By Anna Gronewold, Shannon Young, Nick Niedzwiadek
ALBANY — New York will unbolt the doors on some of its businesses on Friday. But for communities from Brookhaven to Buffalo, big hits are still coming.
Gov. Andrew Cuomo’s administration is preparing to reveal how it will cull more than $10 billion in spending, and local officials and budget hawks have theories — but no certainty — about how and where the ax will fall. They are living in limbo after Cuomo’s broad warning that schools, hospitals and localities should be prepared to lose 20 percent of their funding.
Ordinarily, when New York’s wallet looks thin lawmakers typically examine the state’s top two spending categories for potential savings: Medicaid and K-12 school aid. Together those two sectors account for nearly half of state operating funds and are often put on the chopping block first. Looking elsewhere means proportionately deeper cuts to make up the equivalent amount of money.
But these are not ordinary belt-tightening times, not in the state that was the epicenter of the coronavirus pandemic in the United States. No state had lost more people to Covid-19, and now, with the number of deaths declining, it’s time to begin counting the financial losses.
“We keep hearing reports that there’s going to be a 20-percent cut,” said Rick Timbs of the Statewide School Finance Consortium, referring to Cuomo’s comment. “It’s almost useless information. Twenty percent of what? … It’s not very telling, and not very informative, and it has people afraid.”
The cuts will be detailed in the coming days, according to the state budget office, and are likely to touch nearly every aspect of life in New York if they become reality. The only way to avoid them, according to state and local leaders (as well as their counterparts across the nation), is an influx of federal aid to cover revenue losses, which in New York add up to at least $13.3 billion so far. When taking into account an ongoing spending frenzy to combat the coronavirus, Cuomo has said New York will need $60 billion to compensate for Covid-19 losses.
House Democrats on Tuesday unveiled a $3 trillion package that would earmark $500 billion for state governments and $375 billion to localities, numbers largely in line with what Cuomo and the National Governors Association have requested. It would also loosen restrictions on how the aid can be used.
But with President Donald Trump having turned his attention to reopening the country and Congress clashing over who is deserving of a “bailout” — and what that term even means — it’s unlikely New York will see additional federal funds before its first round of budget rewrites.
A congressional source told POLITICO that a vote in the House “looks imminent.” The bill’s prospects in the Republican-controlled Senate, in its current form, are dim to say the least.
New York will likely end up with a “grab bag” approach to filling the shortfall, said David Friedfel, director of state studies at the Citizens Budget Commission, a fiscal watchdog group. He’s expecting “broad cuts across all areas,” as well as a look at potential new revenue sources, such as using reserve funds and shifting some spending tabbed for capital projects into operating expenses.
Medicaid will be one casualty — to the consternation of those who believe that would be short-sighted during a health care crisis — although the state already was attempting to pull back its spending. The Legislature in April approved $2.2 billion of the proposed savings backed by the state’s Medicaid Redesign Team, which Cuomo had tasked with identifying efficiencies in the program.
Bill Hammond, director of health policy for the Empire Center for Public Policy, a think tank, argued that while there’s still room in the state’s Medicaid budget to lower program spending, enacting such overhauls are not easy and often require advance planning, like another Medicaid Redesign Team.
Still, budget officials warn that additional cuts may be needed as the state grapples with the pandemic’s financial fallout, particularly given the expected uptick in Medicaid enrollment.
Department of Health spokesperson Jonah Bruno said the budget “anticipates some level of new enrollment in public health insurance programs.” But, he noted, new enrollment due to the Covid-19 pandemic “may exceed our budget projections.”
“We are carefully evaluating this growth and seeking federal assistance to cover these costs,” he said in an email.
Both Hammond and Friedfel agreed that a spike in Medicaid enrollment is expected due to the job losses tied to Covid-19, but noted many of those signing up for the program now were likely covered previously by their employers and unlikely to cost much to insure.
Further complicating the issue, Hammond said, is the political difficulty of making health care cuts during a global pandemic.
“I think [Cuomo] may, for political purposes, say, ‘hey, look we just did a major round of cuts to Medicaid and they’re in the middle of health care crisis, I think we need to hold them harmless, or relatively harmless,’” he said in an interview. “The part about it being a ‘major round of cuts,’ I could pick nits with that — it was a pretty modest round of cuts — but he may also say, ‘look we expect to save some money on the elective surgeries [moratorium].’ You kind of come up with a rationale for leaving Medicaid relatively untouched compared to school aid.”
But school aid is another difficult dance.
While not as directly linked to the pandemic as health care is, the process of returning New York’s 3 million K-12 schoolchildren to classrooms is a critical step to getting people back to work and embarking upon an arduous economic recovery.
Lawmakers already tossed a proposed increase in education aid during budget negotiations and revisited a budgetary trick from David Paterson’s short tenure as governor a decade ago to move $1.1 billion in federal money for schools over to the state’s books and hold total funding basically flat.
But that money, included as part of the federal CARES Act, came with a “hold harmless” prerequisite preventing states from slashing education spending below its average from the prior three years. New York already is close to that threshold, meaning it might have to forfeit that money or seek a waiver from the U.S. Department of Education if it moves forward with substantial cuts.
School districts have been pushing in the exact opposite direction, saying they will need a significant increase in funding — which already tops the nation — to implement the types of procedures necessary to ensure that classrooms can reopen safely. They argue that state aid further would force them to implement layoffs and other cutbacks that would only make schools a bigger threat to public health, especially with heightened concern over Covid-19’s link to a rare inflammatory condition in children.
Additionally, education groups are concerned about how any cuts would be allocated. Poorer districts are far more reliant on state funding than those in areas with a sizable property tax base, and across-the-board cuts would fall disproportionately on high-needs school districts.
School officials have been trying to craft their budgets for next year while scrambling to implement an all-mail vote for school boards and budgets scheduled in less than a month, all the while awaiting word from the Cuomo administration about any potential reductions.
“We have little or no guidance from anyone how to do this,” said the Statewide School Finance Consortium’s Timbs. “Let’s just hope that cooler heads prevail until we get through this thing.”
Other smaller spending categories are on the table. The state’s mayors are concerned about the fate of the Aid and Incentives for Municipalities Program, roughly $650 million in mostly unrestricted funding for cities that can offset property tax increases.
For large cities like Buffalo, Rochester and Syracuse, AIM funding far exceeds their respective property tax levies. Those cities are scheduled for their first and largest AIM payments — tens of millions of dollars apiece — in June. Without that funding, some cities could see property taxes spike 70 to 80 percent, said New York Conference of Mayors Executive Director Peter Baynes.
“Increasing property taxes will be a last option for mayors when they need to offset lost revenues, but the other alternative is layoffs of essential municipal workers, including police officers, firefighters and EMTs,” Baynes said. “Local and, by aggregation, the state economies will not be able to recover if cities have to work through such cuts.”
Local leaders, who will ultimately be responsible for slashing services when they are starved for state funding, say they’re now in a lose-lose situation.
“We can’t cut federally mandated programs, we have to see what is discretionary on our side — that means community college, that means public health, that means youth services, veterans services, safety, consumer affairs,” said Stephen Acquario, executive director of the New York State Association of Counties. “So it really cascades to a much broader and deeper impact in the community, far, far away from the Capitol.”
When the budget division releases details of the cuts, the state Legislature will have 10 days to craft and pass a counter plan if they disagree with Cuomo’s administration. But lawmakers have yet to reconvene, even remotely, after skipping town early April after they passed the budget.
They’ve also so far declined to use their remote voting powers to act on dozens of pending bills aimed at coronavirus relief, but have offered assurances that will return to action as necessary.
“There is no best case scenario for us,” Acquario said. “We are incredibly vulnerable to the actions of the state. The two choices we have are to lay off an already skeleton workforce, or cut or eliminate local services.”