budget contains a $200 million investment into the cannabis social equity fund to help finance capital costs for cannabis dispensaries operated by social equity licensees. 50 million will come from the state, an additional 100 and 50 million will come from private capital investment. The new state budget also created an exemption to the state tax code to allow legal marijuana businesses in New York State to make tax deductions for business expenses and to claim business tax credits at the state level. Section 280 E of the Federal Tax Code currently prohibits such deductions given marijuana’s designation as a schedule one drug. The 2022 2023 New York state fiscal year budget creates a workaround to allow these deductions and credits to be taken.

    Alexander Morse  24:46

    That was Heather Trela Director of Operations and fellow at the Rockefeller Institute. Returning to touch on how the state budget impacts higher education and the State University of New York SUNY system here’s Bob Megna.

    Robert Megna  25:02

    Governor Hochul presented a budget with significant increases to SUNY and CUNY spending, including significant ads for new faculty and increases in capital allocations. In addition, the Governor made generous additions to the ELP program that supports underserved students, as well as increases to the TAP program which benefits students in both the public and private colleges in New York State. The legislature built on the governor’s strong foundation by adding 60 million in one time subsidy for SUNY and 40 million for CUNY, and 220 in operating aid, and 225 million in additional capital spending for SUNY. All in this was the largest increase in the SUNY and CUNY budgets in more than a decade. These need to be matched with the significant increases that were made to programs like tap and ELP and EOC that benefit a significant number of underserved students in New York.

    Alexander Morse  26:16

    That was Bob Megna, president of the Rockefeller Institute. And finally, we have Laura Rabinow, Deputy Director of Research to comment on the environmental initiatives and proposals that made it into the state budget, and some of those that didn’t.

    Laura Rabinow  26:30

    There were a number of environmental provisions left to be decided in the final enacted budget, as only a few of the legislative proposals found agreement across the executive and one house budget proposals. Initial agreement was found on some environmental appropriations. However, those included the environmental protection fund our state’s dedicated fund for environmental programs, which was funded at an unprecedented level of $400 million $100 million increase from last year. It also included 500 million once again for clean water infrastructure. That level of funding has continued since the appropriation of 2.5 billion in the clean water infrastructure act of 2017 and included 500 million towards offshore wind development, which will support New York’s goal of 9000 megawatts of offshore wind by 2035. Under the climate leadership and community Protection Act, most notably perhaps an environmental Bond Act, which New Yorkers will vote on this November was included in the budget. The act was initially set to go to public referendum in 2020 as the $3 billion restore Mother Nature Bond Act, but was delayed amid the pandemic. Each budget proposal this year sought to increase the Bond Act by varying amounts, the executive to 4 billion the assembly to 5 billion and the Senate to 6 billion. In the end, they agreed on a $4.2 billion proposal that will go before voters this November as the clean water clean air and green jobs environmental Bond Act. Should New Yorkers vote to pass the Bond Act this fall. It will be the first since 1996 and would allocate funds towards climate change mitigation, restoration and flood risk reduction, open space land conservation and recreation and water quality and infrastructure across the state. There were also different proposals on exactly how and when New York should require school buses to go electric. The final budget required that districts purchase or lease electric buses by 2027. And the environmental Bond Act also included some $500 million in funding for that purpose. In addition to that requirement, the enacted budget also expanded protection of wetlands by an estimated 1 million acres. A couple of items of note that did not make it in the final budget. There was legislation in the executive and Senate budget proposals regarding building standards and appliance efficiency. The Senate version would have required all new buildings to be electric by 2024. If they were under seven storeys and by 2027 if they were over seven storeys, that was left out of the budget. And there were two proposals related to paper products and packaging materials. One was a ban or restriction on certain harmful materials and packaging, and the other was an extended producer responsibility provision related to the recovery of materials from the waste stream and the level of recycled content within them. Some advocates were glad to see this provision fail temporarily, as they felt the proposal was not strong enough. While the Assembly did not include it in their budget proposal. It was reported that the chair of the Environmental Conservation Committee intends to introduce a related bill All soon. So we may see that issue addressed by the end of the legislative session. Yeah.

    Alexander Morse  30:08

    That was Laura Rabinow, Deputy Director of Research and I’d like to say a big thanks to all those who contributed to this special episode roundup of some of the major initiatives of the 2023 fiscal year New York state budget. If you’d like to learn more about the latest and public policy research, including the New York state budget, please visit our website at www.rockinst.org. That’s rock i n s t dot o RG. If you liked this episode, please rate subscribe and share. It will help others find the podcast and help us deliver the latest in Public Policy Research. All of our episodes are available for free wherever you stream your podcasts. Special thanks to all of those at the Rockefeller Institute for their contributions to this episode. Thanks for listening. I’m Alex Morse, until next time. Policy outsider is presented by the Rockefeller Institute of Government, the public policy research arm at the State University of New York. The institute conducts cutting edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York state and the nation. Learn more at Rock Institute org or by following Rockefeller Institute that I n s t on social media. Have a question comment or idea. Email us at [email protected].

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Policy Outsider” from the Rockefeller Institute of Government takes you outside the halls of power to understand how decisions of law and policy shape our everyday lives.

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