By Dan Murphy
Governor Andrew Cuomo and State Comptroller Tom DiNapoli have been sounding the alarm about the State’s finances, budget holes, and the lack of assistance coming from Washington DC. That warning has now turned into a temporary cut in State Aid to local governments who rely on funding from Albany to operate their local governments.
In Westchester County, White Plains and Yonkers are two city’s that receive a large amount of AIM funding, (Aid to Municipal Governments). Last week, the State budget office cut AIM funding by 20% from a planned payment last month.
For White Plains that means a $1 Million loss in State Aid. For Yonkers, it’s a $19 Million loss. According to the State Budget Division, the reduction, or temporary cut, is just that for the time being.
“We are not reducing support for AIM at this time and instead are holding back 20% of the funding as the State contends with a cash crunch caused by a 14% drop in revenue due entirely to the pandemic, the federal decision to delay income tax filings to July, and awaits clarity on federal assistance to offset this revenue loss,” said Freeman Klopott, spokesman, NY State Budget Division.
NY Comptroller Tom DiNapoli reported that state revenues for the month of May were down by $767 Million, or 19.7% from the previous year. “With an economy still suffocated by a global pandemic, the state’s finances took another serious hit in the month of May,” DiNapoli said.
“We are now clearly seeing the recession’s impact on tax receipts. As we continue to slowly re-open the economy, it’s critical that Washington act on our call for more federal aid.”
Other items of note in the report: Personal income tax withholding revenues were $291.8 million below May 2019, a decline of more than 9 percent reflecting both depressed economic activity and timing factors. The Department of Education made $4 billion in general aid payments to school districts.
“New York is facing an unprecedented public health and fiscal crisis that could dramatically change our landscape for years to come. Now we need help from Washington that comes without strings to protect New Yorkers from seeing essential services decimated,” said DiNapoli.
Westchester County government has also seen a large revenue hole blown in their budget from COVID-19. County Executive George Latimer has estimated a deficit in the current budget of more than $100 Million. Latimer offered an early retirement incentive to county employees to help close the expected budget gaps for 2021.
The Voluntary Separation Program will allow Westchester County employees to voluntarily leave County service in exchange of a $1,000 payment for every year of service to the County. The move will amount to one to two million dollars in savings in 2020, and will save the County six to ten million dollars in 2021.
Due to the societal shutdown caused by the COVID-19 outbreak, the County estimates revenue loss as great as $250 million from sales tax, hotel occupancy tax and other revenues for Fiscal Year 2020 Latimer said: “In light of the impact of COVID-19 on the County’s budget, and the impact it is likely to continue to have, creating a voluntary separation incentive is a fiscally prudent step the County can take to mitigate the revenue shortfalls created by the virus. This is one more thing we can do to assist with getting, and keeping, the County’s finances on track.”
The County is also exploring the following avenues to close the budget gap: the CARES Act resulted in the County receiving an additional $30 million in federal transit aid, the federal government will contribute 50% of the cost of the Medicaid program, the US Marshal service is anticipated to increase its contributions by $3.8 million, and the Department of Correction is expected to accrue $2.8 million in salary savings resulting from a significantly reduced inmate population.
Westchester County employees who wish to participate in the program must notify the County by July 24, 2020. Payments will be made to participating employees within 75 days of their voluntary separation from County service, which must occur on or before August 1, 2020.
What Governor Cuomo, County Executive Latimer, and Yonkers Mayor Mike Spano, are waiting and hoping for is a 4th stimulus-bailout from Washington DC, which includes a bailout of State governments and most important to our readers, a bailout of New York State government. What that requires is the approval of US Senate Majority Leader Mitch McConnell, who has previously said NO to any Blue State Bailouts. President Donald Trump could also intervene and agree to a bailout package for NY, which is also unlikely.
If neither McConnell or Trump agree to help the Empire State, a final alternative to avoid serious cuts would be to wait until the November elections to see if Joe Biden is elected President. A Biden presidency would be more agreeable to helping states like New York through their financial troubles for a year or more.
That is why the Governor is slow to move on any significant cuts, calling them for now a temporary cut, or holding back of revenues the state usually provides Yonkers and White Plains. With short term borrowing, New York State and Yonkers, could delay their doomsday cuts until after November and possibly into 2021.
But even with a President Biden in the oval office, Democrats would also have to take control of the US Senate, so that Senator Charles Schumer from NY becomes Senate Majority Leader Schumer. If McConnell retains his post, and republicans still hold onto the senate, don’t look for any NY bailouts coming from DC.
Democrats will have to pick up at least four seats in November, in Arizona, Colorado, North Carolina and Maine in order to have a 51-vote majority in the US Senate. If Democrats have control over both houses of Congress and the Presidency, then not only will bailout funds become available for New York, but the federal cap of State and Local deduction, (SALT), could also be repealed. This would give Westchester residents the ability to deduct all of their property taxes instead of just the first $10,000.