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Brian Lehrer: Brian Lehrer on WNYC. Today is March 29th, which means the New York state budget for the new fiscal year is due in two days. [unintelligible 00:00:19] budget week is one of the two big moments in Albany every year for enacting big policies that affect so many people's lives. They just announced that deal on legal weed for recreational use, that's happening now because of the budget deadline.

This year is even more intense than usual with the COVID economy having such vast implications for everything from the rent crisis, to COVID relief payments, to undocumented New Yorkers who the federal COVID relief bill doesn't cover, to education funding to get the schools back full time in person with expensive new safety protocols, avoiding CUNY and SUNY cuts or tuition hikes with so many students in their families struggling and more.

Then there are the Cuomo scandals which have implications for him, of course, but also change the power dynamic in ways that could affect all New Yorkers via the budget. In case you missed it, the governor announced last week that he basically found $5 billion to close the projected budget deficit. Now comes a really important debate in these last few days before the deadline, use that money to avoid some big tax hikes on very high-income New Yorkers, or enact the tax hikes anyway, to help cover the expensive necessities that the state faces because of COVID and other ongoing structural things.

Guess which one Cuomo seems to be choosing first. Without his Prelude, with us now are Karen DeWitt, Capitol bureau chief for New York State Public Radio covering Albany for WNYC and other public stations around the state, and Christopher Robbins, watching the April 1st budget deadline dance for Gothamist. Good morning, Karen. Good morning, Chris.

Karen DeWitt: Good morning.

Christopher Robbins: Morning, Brian.

Brian Lehrer: Karen, we've been hearing for months that this year's budget was going to be dire because of the COVID economy, all that lost business, therefore tax revenue, and that was creating a multi-billion dollar deficit. How did that deficit disappear?

Karen DeWitt: Well, I feel like as you were going through the introduction, it's partly my fault for not reporting it more clearly. Governor Cuomo has been saying since sometime in the winter, that the state had a $15 billion deficit over two years. If you go to his budget office's own reports, which I have consistently gone to, they never said that. It was really more like $6 billion, which is still an awful lot of money.

I think the governor's strategy was, if I say this, we can get everything that we can from the federal government when Joe Biden gets in and they finally do the stimulus package. Also, I think the revenues are not as bad as they thought they were going to be. At this time last year, sales tax revenues were plummeting, and everything was shut down. A lot of those sales tax revenues have come back. The quarterly income tax collections haven't been that bad. The Wall Street bonuses that the state comptroller announced the other day, were up 10%, and those are very heavily taxed.

New York budget is dependent from revenues about 18% from Wall Street. I don't think it was ever as bad as the governor portrayed. Granted there a few billion dollars or the few billion dollars, but I don't think it was ever quite as bad as he said that it was.

Brian Lehrer: He kept saying that the Biden relief bill was needed to close this budget deficit for this year and the Biden relief bill came, but it didn't give New York as much aid as the original deficit projection. In other words, it was supposed to help but not close the whole thing, but here's a clip of the governor's budget director, Robert Mujica, describing and this is going to be a little technical and wonky, folks, on how they close the rest of the budget deficit, but listen at the end of this 49-second clip to where he lands because this is the bombshell on tax hikes.

Robert Mujica: We have an additional $2.5 billion in revenue from the consensus revenue forecast, which is really that there's been a recovery in receipts faster than we had anticipated. We haven't quite recovered completely, but the projections added another $2.5 billion which were previously announced, and then we have additional federal aid. Together, those provide us with over $5 billion which is enough to restore all of the reductions that were proposed in the executive budget.

As of right now, we have the resources necessary so that there would be no cuts in the governor's budget, so you wouldn't require any significant level of tax increases to pay for the restoration.

Brian Lehrer: You wouldn't require any significant levels of tax increases to pay for the restorations. Boom. Chris Robbins from Gothamist. I'll tell the listeners that you wrote a very focused Gothamist piece the other day on the taxing the rich debate. Can you frame it for us in its most basic terms?

Christopher Robbins: Yes. I think the legislature and a lot of the more progressive members of the legislature, they point to the disparities that the pandemic has really underlined for the state, and for the country. They point to the fact that so many New Yorkers are still having trouble paying rent, so many New Yorkers are hungry. So many New Yorkers are being left out of COVID relief packages in the state and on the federal level.

They say that now is the time to significantly raise taxes on wealthy New Yorkers, people making $5 million, $10 million, $50 million a year in income. Whereas the Cuomo administration and some other more centrist folks, they say that now is not the time to rock the boat, that we should all focus on [unintelligible 00:06:31] up the state and New York City's economy. Increasing taxes and this drastic way, would cause a flight of rich people and would destabilize the economy precisely when we don't need to destabilize it.

Brian Lehrer: Your article on Gothamist says the state, " "identified" an extra $5 billion in the annual budget," implying what? That this money isn't real, because some of the people you quote, seem to suggest that it appeared too magically.

Christopher Robbins: Yes, it's not as if it's not real. It's just that it's been moved around. It's an accounting trick. You've seen the Cuomo administration do this before with Medicaid spending a year or two ago where they bumped the spending over to a different fiscal year. Also, right now, last year's budget, which we're still living out the last few hours of, there's still around $3 billion that was withheld from what's called local aid throughout the state. We still don't know if those cuts are going to happen, or if that money is going to be restored.

Again, we're in the final hours of this fiscal year budget and we still don't know what's going on there. Yes, it's very confusing, and there's a lot of money being moved around.

Brian Lehrer: Before we go back to Karen, your article, Chris lays out some of the specific tax hikes on specific categories of wealth or income that the legislature is considering this week. Can you give us the big ones briefly?

Christopher Robbins: Yes, the biggest ones is, they want to increase the income tax rate for people who make between $5 million and $25 million and then bump it up even more for people who earn $25 million or more. Those are the big ones. There's also a 1% capital gains surcharge. There's a tax on owners of high-value second home, so it's like a version of the pied-à-terre tax that's been kicking around Albany for a while. They want higher corporate tax rates, 4% hike on top estate taxes. They're saying this is going to generate around $7 billion.

I guess I would also point out that these proposals are a far cry from the more ambitious controversial proposals like the billionaire's tax or the stock transfer tax, that proponents said could have raised $50 billion for the state.

Brian Lehrer: Yes. Karen, Cuomo was against the tax hikes on the wealthy before he was for them, and now he's against them again. Can you explain the Cuomo politics or belief system on those flips and Fox?

Karen DeWitt: Yes. He's always been a fiscal conservative. There's been a self-imposed 2% spending cap each year in the 10 years that he's been governor. He's expressed fears many times that the rich will leave the state if you raise the taxes. Actually, it's not that hard for a rich person to do that. You really just have to shift your residence for a few weeks of the year. Say you have a house in Florida and a house in New York City, you just have to live in Florida a few more weeks a year to do it. That argument is somewhat valid.

Also, a lot of people are working from their homes, they don't need to be in the office. Some companies have already moved, so I think he does have legitimate fears. Also, a lot of his donors are wealthy people because when you run for governor and you have [unintelligible 00:10:09] the modern campaign finance system, a lot of rich people support you. I think there's part of that. I don't think he was ever really for raising taxes but I think there was a point where they thought they might have to if they didn't get as much money in the stimulus plan.

Brian Lehrer: Listeners, we can take a few phone calls for Karen DeWitt and Chris Robbins covering the budget deadline negotiations in Albany. They're supposed to come up with this with so many implications for so many things by Wednesday night at midnight, 646-435-7280. Maybe some of you listening right now are lobbying the state as always happens this time of year for one priority or another that's important to you or your community. 646-435-7280 if you want to get in on this briefly.

I want to play a weird political TV commercial that I've been seeing on the news channels. I'm just going to play the last 10 seconds of it, but this seems to suggest that President Biden is advocating some alternative to tax hikes on the rich for New York. Listen to how this ad seems to put Biden in a no-tax hikes campaign against the state.

Speaker 4: President Biden has a plan to help New York without raising New York taxes. Tell your state senator to support the Biden plan. Tell them, "Don't raise our taxes."

Brian Lehrer: The Biden plan, "Don't raise our taxes." I wonder if either of you are familiar with this. I saw an article in the Rochester paper Karen, that calls it "A Trump Linked Group" that bought this ad.

Karen DeWitt: Actually, it would go with what Governor Cuomo has been saying that with New York state raises taxes, rich people will go to another state and he said it would be better if there was a national tax hike. I don't know. That maybe Cuomo and the Trump people are agreeing on this but I don't really know the origins of that ad, so that's just speculation.

Brian Lehrer: Chris, I know I'm pulling this out of the air and throwing it at you. Have you heard this or heard anything about it?

Christopher Robbins: I have not heard. It's pretty fascinating. I will say that one federal component of this that opponents of higher taxes consistently cite is the salt tax deduction that went away under the Trump tax cuts, and that's not to bore anyone, but basically, you could write off your state and local taxes on your federal taxes beforehand. Now that has been capped at $10,000. If you're a really wealthy New Yorker, you can no longer deduct those state and local taxes from your federal taxes. That is something that some people point to saying, "Look, they're being double taxed, we can't raise taxes now especially because this salt deduction isn't in place."

That said, I have spoken to some really wealthy people and some billionaires, and they are not particularly-- this is kind of like a rounding error for them but that is definitely a piece of discussion.

Brian Lehrer: This is 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 with Karen DeWitt from New York State Public Radio, and Chris Robbins from Gothamist. Rasheeda in the Bronx, you're on WNYC. Hi Rasheeda, are you there?

Rasheeda: Hi Brian. Can you hear me?

Brian Lehrer: I got you just fine, yes.

Rasheeda: Hi Brian. Thanks for taking my call. Karen and Chris know all so well our public schools need this money. New York state owes our public schools billions and foundation aid. We know all about this since 2004. Parents took New York state to court for severely underfunding our public schools in certain areas and parents won. We need this money, they paid a tiny bit in a couple of school districts, we hit a recession, we all know what that was like. We recovered since then and we have not received a penny more towards foundation aid for our public schools.

We need New York state right now, the time is now. The time is now, we want to rock the boat. [chuckles] The time is now, we need New York state to finally fully fund $4 billion owed in foundation aid. The assembly and the state are trying to get it done but Cuomo is trying to block it, and we cannot allow him to do that. The time is now, we have the money, our children need it.

What are we telling our children when we don't invest in them, when we don't invest in the schools. What are we telling them for our teachers and our students, our families who look around and see some schools in some districts doing way better than others, because of what? Because Cuomo refuses to fully fund our public schools in certain areas the way he should.

Brian Lehrer: Thank you so much, Rasheeda. Chris, you want to get in on this? You're familiar with what this $4 billion in foundation aid is?

Christopher Robbins: Well, I will say that like, what Rasheeda's argument is, it's one that the progressive Democrats and Albany have been making. As Karen pointed out earlier, Cuomo is a centrist, he's very fiscally conservative. He has presided over austerity budgets for years in Albany, and that plays out in cuts. The progressive Democrats say, "Let's raise taxes on the ultra-wealthy, to restore those cuts that have been made over the years, and to bring some budget justice, not just for COVID, but to fill in the gaps that have been made over the governor's three terms."

Brian Lehrer: Go ahead.

Karen DeWitt: I would just add, [unintelligible 00:16:08] Brian. What Rasheeda is referring to is the state's highest court ordered back in, I think it was 2006, that in order to have a constitutional right to a sound, basic education, the state needed to spend billions more on schools, and that has actually never been fulfilled. It was started under Eliot Spitzer, a plan. Remember Eliot Spitzer that far back? Governor Cuomo has never really fulfilled it because he's held the line on spending, but the court did order that and they've really been in violation of that court order now for a decade and a half.

Brian Lehrer: Julie in Hastings-on-Hudson, you're on WNYC. Hi, Julie.

Julie: Hi, Brian. Thanks so much, and thanks to Mr. Robbins for mentioning the people who are getting no aid, have gotten no aid during the pandemic. It's usually because they don't have legal status, of course, so many of them are essential workers that have been giving us delivering my husband and me our food, we're high risk. In fact, right now some of them are on a hunger strike, asking our elected to not forget them, a hunger strike at White Plains Presbyterian Church.

Brian Lehrer: Indeed. We talked about this on the show last week. Chris, do you want to remind people, if you've been also covering this story yourself what the issue is specifically?

Christopher Robbins: Yes. Undocumented New Yorkers, hundreds of thousands of workers in New York had been left out of federal and state pandemic relief and unemployment assistance during the course of the pandemic. The more progressive wing of the party in New York wants a $3.5 billion fund from these new taxes on the rich, to provide that relief to these people that they have missed the entire year.

I think the current legislative proposal is around $2.1 billion, so it's a little smaller. That $2.1 billion would provide essentially the $600 a week that people were getting back in the late spring of last year, and then the $300 a week, in additional pandemic assistance on a federal level, whereas the $3.5 billion would give them the whole relief for the whole year, the state and federal aid. That is very much top of mind for a lot of lawmakers. I've asked the Cuomo administration if they support a fun for these New Yorkers, and they have not definitively said whether or not they do.

Brian Lehrer: Before we run out of time, Karen, how are the Cuomo scandals affecting the budget?

Karen DeWitt: Yes, that's the elephant in the room. He's facing about four different scandals right now. What I'm really interested in is when they do get a budget agreement. Is the budget going to look more like what the legislature wants. As we are discussing, they want a lot more tax increases, they want this fund for undocumented workers. Or is it going to look more like what the governor wants, and that's going to be a measure of just how much power and political capital that he has been pretty much hemorrhaging in the last few weeks.

We may know that by April 1, it may take a little longer this year, but we'll certainly know that in the next couple of weeks.

Brian Lehrer: What about the Democrat's Veto-proof supermajority in the legislature, which we've talked about so much since Election Day? Is there enough dissension within those ranks to make these tax hikes on the wealthiest not automatic? I had thought they would happen because of the supermajority, even before the scandals erupted.

Karen DeWitt: Yes, that's a good question. They do have the numbers but that would mean every single Democrat would have to vote "Yes." That would certainly be a test but it's certainly an implied threat when they're dealing in budget negotiations with the governor that yes, we potentially have the votes to override anything that you Veto.

Brian Lehrer: All right. The new New York state budget year begins April 1st, which is Thursday. So much at stake in the closed-door negotiations between now and then. We will keep our eye on it as much as we possibly can. Karen DeWitt, on the radio side. Chris Robbins for Gothamist, thank you both.

Karen DeWitt: Thank you.

Christopher Robbins: Thank you so much, an honor to be here.

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