On Wednesday, Gov. Andrew Cuomo announced New York will advance $1.5 billion to organizations that need cash flow until February or March 2021, as the state awaits a federal stimulus package that helps America's state and local governments. The step will be taken amid media reports that Congress will pass a stimulus package that does not include funding for state and local governments.
“Another topic: state finances. Newspapers today suggested Congress suggests no state and local funding. This is a major problem,” Cuomo said. “It's also a major disgrace. We have been talking about this for months, since before the election. And then after the election, people were supposed to put their politics aside and actually do their job. Apparently, that hasn't happened. This is a purely partisan debate.
“Again, I'm chairman of the National Governors Association. I talk to governors on both sides of the aisle. Many Republican governors received a lot of funding early on from the CARES act. As a matter of fact, they received so much funding that they need flexibility to be able to spend their money. The Democratic states that were hardest hit have run out of that money and need additional funding, like New York, like Michigan, like California, like Illinois.
“Some people in Washington say, "Well, bankrupt the states." Bankrupt the states? If you bankrupt states, you bankrupt the nation. You really want to bankrupt New York? What would that do to the nation's economy, bankrupting New York? And you want to bankrupt New York now, in the middle of this pandemic – when the numbers are spiking – when we're just about to start this ambitious vaccination program – where I need hospitals and nurses and National Guard to do this unprecedented operation? Now is when you want to bankrupt New York? It is madness. Madness. Hyper-political, parochialism madness.
“You know how important New York is to the overall economy. You know how important California is to the overall economy. Chicago, Illinois – how do you just say, ‘Let these states go bankrupt’? How do you expect me to administer the vaccine? And you know that unless we crush this virus everywhere, we don't crush this virus anywhere. Virus is a national pandemic. Infected people from one state are going to the other state, that's the problem.
“I've been fighting this fight for months. I believe President-elect Biden will correct the situation. He has said it publicly/privately; he gets it. The problem is, he has to get into office; so you're talking about February or March of next year. The question is what do we do to get from now till next February and March. We can't lose essential workers in the central organizations, especially with what we're doing now.
“So, the state is going to advance $1.5 billion to organizations that need cash flow between now and next February/March when we expect the federal government will tell us that they're going to be helpful and what that amount of funding is; but we understand we have to get from here to there, and we need them to function. So, we'll have up to $1.5 billion that we will advance until that point.
“Some people are talking about doing a tax increase. Look, at this rate, we're going to need tax increases. The question is how much of a tax increase? And to determine how much of a tax increase, you have to do that in the budget, because a tax increase is only one mechanism to close the hole. You have a $15 billion hole in the budget. We need $15 billion. ‘Well we can do some in taxes.’ OK. How much? And how do we fill the rest of the hole, which is going to be in cuts? You have a $15 billion hole. You want to do $5 billion in taxes? All right, then we need to cut $10 billion. Where do we cut that $10 billion and who do we cut on that $10 billion? You want to raise taxes, fine, from who and where do they go? You want to do cuts for the rest, fine, from where? Education, housing, health care? And are there other ways to get revenue? How about marijuana? How about sports betting? Marijuana we were supposed to have done for the past two years anyway and would raise revenue.
“So, if the Legislature wants to do the budget now, we can do that, but we have to do a budget not just a tax increase, because you can't do a tax increase in abstract. You have to do a tax increase relative to the budget. We could do a whole budget now, but then we're going to close a $15 billion gap now, and it is going to be devastating to people, because you would have to do massive cuts and massive tax increases without the federal aid. But those are the choices: you do the budget now with no federal aid and you solve for a $15 billion hole. That would lay-off thousands of workers; the tax increase would be extraordinarily high. Also, doing the tax increase now gets you no additional funds than doing it in the beginning of next year. Legally, that is not correct. We've done tax increases in 2009, and had them retroactive, and they've been upheld. Or, we wait until next February-March, we do a budget when we know what the federal funds will be, and then we do the tax increases and the cuts to actually balance. Those are the two choices; we can do it either way.
“I favor waiting until next year, because if we close the $15 billion hold this December, I can tell you the cuts to education are going to cause school districts to lay off teachers all across the board. I can tell you hospitals are going to have to lay off workers. I can tell you government is going to have to lay off workers. Just when we're doing vaccines, just when we're fighting the pandemic. And then Joe Biden takes office and comes up with a federal aid package to the states, then what do we do? Call back the school and say, ‘Oh, by the way, now I can give you funding.’ And the school's going to say, ‘I just fired 500 teachers, how do I get them back?’
“So, that's where we are on that.
“But, a bridge to here and there, is the state advancing $1.5 billion until we know where we are on the other side. If Joe Biden, as president, doesn't provide state and local funding, or can't get it passed, we're going to have to close that $15 billion on our own. If we have to close the $15 billion on our own, it is going to be devastating. You're not talking about the tax increase they're talking about. You're talking about multiples of that tax increase.
“You're talking cuts in almost every service. This would be the highest deficit in the history of the state of New York. And this is no time to be savaging essential services.
“Look, this is all hard. This is all hard. And I know hard. The times test us. It creates pressure. Pressure finds the crack in the stone, little crack. You put it under pressure. And then the pressure explodes the crack. The weak crumble.
“But pressure also forges diamonds. And New Yorkers are diamonds, a necklace of diamonds, different shapes, different sizes, different colors. But a necklace of 19 million diamonds, and that's why we're New York tough, and smart, and united, and disciplined, and all the rest.”