Sunday, March 29, 2020

Here Is Your Budget Breakdown For the Year

"Drastic. Like nothing you have ever seen".

That was Andrew Cuomo at the end of his rant about how poorly New York State faired in the last federal stimulus package. It was a Sunday and, during the question period, he answered a few about New York State's budget. The state is facing a $15 billion budget gap, he said. The federal government will not help us, he said. Not one bit. Chuck Schumer, New York's senior senator with whom Cuomo does not get along should 'try to pass a bill that actually helps the state of New York", he said. As a consequence, the cut will be "drastic. Like nothing you have ever seen".

The reality is much less bleak but will still be very painful for all of us in the classroom.

Before this crisis began, the budget outlook was already looking bad. With a $6 billion deficit, a veil of opacity had fallen around Albany, with both houses of the legislature having failed to even have a space for the 2020-2021 bills and resolutions (See the Senate website here. And then the Assembly website here. You'll notice no bills. That's a first). So it was difficult to even see what they were up to. By in large, Cuomo had wanted to make up the state deficit but offsetting medicare costs to localities.

But then the crisis hit and tax revenues suddenly stopped rolling in. The upshot? A $15 billion deficit with no plan for filling it. Cuomo said today he had hoped this federal stimulus package would bring money to his state budget but failed to do so.

A bit of context first: The governor of New York typically has enormous budgetary powers. This is a pretty good history of gubernatorial powers in New York and those powers are vast. Typically, they are only offset by a very active legislature, who can veto his proposals with a 2/3 majority. And if the legislature doesn't act by the April 1st deadline, he has the power to enact his budget anyway, if for a short period of time.

This year, the legislature is setting up their rules so that they can vote from home . This means that the budget will be settled by the governor, the Speaker of the Assembly and the Majority Leader of the Senate. And if he doesn't like what they suggest, he can just mandate that his proposals become, in effect, the law for a certain period of time.

So this year's budget is, very much, Cuomo's show.

And he is seeking a flexible budget and a "slimmed-down spending package that his administration can adjust periodically throughout the fiscal year" (here). This means that when it comes, the pain we feel in schools and our own homes will come slow. Look for bad news at the beginning of each quarter next year -in July, October, February and April. It will come in waves.

He is is proposing to spend 41% of a $178 billion budget on education this year (here). This includes an overall 2.1% increase for NYSED (which could be more for school and district aid. That 2.1% is for all of NYSED and where, exactly, that aid goes has been kept very quiet) (here). But look for that to be adjusted as well. Typically, the state "foundational aid" is a 4% increase from the previous year. That's the number we should all be looking for to gauge how bad the cuts will feel at the beginning.

And all of that greatly effects NYC's budget. This will be de Blasio's first downturn and his past fiscal actions will greatly inform his future decisions with the city. It is important to understand that de Blasio is cheap and is stubborn. The UFT has had to find ways to pay for at least part of every single raise and every single new benefit since he has been in office. This is why we should expect that our retro checks will be paid next October.

Last year's NYC budget was $92.8 billion. Unlike the state budget, Bloomberg news classified New York City's budget as "sound" (here) as recently as last December. They reason they pointed to for this stability was the increase in property tax revenues since de Blasio has been in office. Revenue collected form property taxes are typically more reliable than sales tax revenue, so I believe that, as of December, NYC was in pretty good shape.

That didn't stop the mayor for asking for a 1.4% cut from agencies -$1.3 billion in all. I'm not sure how much the NYC Reserve Fund has, but 24 months ago, there was $1.125 billion (here). This is much akin to having a ten dollar bill in the glove box in case you run out of gas on the way home but it is probably enough to cover a 2% reduction in city spending.

And with outlets like the Post already calling for a state wide pay freeze of all government workers (here) we teachers are in for a very rough patch. How rough still depends on two things:

A) How twill he state and city politicians address the fiscal implications of this first wave of the fiscal end of the crisis? Imagine an economy that is in the process of going off of a cliff. Clearly the situation is dire. The car is going over that cliff. But the car has not yet fallen completely and no one knows how big that cliff os or how far the car mist travel before it actually hits the bottom. It is in this context that the two budgets the state (due April 1) and the city (due in June) -the ones that will determine our future as teachers- must be enacted.

B) How much worse will the fiscal out look get before it begins to improve? The light at the end of the runnel won't be the budget announcement next Wednesday. The true light at the end of the tunnel will happen on the other end of the 'curve' we're all being asked to flatten. Once we see an end in sight to the health crisis, we will all better understand how painful the 2020-2021 year will be.

I'll write more on that tomorrow.

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