The state legislative session moves into a higher gear this week. We’ll hear a lot about the state’s multibillion dollar “budget surplus.” That phrase implies that things are humming along fiscally or economically. It’s really a one-time windfall and an enormous emergency patch. The money, and the final details, aren’t in hand yet, but most estimates hover around a $4.8 billion windfall. It could be perhaps $6 billion when it’s all over. Or perhaps it doesn’t really exist. The federal government is still saying that $4 billion will just about cover the reimbursement it claims New York owes for Medicaid overcharges.
That will probably not be allowed to stand, politically. The windfall comes from a series of settlements with the usual suspects, giant banks that got caught. Because state laws and regulations were in play, New York will be given a significant share of this round of settlements. As usual, the miscreants cut the government in for a small percentage of the haul and we all call it even. This time the violations include defrauding investors in mortgage-backed securities and failure to comply with anti-money laundering regulations that are supposed to help prevent terrorism and human-trafficking. The biggest chunk, $9 billion, of which New York will get about a third, will be paid by BNP Paribas, the French bank which violated U.S. sanctions on money transfers to Iran, Sudan and Cuba.
Please don’t call it “blood money.” It’s a budget surplus. No one will go to jail. No one will lose their bonus. In 2013, Wall Street bonuses to 165,200 employees totaled $26.7 billion, exceeding all the wages earned that year by the 1,085,000 Americans who worked full-time at the federal minimum wage.
Under previous federal administrations, some crooked financiers got sent up to maintain at least the image that justice is blind. Now we don’t even ask people to give up their regular table at Daniel for the squab terrine.Everyone has ideas about what to do with the windfall. It could be the still-unidentified money needed to complete the $4 billion Tappan Zee Bridge project, or hold down thruway tolls. Coalitions of public officials and business leaders have formed in different parts of the state, urging the money be used for infrastructure repairs and improvements, including some projects that were started and remain uncompleted. It might bring an earlier end to the Gap Elimination Adjustment school aid “take back” that has cost districts billions in funding over the past five years.
It’s a single shot, and some things on that list require structural fixes that go beyond 2015. Despite the happy dances, the smell of brimstone continues to vent from cracks in the earth (“State Warns Troy Is on Financial Brink,” says a recent headline). Over the past 20 fiscal years dating from 1985 through 2014, the share of New York State’s major taxes collected from business ad corporate
taxes has fallen from 16.2 percent to 11 percent. Over that same time, the percentage of major taxes collected from personal income tax has risen from 53.1 percent to 64.2 percent. If we had just kept the corporate share of taxes where it had been, we would have collected an extra $3.5 billion.
Between 2013 and 2014, revenues from personal income (people) tax rose 6.8 percent, but revenues from corporation and business taxes were down 8.5 percent. This shift in burden will increase significantly in 2015. Last spring’s state budget eliminated the bank tax and reduced corporate tax rates. If New York reduced all or part of its 24-year-old 100 percent rebate of the stock transfer tax, we could pay for the Tappan Zee Bridge in cash and reduce property taxes by billions. Game-changing structural fixes will go on the table only if we insist that they belong there.
Michael Miller has worked in state and local government. He lives in New Hyde Park. Email him at mmiller firstname.lastname@example.org.