January 16, 2018
Albany, NY

Video, Audio & Rush Transcript: Governor Cuomo Outlines FY 2019 Budget: Realizing the Promise of Progressive Government

Video, Audio & Rush Transcript: Governor Cuomo Outlines FY 2019 Budget: Realizing the Promise of Progressive Government

FY 2019 Executive Budget Protects Taxpayers from Washington's Devastating Federal Attack, Invests in the Middle Class and Maintains Fiscal Discipline By Holding Spending Growth Below 2 Percent

First-in-the-Nation Plan to Fight the Federal Tax Assault and Close Carried Interest Loophole

Makes Smart Investments in New York's Future to Create Jobs, Safeguard the Environment, Protect the Health of Our Communities and Rebuild our Infrastructure for the 21st Century

Continues State's Historic Investment in Education and Protects New Yorkers from Targeted Federal Attack on Healthcare

FY 2019 Executive Budget Briefing Book Available Here

Earlier today, Governor Andrew M. Cuomo unveiled the FY 2019 Executive Budget, which continues the state's efforts to deliver on the promise of progressive government by protecting taxpayers against devastating federal action, strengthening the middle class, cutting taxes and making smart investments in New York's future. For the eighth consecutive year, the Budget is balanced and holds spending growth below two percent.

The robust agenda includes a number of proposals - from fighting the federal tax assault to ending the opioid epidemic by holding pharmaceutical companies accountable to investing record amounts in education - that will continue to increase opportunity for New Yorkers and ensure the Empire State continues to serve as a beacon of equality, unity and fairness for the nation. More information is available here.

VIDEO of the event is available on YouTube hereand in TV quality (h.264, mp4) format here.

AUDIO of the event is available here.

PHOTOS of the event are available on the Governor's Flickr page.

A transcript of Governor Cuomo's remarks is available below.

Thank you, thank you very much. Thank you very, very much. Thank you very much. Welcome to all of you. I've never seen you in this room before. You're a good-looking group, you really are. To the legislative leaders, thank you very much for being here, thank you for the cooperation and the conversations we've had thus far. I want to thank Robert Mujica and the budget division that has done a great job. I want to congratulate the New Governor of New Jersey, our new neighbor Governor, Phil Murphy, and thank the Lieutenant Governor for being there, but let's give him a round of applause. It's a very important relationship for us, and it's worked very well for both states for a number of years. This year is going to be challenging, my friends. In many ways, this is going to be the most challenging budget that we've had to do. It intertwines a number of economic and policy and legal issues that makes the situation complicated. And I want to go through that with you in some detail. Because it's not just the budget this year. It's really an economic transformation plan that we're talking about. Given the changes in Washington that we're going to, that necessitate changes here. The budget, as a budget is going to be a challenging one. There's a $4.4 billion deficit. We have tremendous federal cuts, especially in health care and then we have pressing needs all across the state. So the budget as a budget is going to be difficult to resolve but that is actually the easy part of the equation. The hard part is to ensure New York State's structural economic viability in light of the federal tax plan. That federal tax plan raises income and property taxes about 25 percent for New Yorkers. And makes the New York business climate and economy much more attractive. And could actually accelerate quote, unquote, tax migration which is a real phenomenon. It's a statewide problem, it's New York City, where income taxes are high, it's Long Island where property taxes are high, it's Westchester, it's upstate that, where by percentage they have the highest property taxes in the United States of America. And it's upstate which is a more fragile economy than downstate. We've worked very hard to turn upstate around and change the energy.

This will set it back. We're doing everything we can to thwart the effects of the federal plan. We're working on a lawsuit, we're advocating for the plans repeal, there's been a federal bill that's been announced by Congressman King and Congressman Nita Lowey to repeal the state and local deduction and today we're going to be talking about restructuring our tax code in light of the federal changes. There are two separate problems with what the federal government has done. It's a loss of income tax deductibility and property tax deductibility. So in my budget, we propose the New York State tax payer protection act. And it restructures the New York tax code. Starting with the state income tax, the federal changes basically attack our state income tax structure. We would shift from an employee paid system to an employer paid system. And rather than have a tax on the income received by the employee, tax the wages paid by the employer. This shift, while dramatic, would in many ways, thwart what the Federal Government was trying to do on loss of deductibility. An employer, employers pay a wage tax which would be equal to that individual's income tax. The payment by the employer is federally deductible, the employee has no state income tax liability on those taxes. So this gets a little complicated but just, to try to simplify it—the law was the 2017, an employee made $100, they were in the 5 percent bracket, they paid $5 to the state government. The federal government then taxed them on $95. They allowed the deduction of the state tax.

The new law says we don't allow the deduction so you make $100, you pay $5 to the state. We tax you on the money that you paid to the state. We tax the $5. That's why we call it a double tax. You're taxing the tax and that costs the employee. The proposed alternative, the employee makes $95, pays no state income tax, the taxable federal income is $95 so the employee is held harmless, may get a benefit which I'll explain in a moment. The employer pays $95 in wages and pays a $5 tax as a wage tax which is federally deductible. So, at the end of the transaction costs businesses nothing, the employee is held harmless with a 25 percent deferral tax increase and the loss of deductibility. Tax code would have to find what corporations are eligible and are not but it may actually even reduce an individual's federal tax liability because when you deduct the state tax it may bring you down into a lower income bracket for federal taxation purposes. It could actually lessen the amount of money that New York State pays to the federal government which would be a cruel but welcome irony

Income tax reform could also apply to New York City and Yonkers which have their own income tax. We're also exploring other code changes. This would only apply to wage earners, wage earned income for higher income individuals who aren't earning a wage that would be applicable. There's something called the UBT, Unincorporated Business Tax that might be the same thing on the higher end of the income spectrum. We're looking at that. At the same time, you should still have to run the normal state income tax system, so you would have the run two systems which will be complicated but an employee doesn't have just wage income. It may have wage income, dividend income, passive income, etc. so you would still have to have a personal income tax system that justifies the payment at the end of the year.

Department of Taxation and Finance is going to issue a report tomorrow that goes over a number of these issues. They have been working with other states' tax experts. They'll work with the appropriate people in both houses to talk this through. Second restructuring idea is to set up charitable funds where the contribution to the charitable fund would be tax deductible for federal purposes, and you could get a state tax credit for the amount that you actually paid into the fund. This is an avenue that California is looking at. It shows promise. It's more cumbersome, the tax credit would probably not be dollar for dollar. You wouldn't actually get every dollar back on your taxes but it's something that we're working on and we should explore.

For property taxes and the loss of the deductibility of property taxes, this to me is a larger problem than the income tax loss of deductibility. First of all, it's more money. Property taxes are two and a half times the income tax. So this is where the money is. There's going to be no short answer other than continued to work to find shared services and find efficiencies. The charitable deduction could work on the local level but again, it's not dollar for dollar and it's not a perfect situation but a local government could set up a charity for education, set up a charity for health care, you make a contribution to the charity you get a federal tax deduction and you get a state credit for the amount you contributed, again, we're looking at all options. These are very dramatic changes and they have consequences so we're going through it very careful and we want to go through it careful together.

2019 budget as a budget, we start with a $4.4 billion deficit. We propose a billion dollars in revenue raisers. Health care's going to be a major problem going forward. There's a tremendous cut immediately to health care. It only gets worse. We estimate about $5 billion in the out years. The budget increases education, health care, transportation, economic development and environment. State agencies stay flat, every jurisdiction gets more money.

These are the revenue raises and let me talk them one at a time. Four-billion-dollar deficit, you can't possibly get anywhere near where you want to be on education and health care unless you raise revenues. It's just too big a deficit and the choice of cutting education or cutting health care, I don't think is a place anyone wants to go this year. So we have to raise revue. You have to raise revenue that doesn't hurt the state's economy. This is a very fragile time for the state's economy. You just had a federal government pointing the finger at New York and California and saying those are the bad places to be, those are the high tax state's, we don't want to make a bad situation worse with what we do for revenues. We've identifies a billion dollars in revenues. One will come from health care conversion. This is about not-for-profit health care companies that we financed through Medicaid primarily. They want to sell to a for-profit or convert. The state already has a statute where we get the majority of the revenues. There are several that are pending. We estimate that at $750 million.

There are health insurance companies that just got a 40 perfect windfall profit from this federal plan. They weren't expecting it. The health care costs wind up getting shifted to us. I think it's totally justifiable to have a tax to recoup part of their windfall benefit. Opioid manufacturers have created an epidemic. We would have an opioid surcharge, 2 cents per milligram will be paid by the manufacture and would go to offset the costs that we're spending to fight opioid abuse which are multiples of the $170 million. There's something called the Carried Interest loophole which everyone admits is a loophole. President Trump said he was going to close it. Never happened. We would need regional cooperation to do it but if we could get the others states to do it that would be a billion dollars. We don't score that because we don't have any certainty on the other states.

You have corporations, again, that just got a 40 perfect tax cut which they were even planning on. We would defer our tax credits for companies that have $2 million or more in credits, one year to raise $300 million. They weren't expecting the tax cut. They got the tax cut and it would more the offset the deferral of our tax credits.

Right now, internet sales are hodge-podge. Some internet sales companies charge sales tax, others don't. We would justify it with an all pay a sales tax and it's not this current selective system. We tax the revenue, raises 50 percent go to a health care shortfall fund, 50 percent to an education increase.

Education has a growth cap. The growth cap is 1.5 percent. We would propose actually doubling the growth cap to 3 percent is $769 million dollars for education. We have increased education more than any area in state government, period.


Education increase over the years is now 26 billion dollars. $26 billion is a 35 percent increase since 2012 - $6.8 billion. On top of that, the sound basic education formula that says we should get more funding to poorer schools, this has, our distribution formula would have 70 percent going to the poorest districts which is the highest number ever. And, we should even take it a step further. It's not enough to give funding to the poor districts. You have to make sure the money goes to the poorest schools, in the poorer districts. And right now we have no idea where the money is going. So, yeah that's great we have a formula, we direct it to the poorer districts, but what did Buffalo do with it? What does New York City do with it? And, we should mandate that they have a formula that also mirrors our formula sending the money to the poorer schools. Community budgets, community schools, a 50-million-dollar increase for high needs school districts' transformation. Non-public schools get the same increase that public schools get, which is 3 percent. We continue this 60-million-dollar cap program from last year and a 5-million-dollar reimbursement for STEM. Full-day pre-K goes up $15 million dollars, after school budget would go up $10 million dollars, which would be another 6 thousand slots. Charter schools, we changed the law last year where we linked charters to public school increases. Public schools go up 3 percent, charters would go up 3 percent. Excelsior Scholarship we would take to Phase 2. The child care funding would go up to a record high of $800 million.

Health care, which is where the real potential shortfall is, would be funded at the Medicaid cap which is 3.2 percent. But then set up a reserve that we call the Healthcare Shortfall Fund of about a billion dollars to make up for these federal cuts that are coming down the pike. There's some uncertainty of what's going to happen with the federal cuts. Depending on who you talk to they say they're going to be restored, they're not going to be restored. If they're not restored, they are in the billions pf dollars, and affect millions of New Yorkers. So, it's something that's going to change over time and that we have to watch but we would set up the Reserve Fund now.

All the investments continue, all the upstate investments, all the projects continue upstate and downstate. Economic development we would have another round of our REDCs of URIs and Downtown Revitalization. We would continue the middle class tax cut. They're taking a beating. This is not the time to say to them we told you you'd get a tax cut but we're going back on what we said so we continue the middle class tax cut. We also continue the Property Tax Relief Program for the same reason. Their property taxes are going up; I don't think it's a good time to end the state's Property Tax Relief Program.

For the MTA, currently the state collects what's called a Payroll Mobility Tax which is $1.6 billion. We would change the law so the MTA collects that tax itself, it now has a dedicated funding stream, it can securitize it, it can get a better credit rating from it, it can finance the installation of the Fix New York City Technology - the Penn renovation, etc. MTA funding short term, we need $36 million for what they call the Subway Emergency Repair Plan. We've said it should be split 50/50 New York State/New York City, we have funded it 50 percent, New York City needs to fund it 50 percent. That's the short-term. Long-term you're going to get the Fix New York City report at the end of this week. It will define a pricing zone. It doesn't toll bridges, it uses the new technology that we have at the cashless tolling sites and it can define a geographic zone, if you drive into that zone at certain times, you can pay a toll increase. The technology exists, we have to define the zone, we have to determine the fees, we have to determine the hours, and it's literally an on-going spectrum of options. You can change the hours, different rates for different vehicles, different rates for different trucks, and you'll get that full report at the end of this week. My point is, it has to be fair to all people in all industries. You have yellow cars, now black cars, green cars, blue cars, purple cars they all have to be treated the same. I don't want anyone saying they had a competitive advantage or this advantage because we put a surcharge on one versus the other.

The environment - we renewed the Environmental Protection Fund at $300 million dollars, which is the highest level it's ever been. We proposed dedicating $50 million dollars to finishing the Hudson River Park on the West Side of Manhattan. It was supposed to be done in 2003, so it's about time. The Northrup Grumman plume is contaminants in the aquifer of Long Island which is literally poisonous. They've been talking about it for years but it's still there. We propose $150 million to clean it up. And the upstate lakes, we have a really serious problem with different bacteria and algal blooms. Many of those lakes are also sources of drinking water and any filtration to assist them can be billions of dollars. So getting ahead of this problem is very important and we have $65 million dollars for the upstate lakes.

$112,000 for the creation and preservation of supporting and affordable housing. On the opioid crisis, $26 million more for OASAS. Also, we believe the surcharge on opioids will cause people to start to migrate away from opioids to other types of medicine. There are other medicines they can prescribe besides opioids. And to the extent they do, it's a good thing.

The judiciary is asking for a 2.5 percent increase. They would be the only entity above 2 percent. The Senate, the Assembly, the Executive, all came in at 2 percent. Attorney General came in at 2 percent. Controller DiNapoli wins the prize on the budget limbo contest at 1.5 percent. Congratulations to the Controller. So the judiciary is coming in a 2.5. My position is the backlog of cases is tremendous, especially in downstate New York. We have a chronic problem of people in Riker's Island who've been there for years, haven't had a day in court. The judiciary wants a budget increase. The people of the state have a right to know that the courts are open and functioning from 9 to 5. You have many courthouses where literally at 1 o'clock, the place shuts down. So, I would support the increase at 2.5, but the judges have to certify that the courtrooms are actually operating from 9 to 5.

Transportation, we have $29 billion for the MTA Capital Plan, we propose $29 billion for roads and bridges, including the Thruway. We need to do an EZ-Pass education campaign. We have an issue on the old Tappan Zee, Mario Cuomo Bridge. Interestingly, downstate, people use E-ZPass more than people upstate. They've been using it for years. There are many more E-ZPass bridges, tunnels, etcetera, so the number of E-ZPassesupstate and in the Hudson Valley is much lower. So that means when you go through the toll, you don't have an E-ZPass, you get a bill sent to your house, you have to then open the letter, write a check or go on the internet. That lag is creating a problem, but it's just a process of educating people about E-ZPass, which costs them nothing and actually saves them because you pay a lower toll.

Direct care workers, we fund a salary increase that we talked about last year and the year before. They deserve it, they deserve it. Sexual harassment, I think New York should take the lead. This is a national crisis, it's a national issue, but I think we should step up. I put forth a policy in the State of the State, no taxpayer funds to be used for a sexual harassment payment if it's only based on the individual's behavior, no secret non-disclosure agreements, require companies that do business with the State to disclose the number that they've had. For JCOPE, JCOPE has jurisdiction over these issues, that's in the existing law. The only criticism of JCOPE in the past, and JCOPE has done these cases before, and they've been very effective. The criticism in the past was the timing, that it took them a long time. I would propose funding so JCOPE can set up a specialized unit of people who are trained in these cases so the timing is actually faster. And then we need to set a uniform code of sexual harassment policies and procedures that apply to every branch of the state and local government. You know, why do we leave it to thousands of local governments to, each one to come up with their own sexual harassment policy and procedure and whether or not you get protections and confidentiality. We should set one policy, it applies to the State, it applies to everyone, it protects a woman's right. This where this has to come out anyway.

Marijuana—things are happening. New Jersey may legalize marijuana. Massachusetts already has. On the other hand, Attorney General Sessions says he's going to end marijuana in every state. So you have the whole confluence of different information. I think we should fund DOH to do a study, let them work with the State Police, other agencies, look at the health impact, the economic impact, the state of the law, if it was legalized in Jersey and it was legal in Massachusetts and the federal government allowed it to go ahead, what would that do to New York because it's right in the middle. But this is an important topic, it's a hotly debated topic, pardon the pun, and it'd be nice to have some facts in the middle of the debate once in a while.

The other policy initiatives that I laid out in the State of the State are also included in the budget. Life is options, math matters, what we tried to do with this budget as a budget, you start with a $4 billion hold, we raise $1 billion in revenues. I am comfortable that where we raised revenues, it was fair, it was right, it's not going to hurt the long-term economy of the state, but it's justifiable and we need it. Education at three percent, which is double the cap. Health care, short for fund of a billion dollars to get back to zero and then their cap, which is three percent. Middle class, make good on our promise to deliver a tax cut. Everyone is going to say to you what they say to me, "I want more." That is the constant refrain. "I want more for education. I want more for health care. I want more for infrastructure. I want more for mental health." And everybody's right. But everybody's wrong. It's a question of balancing resources. We start with a $4 billion hold, we have to raise a billion in revenue, and we're doing this in a time when the overall economy is destabilized and we really don't know what the effect of this federal cut is going to be. But, I think when you look at how this has balanced the needs and the resources, it's more than fair.

But don't lose the forest for the trees, because the main issue in the budget is not the budget. The main issue in the budget is about the SALT deductions. Even if you support it, the federal plan or the rate cuts or the theory of the federal plan, as a New Yorker, you can't support the fact that it targets New York with a penalty. It targets twelve states to pay for the cuts on the rest of the country. That's what it does. And they targeted states that have high state and local, coincidentally, they also all happen to be democratic states, but I'm sure that was a coincidence, and those are the states that are financing the tax cut. Their rationale is that, "Well, New York State is a high tax state, so here's the reasoning: New York State is a high tax state, we're against high taxes, so we're going to increase taxes more." That's what the federal government really winds up saying to us. And, you know, that's the captain saying, "The beatings will continue until morale improves." You think we have high taxes, so you're going to raise them more.

And by the way, that's an old stereotype. "New York, high taxes, big spenders." That's not even true. The last big increases, seven, eight, ten percent, those were back in '99, 2001, 2006, 2007. That's a different administration, a different time. Half, more than half of the legislature, wasn't even here for those votes. So we'll be defensive about it. We've had seven years at two percent limits. Seven years ago, New York was number twelve in the state in taxes. Today we're number twenty in taxes. Where are the other twenty states and why don't they have them paying them? Over the past seven years, New York's spending increases have been 25 percent lower than all other states. Our property taxes have been high, but we capped them, and now you're seeing the lines flatten out. Average property tax increase in other states is 3.7, almost double our two. So over time, yes we were high on property tax, but even that is flattening out. And so it costs us $14 billion, that is on top of the fact that we are the number one donor state in the nation.

We are a rich state as states go. We pay a high state tax and we pay a high tax to the federal government. Senator Daniel Patrick Moynihan, God Bless his soul, used to rant that New York is the number one donor state and sent $48 billion to Washington more than we get back every year. $48 billion. This is going to add another fourteen on top of the 48. If they want to do something about high taxes, here's my idea, just give us the $48 billion back. Give us the 48 back. Property and school taxes are only $58 billion. We'll take the total 48 and we'll pay property and school taxes with it and we'd only be left with a $10 billion hold. Which would be nothing. It would be a couple of points. It would transform the state. That's what would be fair. Not to say to the number one donor state, we're going to raise your taxes more. They needed money to pay for the tax cut. We get it. We've done it in years. You need to increase health care, so you reduce this. I get the tradeoffs, but their plan is to use California and New York primarily as the piggy bank to finance the tax cut for the other states. Our state and local burden is already high. You cannot now impose on our people another tax increase. It totally dwarfs everything we've done in seven years. Two percent, two percent, two percent, tax cut, tax cut, tax cut, tax cut. One move all of that progress wiped away and taxes wind up higher than they were seven years ago. Despite all the cuts and all the fiscal discipline and all the fiscal austerity. They send us backwards. It will devastate people on fixed incomes, it will devastate seniors, and it will devastate our economic competitiveness. Don't kid yourself.

Howard Zemsky is on the phone all day talking to businesses. I'm on the phone all day trying to pitch businesses. What they're saying about New York and now making our tax burden higher and now institutionalizing that increase-- this is going to be very damning from an economic development points of view. And we have to have an answer and we have to have an answer now.

It's hard restructuring the tax code is complicated there's no doubt about it but it's also simple at the same time. Washington hit a button and launched an economic missile and it says New York on it and it's heading our way. You know what my recommendation is? Get out of the way before it lands. They want to shoot at our tax code the way it was? We change the tax code and we change it in a way that thwarts their attack. It is that simple because if that missile hits, everyone in the state of New York gets a tax increase by losing the deductibility, makes them different from every other state, and economically it puts us in a very difficult stance going forward and it could institutionalize us there. It is hard, it is complicated, but it is doable.

This is not a political issue. This is green my friends. It's Democrat, Republican, Independent everyone it does not discriminate. Upstate, downstate, doesn't say on the tax form "if you're a Republican then don't worry you get 10 percent back." Doesn't say that. And it is all across the board it's all of your constituents. There is no we may have different strategies of how to fix it, but there's no doubt that it is a problem that affects everyone in this room and everyone's constituents in this room.

This is going to be the toughest thing we have done as a government. I believe that. We've done a lot of great work together, we've passed a lot of great bills, a lot of progress all throughout the state. This is going to be the most difficult challenge that we've had to take on. Because it is the most complicated. And it comes at a difficult time. A difficult economic time, a difficult social time, and a difficult political time. But I have no doubt that this is the fight of New York's future and we're going to get there and we're going to get there together. The way we've always gotten there together because at the end of the day the history books are going to say about you that you are the legislature that actually performed. We get the job done. We pass budgets, we're professional, you drive around the state you see signs of progress everywhere. That's what you've done. This is tough, but it's doable and we're going to do it together and we're going to do it on time.

Thank you and God bless you.

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