To close state's budget deficit, raise taxes or cut spending?

Dec 5, 2019

New York state is facing the largest budget gap in several years. The $6 billion deficit is due largely to higher costs for Medicaid, the health care insurance program for low-income people.


The problem began late in the last fiscal year, when Gov. Andrew Cuomo's budget officials delayed one of the state's monthly Medicaid payments to providers, worth $1.7 billion, for three days in late March so it would count in the new fiscal year that began in April. 

Since then, the gap has grown worse. A November report by the governor's budget office estimates the deficit to be between $3 billion and $4 billion, and recommends again delaying this fiscal year's final $2 billion Medicaid payment. The rest of the gap could be made up through across-the-board cuts to hospitals, nursing homes and other health care providers, the budget office said. 

Cuomo has not yet committed to a specific plan to fill the gap.

"It's nothing we haven't addressed before, but it is serious," Cuomo said in Buffalo on Dec. 3. "The federal government has cut back on their Medicaid reimbursement. Labor costs have gone up. That's driving the deficit."

The state's increase in the minimum wage and pay hikes in recent union contracts have driven up labor costs for hospitals and nursing homes, as well as home health care companies. In addition, more New Yorkers now have health insurance through Medicaid under the Affordable Care Act, also known as Obamacare.

Legislative leaders, who will have a say in the final state budget plan, are not on board with health care cuts.

Senate Leader Andrea Stewart-Cousins said state cuts to Medicaid spending could trigger even deeper reductions, because state aid is linked to federal and local money for the program. 

The Democratic majority leader questioned the governor's self-imposed 2% state spending cap. Cuomo was trying to keep within that limit when his budget office delayed the Medicaid payment earlier this year.

"This is an opportunity to take a look in terms of some of these self-imposed caps," Stewart-Cousins said in late November. "I think everybody understands the importance of being prudent with taxpayer dollars. It's not something we take lightly." 

Assembly Speaker Carl Heastie said he'd consider raising revenues before cutting aid to the needy.

"Unless money is going to fall from the sky, you are always going to have to try to do things," Heastie said during a meeting at the Capitol with his Democratic members on Tuesday. "The two options always are, do you cut spending or do you raise revenue? For us in the Assembly, we always believe in raising revenue." 

Michael Kink with Strong Economy for All, which is funded by unions and advocacy groups for the homeless and lower-income New Yorkers, said the state has numerous billionaires and multinational corporations, and they can afford to pay more in taxes.

"There has been an explosion of wealth and income at the very top," said Kink, who added the new taxes would "not touch any working people at all" and close the deficit.  

Kink and other advocates planned to protest outside a fundraiser in New York City on Wednesday night for the governor's birthday. They were planning to bring a cake decorated with frosting spelling the hashtag #makebillionairespay. 

Rich Azzopardi, a senior adviser to Cuomo, said the protest wouldn't influence tax policy. 

"Mike Kink and his merry band of special-interest-funded mimes and puppeteers revive this same tired show every year," Azzopardi said. "We'll put our nationally significant progressive record up against anyone anywhere and budget decisions are made on the merits, not as a result of performance art." 

For now, the governor is silent on whether new taxes or spending cuts are needed to close the deficit, saying everyone will just have to wait until he gives his budget address in January.