Governor, Legislature Agree on $147B Budget

ALBANY—New York Gov. Andrew Cuomo and state legislative leaders announced on March 31 that they had agreed on a $147-billion budget for Fiscal Year 2016-2017 that includes a phased in $15-minimum wage in portions of the state, paid family leave and a middle-class tax cut.

The budget holds growth in state spending to 2% for the sixth consecutive year and also includes a $4.2-billion middle class tax cut when fully effective and significant statewide infrastructure investments, including a new $55-billion state transportation plan that commits $27.14 billion for the New York State Department of Transportation and New York State Thruway programs and $27.98 billion for the Metropolitan Transportation Authority. The state funding for the Thruway Authority also earmarks funds for the new Tappan Zee Bridge and freeze tolls on the system until at least 2020.

Spending

The budget agreement includes Total State Operating Funds: $96.2 billion; 2.0% growth; school aid: $24.8 billion; 6.5% growth; Medicaid: $18.5 billion; 3.4% growth under the cap and higher education: $7.2 billion; 2.0% growth.

“In a time defined by vitriolic hyper partisanship and when people have lost faith in their government’s fundamental ability to address the critical challenges of our time—in particular, the growing income inequality in our country, New York State has once again come together to get things done,” Gov. Cuomo said. “Many have proposed the big changes we sought – minimum wage, meaningful paid family leave, a balanced budget that caps spending and cuts taxes – but almost all have failed. Today, I am proud to announce that with this agreement, we have succeeded.

Details on some of the most significant parts of the budget are as follows:

Minimum Wage

For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage would rise to $11 at the end of 2016, then another $2 each year after, reaching $15 on 12/31/2018.

For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage would rise to $10.50 by the end of 2016, then another $1.50 each year after, reaching $15 on 12/31/2019.

For workers in Nassau, Suffolk and Westchester Counties, the minimum wage would increase to $10 at the end of 2016, then $1 each year after, reaching $15 on 12/31/2021.

For workers in the rest of the state, the minimum wage would increase to $9.70 at the end of 2016, then another .70 each year after until reaching $12.50 on 12/31/2020 – after which will continue to increase to $15 on an indexed schedule to be set by the Director of the Division of Budget in consultation with the Department of Labor.

The state estimates that more than 2.3 million people will be affected by the increases in the minimum wage.

Paid Family Leave

When fully phased- in, employees will be eligible for 12 weeks of paid family leave when caring for an infant, a family member with a serious health condition or to relieve family pressures when someone is called to active military service. Benefits will be phased-in beginning in 2018 at 50% of an employee’s average weekly wage, capped to 50% of the statewide average weekly wage, and fully implemented in 2021 at 67% of their average weekly wage, capped to 67% of the statewide average weekly wage. This program will be funded entirely through a nominal payroll deduction on workers. Employees are eligible to participate after having worked for their employer for six months.

Middle Class Tax Cut

The budget lowers Personal Income Tax rates for middle class New Yorkers. With the middle class tax cuts of 2012, rates were lowered from 6.85% to 6.45% for taxpayers in the $40,000-$150,000 income bracket, and to 6.65% in the $150,000-$300,000 income bracket. Under these new reforms, the rate will drop even further beginning in 2018 and will continue to drop all the way to 5.5% when the cuts are fully phased in.

These new lower tax rates will save middle class New Yorkers nearly $6.6 billion in just the first four years, with annual savings reaching $4.2 billion by 2025. As the new rates phase in, they will be the state’s lowest middle class tax rates in more than 70 years. When the tax cuts begin, they will benefit 4.4 million filers, growing to 6.0 million filers when fully phased in.

Schools and Education Funding

The budget provides $24.8 billion in School Aid, the highest amount ever, and $5.3 billion more than 2011-12. While total state spending has been held to 2% annual growth and most state agency budgets have been held essentially flat, School Aid is increasing by 6.5% for the 2016-17 School Year.

Infrastructure Spending

The budget contains the largest state transportation plan ever approved, with more than $55 billion of transportation investments statewide, including $27.14 billion for State Department of Transportation and Thruway programs and $27.98 billion for the Metropolitan Transportation Authority programs. The plan aligns capital programming for DOT and MTA over a five-year period (SFY 2016-20) and includes additional commitments for priority projects and programs that extend over a sixth year, state officials said.

The $27-billion DOT capital program includes: $21.1 billion for capital improvement of highways, bridges, rail, aviation infrastructure, non-MTA transit, and DOT facilities throughout the state. This includes the launch of three new initiatives – BRIDGE NY, PAVE NY, and the Extreme Weather Infrastructure Hardening Program to further improve conditions on state and local roads and bridges, as well as provide resiliency to roadways that are particularly susceptible to weather events. It also includes $4 billion for capital investment for a sixth year, and $2 billion in Thruway Stabilization funding that will support capital improvements on the entire Thruway system and the New New York Bridge, allowing the Authority to freeze tolls on the system until at least 2020.

The $27 billion MTA Capital Program includes: $26.6 billion for improvement of capital facilities operated by the New York City Transit Authority, Long Island Rail Road, Metro-North Railroad and MTA Bus and major initiatives including $1.5 billion for Phase II of the Second Avenue Subway. Specifically, the budget authorizes a record $8.3 billion of State support for the program.

Photo Caption:
From left, James Malatras, director of state operations, Gov. Andrew Cuomo, Robert Mujica, director of the division of budget and Alphonso David, counsel to the governor.

John Jordan
Editor, Real Estate In-Depth