Gov. Andrew Cuomo’s budget office is temporarily withholding 20% of a state aid payment owed to several cities across New York, citing the COVID-19 pandemic-related revenue shortfall and budget deficit plaguing the state government.
Cuomo and state Budget Director Robert Keating have said for months that the state will have to cut funding to schools, hospitals and cities by one-fifth if Congress does not provide another relief package for state and local governments hard hit by the effects of the pandemic.
The first sign of following through with that plan came this week, when several cities with fiscal years beginning July 1 learned that they would temporarily be getting only 80% of the amount allotted to them in the state budget approved in April. Those cities include Buffalo, Rochester, Syracuse, White Plains and Yonkers. The 12 cities were to have received over $370 million in state aid. Instead, they will get just under $300 million.
Peter Baynes, with the New York Conference of Mayors, said the loss comes on top of other fiscal hardships caused by the coronavirus economic shutdown, and cities are already scrambling.
“Based on the estimated 20% drop in sales tax revenues over the course of the entire year for these cities, virtually every city is talking about furloughs and potentially layoffs,” Baynes said.
A spokesman for the governor’s budget division, Freeman Klopott, said in a statement that the reductions should not be viewed as a permanent cut. He said the state is holding back 20% of what is owed because 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.”
Cuomo, in a news conference Wednesday, said there is still time to wait for Congress to act before he has to propose permanent cuts and that, as of right now, there is no hard deadline.
“The drop dead date is what you declare, in some ways,” Cuomo said. “If you conclude that the federal government is not going to provide any aid, period, and these are the numbers, then you would act on those numbers. But we’re not there yet.”
Democrats in the House of Representatives passed a $3 trillion dollar aid package that would help bail out the state and local governments. Republicans who control the Senate have objected to the package.
Cities, by law, are not allowed to run a deficit. So Baynes said they will have to make adjustments now.
“The uncertainty at this time of the fiscal year creates all kinds of problems,” he said, adding that other alternatives include borrowing money or transferring funds.
“They don’t know when the temporary period is going to end,” he said. “Or whether they, down the road, may be told they will never receive the aid.”
For now, the state Legislature’s hands are tied when it comes to the temporary cuts.
If the governor’s budget office decides to propose making the cuts permanent, then lawmakers have 10 days to accept the plan or come up with an alternative, under rules set up in the current state budget. Many Democrats in the state Senate and Assembly favor raising taxes on the wealthy instead of cutting aid. But as long as the funding reductions are temporary, the legislature does not have the power to act.