Title: Gov. Hochul's Budget Proposals

[MUSIC]

Brian Lehrer: Brian Lehrer on WNYC. Governor Hochul presented her $252 billion New York State budget proposal on Tuesday, and it included a lot of things. We're going to go down some of them and it's going to be really interesting to see because there's some new stuff here, but the frame is it included taking advantage of the better-than-expected revenues. Yes, New York State has a surplus right now, taking advantage of those to help families.

Governor Hochul: "So when you add all this up, the tax credit for the little ones, your family's inflation refund, school breakfast and lunch, plus the middle-class tax cut, this puts nearly $5,000 back in the pockets of many New York families."

Brian Lehrer: What it doesn't include is closing the gap in the MTA's capital budget, for example, or taking account of cuts in spending from the new Republican-controlled federal government.

Governor Hochul: "Changes at the federal level will create new challenges for our state and for programs that New Yorkers care deeply about. It's already started. And if the Republicans in power there cut critical federal funding streams for Medicaid, education, child care, utility assistance – the list goes on, those who are hurt need to raise their voices and direct their anger at Washington and push their members of Congress to fight for them. Because New York and other states will simply not be able to shoulder these costs on our own."

Brian Lehrer: As negotiations begin between the states and the Trump administration, and negotiations begin between the governor's office and the state assembly and Senate aiming for the April 1 state budget deadline, where are we?

To talk about this I'm joined by an old friend of the show, but in a new role, Jimmy Vielkind. You may know the name. He's reported on Albany for other outlets, including The Wall Street Journal. Now, as of just recently, he's part of the WNYC family as our state issues reporter, working alongside John Campbell.

Hey, Jimmy. Welcome to WNYC and welcome back to the show. First time as an insider. Let me just tell the listeners, we are all lucky ducks to have you on our team. Welcome.

Jimmy Vielkind: Well, thank you, Brian. Happy to be here and thanks so much for the kind words.

Brian Lehrer: Where should we start? How does the budget stack up against last year's?

Jimmy Vielkind: Well, I think the first thing to know about the budget is that it's just really big. $252 billion, another way to think of that is a quarter trillion – trillion with a T – dollars. This is about $10 billion more than last year's all-funds adopted state budget. It's up $100 billion over the last 10 years. Fiscal watchdogs, including some Republicans, their first blush is, man, that's a lot of spending, and they're starting to get concerned about whether or not it's sustainable in the long run.

The other big blush is what you noted in the intro. There's $5.3 billion that state officials have looked at and found, mostly due to a reasonably improved economy and always a concern in New York, strong returns and strong profits among financial institutions down on Wall Street. As you said, Governor Hochul is going to take the bulk of that newfound surplus and direct it at actions that she says will put money back in New Yorkers' pockets. That's $3 billion for rebate checks. That's about $1 billion a year for a tax cut and about another billion dollars for extending childcare subsidies to low-income New Yorkers and Child Tax Credits for lower-income New Yorkers.

Brian Lehrer: Let me ask you to put together those numbers for our listeners in an additional way because, in a way, the two things that you said boggle the mind because they shouldn't fit together. If the state has been spending so much more year by year over the last decade, and it was around a $250 billion state budget last year too, how is it that there's a $5 billion surplus left over at the end of last year rather than getting deeper and deeper into debt, which is what the budget watchdogs are worried about?

Jimmy Vielkind: Well, the state budget gets most of its state-based revenue from income taxes. Think about your own personal budget, Brian, or a listener could do the same thing. You know how much money you're going to have next year. You know how much your job is going to pay you. Maybe you know if you're going to get a raise. Maybe you know if you're going to start a business on Etsy or something, and you can kind of predict what your revenue is going in.

That's really, really difficult for an entity like a local government or a state government where the bulk of your money comes from income taxes. Can you tell me how well the economy is going to be doing in three months, six months, 12 months? How about five years? In some ways, budgeting inherently has a little bit of sorcery involved in it in that you have more money to spend if you assume you're going to get more money in that you can then spend. Over one year, that's probably a reasonable assumption in this case.

In this case, budget officials say that it's about $3.5 billion that they're finishing the current fiscal year with. That's money that they're pretty reasonably certain is going to come in, and they say there will be about 1.8 billion extra dollars coming in next year. That's where we get that 5.3 billion extra dollars.

Brian Lehrer: Right.

Jimmy Vielkind: The concern is how. How long do you assume the good times are going to go? How long do you assume those returns are going to be so strong? It's those out-year gaps. Already projected to be deficits in the out years, but it's the fact that how long can you make these assumptions reasonably given that we live in an uncertain world, and of course, New York is now facing a potentially hostile administration at the federal level.

Brian Lehrer: On the tax revenues, let me ask you kind of a three-headed question about taxing the rich and taxing everyone else. In her State of the State address the other day, she said she was going to propose a tax cut for New Yorkers making up to $323,000 a year. I think that's for couples. Tell me if that's right.

Jimmy Vielkind: Correct.

Brian Lehrer: She resisted calls from progressives to impose a tax hike on people making $5 million a year or more. That's been a request from the left that Hochul rejected, a tax hike where you have to be making $5 million in order to get that tax hike. But she is going to extend an existing tax on millionaires, she announced yesterday. Can you put those pieces together for us?

Jimmy Vielkind: Oh, sure. It really comes down to the fact that the income taxes that middle-class and working-class New Yorkers pay, they're basically chump change compared to the amount of money that comes in from the rich. Those top rates on people who are individuals reporting more than a million dollars in income, they account for the bulk of the revenue. I'm just pulling up some numbers here, but it's really incredibly, incredibly top-heavy.

Basically, the top 2% of income filers account for half of all New York State income taxes. I think if you take the top 200 filers, it comes down to something like a third of the revenue. By extending those high rates on the top earners, it's something that was already going to be in place until 2028. Now Governor Hochul is proposing to keep it in place through, I believe, 2032. You can really assure more or give more certainty to revenue coming in. When you trim the rates for middle-class New Yorkers, the costs are just minuscule compared to the money you get from that high end.

Also, Brian, it's worth noting that that middle-class tax cut, it's not going to be particularly big. One of the middle-class rates is about 6.85% of the tax rate, and Governor Hochul's proposal is to knock that down by 0.2%. Instead of paying almost 7 cents per dollar that you make, you're going to pay 0.66 cents rather than 0.68 cents. It'll be a couple hundred dollars for some people, but it's not going to be particularly big.

Brian Lehrer: Listeners, we invite your phone calls. Maybe one group of you, if you live in a Republican congressional district, are you hoping your representative will push back on federal cuts that Jimmy was talking about and that the governor was talking about that will impact New York's ability to spend on Medicaid and schools, et cetera, or anyone else? 212-433-WNYC, 212-433-9692 for our brand newly minted Albany issues reporter Jimmy Vielkind here on WNYC FM HD and AM New York, WNJT-FM 88.1 Trenton, WNJP 88.5 Sussex, WNJY 89.3 Netcong, and WNJO 90.3 Toms River.

We are New York and New Jersey Public Radio, and live streaming@wnyc.org at 11:01 as we talk for another few minutes about Governor Hochul's budget proposal for the next fiscal year for New York State. Besides the budget items, there was also the proposed bell-to-bell cell phone ban for children in school, so maybe some of you want to weigh in on that. That's the thing, rather than the budget numbers themselves that are making most of the headlines. So we could take some calls on that if you want.

Jimmy, I want to pull back for a minute and ask you, in your opinion, what kind of Governor Kathy Hochul is trying to be right now. My newsletter column last week was about her State of the State address and the way that I see her setting up for her reelection campaign for next year as well as for the new Trump era. I ticked off a number of the things that she ticked off in her State of the State. Let me go down a few of these, and you tell me how you think they fit together

More cops on the subways, more involuntary mental health hospitalizations, less sharing of evidence with criminal defendants and what they call discovery, that tax cut for New Yorkers making up to $323,000 a year, a housing plan that goes easy on NIMBY suburbs. All of those things could make you think she was a Republican. At the same time, she's proposing free public college for adults 25-plus who want to go back to school, a ban on private equity firms bidding on homes for sale for the first 75 days, a billion-dollar investment toward a zero-carbon emissions economy, universal free school breakfasts and lunches, and what she called the pathway to universal childcare

Is she trying to be some kind of centrist populist by leaning into populist things from the right and populist things from the left?

Jimmy Vielkind: I think that's one way to look at it, and I think that's a very valid analysis. The way I see it is Governor Hochul looked at the last election and she saw that President Trump did a better job in New York than he did four years ago. She also saw polls that showed consistently voters named the economy and immigration as the top issues in New York. We also have major concerns about public safety that are lingering. Regardless of the fact that the pandemic spike in crime has started to ebb or has largely ebbed, depending on your perspective, people are still concerned about that.

I think what Hochul saw from this election was that Republicans addressed these issues head-on. Democrats, maybe not as much. One person who put a very fine point on it is Assembly Speaker Carl Heastie. He's a Democrat from the Bronx. He told reporters after Hochul's State of the State address that he believes that Democrats in the November elections had a muddled message of something along the lines of "We stand up for abortion rights and Trump is bad." He said voters were more swayed by Trump's arguments on the economy and public safety and immigration.

Heastie said that Democrats have always held this mantle. They've always, in his estimation, been the party that takes actions to help regular people, to help working people, and that he believes the party just needs to do a better job of talking about it and selling their position. Hochul seems to have accepted that challenge head-on. She's talking about affordability and public safety, and my guess, Brian, is that you're not going to hear much of anything else come out of her mouth for the next six months, 12 months up through her 2026 bid for another term. Whether or not that's successful remains to be seen.

Then I think the other flag on that is that she's assiduously avoided picking fights with people that might distract her from that twin-pillared message. One of the clearest examples has to do with school aid. Anyone who's been listening to the show knows that in New York, the amount of school aid is a topic of perennial debate. Last year, Governor Hochul proposed some pretty significant changes to the formula by which school aid is distributed to districts around the state. This year she essentially abandoned those changes, which provoked a backlash from lower-income districts and from unions representing the teachers there.

This year she's proposing only mild changes. She's proposing about a 4% increase in school aid, which is according to the formula as it's run, and hopefully avoiding a problem.

Brian Lehrer: Let's take a phone call that relates to that top-line budget number that you said was so eye-popping for budget watchdogs. A $252 billion budget proposed for the next fiscal year that's gone up by how much in the last 10 years did you say?

Jimmy Vielkind: It's about $100 billion over 10 years, according to the Citizens Budget Commission. Now, in that interim, we did have the pandemic, and we had a big influx of federal aid.

Brian Lehrer: Scott in Weehawken, though, has a question, and I think a comparison with another state about that. Scott, you're on WNYC. Hi.

Scott: Yes. Hi, Brian. Thanks for taking the call. I just looked at the Florida budget. I think they have about three million more people than New York and their budget is 116.5 billion. I don't think they have a state income tax. New York budget's more than double that. I'm curious where does that extra $130 billion go? $250 billion is a massive amount of money.

Brian Lehrer: Yes. It's--

Scott: Golden Street is ridiculous.

Brian Lehrer: It's a fair question. I think his number about Florida is accurate. I know that there's a conversation to be had here about what New Yorkers get for their money compared to what Floridians arguably don't get. Do they have that conversation in the governor's office? Have you heard it?

Jimmy Vielkind: I hadn't heard it in the governor's office, and I'd like to thank the caller for his question. The thing to think about-- and I won't pretend to be any kind of an expert in the Florida budget, but some of the big differences there are in the main spending categories in New York, which are health care and education. The Medicaid program is the bulk of the healthcare spending. This is something that was set up in the early 1970s when Nelson Rockefeller was governor, and he bought in big. New York has been living in a world where when the state at that time was a little bit more economically robust, was a bit more of a population juggernaut, it bought in big to programs like Medicaid.

For example, in New York, Medicaid covers some things which it doesn't cover in Florida, like dental care. In New York, it covers personal care. New York has set aside money to cover undocumented immigrants for health care, to provide them with health insurance. These are things that Florida doesn't do.

On the education side, one of the big differences is teacher salaries. Again, I don't have these numbers in front of me, but if you look at the average salaries of a teacher in New York compared to other states, particularly states in the south, it's much, much, much higher here. That's one of the reasons why sometimes you hear Democrats talking at a national level about the need to raise teacher pay. In New York, that's not so much of a political issue because teachers are relatively well compensated in this state, and part of that is because of state aid.

Brian, I know we're going to get teachers who might hear that and want to call in. I'm not saying that they are rich or overly compensated. I'm just saying that compared to other states, teachers are much better compensated in New York.

Brian Lehrer: Well, we have a text message from the wife of an assistant principal in a New York City public school that I'm going to read in a minute as our last listener comment in this section. Let me set it up with one more clip of the governor – the item getting a lot of press – her proposed cell phone ban for students.

Governor Hochul: "By the start of the next school year, every student will be required to disconnect from their devices during the school hours, bell to bell. That means during class, at lunch, in the hallways. Our kids will finally be freed from the endless disruptions of social media and all the mental health pressures that come from it."

Brian Lehrer: I guess it's in the budget because the state will provide some funds to cover how school systems decide to implement this. To that point, the listener writes, "My husband is an assistant principal at a New York City middle school. They have a cell phone ban and it doesn't cost anything. They just confiscate the phones if they see them. No pouches needed," writes a listener in Brooklyn. Why do they have to spend money at the state level to tell schools not to allow kids to have phones during the school day?

Jimmy Vielkind: Well, it becomes a question of what works at what kind of school. I don't know anything about the place where that listener's spouse works. Maybe it's a very small school. Maybe it's a school where there's an assumed culture. Maybe despite what the listener says, some kids are sneaking cell phones, maybe on the side. Maybe they're not getting caught, maybe they're not all being taken away, but maybe that ban is not as absolute as it could be.

There are other districts who have found success with a little bit more rigorous enforcement. People look at the pouches that can be used, where cell phones are magnetically sealed within a pouch that can be unlocked. Governor Hochul is not specifying. For schools that opt to implement and adopt a policy similar to what that listener has described, amen. But for those who feel that they need to make some kind of an investment in some kind of technology, or who need some kind of funding to implement a system, there will be $13.5 million available.

Now, I don't have a crystal ball, but it's my guess that that number is going to be the subject of debate in the coming weeks between Governor Hochul and members of the legislature. Because when you consider there are roughly 700 school districts in New York State, and the largest, New York City, has 1.1 million students, $13.5 million isn't going to get you very far.

Brian Lehrer: Well, I'll tell you that the biggest laugh I had when I was out on Halloween was seeing one of my neighbors who dressed up as a Yondr pouch, the pouch that they use to put those confiscated cell phones in. We know we're living in the '20 – in that case, 2024 world – when somebody goes on Halloween as a Yondr er pouch.

Jimmy Vielkind, our brand new Albany, New York State issues reporter here at WNYC. Thank you so much for today.

Jimmy Vielkind: Thanks, Brian. Always a pleasure.

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