In the early hours of Saturday morning, March 31, New York legislators passed the final budget bills, marking the end of the budget process for the 2018 legislative session. This year's budget was a marked change from previous budget cycles, as the focus shifted from bold policy proposals to responding to the financial burdens placed on state taxpayers by the federal Tax Cuts and Jobs Act, approved by Congress in December 2017. The final budget came in with all funds spending at $168.3 billion, including a 3.9 percent, or $1 billion, increase in education spending.
The final budget contained a handful of high-profile proposals intended to blunt the effects of the new federal tax law, which limits deductibility of state and local taxes.
- The first major workaround to be included in the final budget would create two state-operated charitable contribution funds to accept donations for the purposes of supporting health care and education in New York. Taxpayers who itemize deductions would be permitted to claim these charitable contributions as deductions on their federal and state tax returns.
- The final budget also included a provision to allow employers to opt in to a new Employer Compensation Expense Program (ECEP) structure. Employers that opt in would be subject to a 5 percent tax on all annual payroll expenses in excess of $40,000 per employee, phased in over three years beginning on January 1, 2019, in an attempt to limit the amount of personal income tax New Yorkers are exposed to.
- Finally, the budget decouples the state tax code from the federal tax code in a number of areas.
As political observers and tax experts have pointed out, the success of these proposals may be contingent on the subsequent response from the IRS.
Housing and transportation
Governor Andrew Cuomo pushed a number of proposals aimed at tackling issues at the New York City Housing Authority (NYCHA) and the Metropolitan Transportation Authority (MTA) that have been at the center of the longstanding political tension between his administration and New York City Mayor Bill De Blasio.
- Regarding NYCHA, the final budget includes an additional $250 million in funding for capital improvements, as well as "design/build" legislation intended to expedite the repair and construction process. Design/build authority was also extended to the construction of new jails to replace the Rikers Island Jail Complex and the reconstruction of the Brooklyn Queens Expressway (BQE).
- Regarding the MTA, the final budget includes $836 million, with half the funding coming from New York City, to fund the agency's "Subway Action Plan" aimed at tackling the ongoing system failures, breakdowns and delays that have plagued commuters over the past year. The final budget also includes a congestion pricing plan that places a range of surcharges on for-hire vehicles traveling below 96th Street in Manhattan. Funds generated by congestion pricing surcharges will be dedicated to the Action Plan.
In responding to the sexual harassment scandals that have rocked the country in recent months, state legislators and the Governor crafted a number of sexual harassment-related legislative proposals that were included the final budget. The budget legislation would:
- Require all state contractors to submit an affirmation that they have a sexual harassment policy and have trained all of their employees regarding the policy;
- Prohibit employers from using a mandatory arbitration provision in their employment contracts in relation to sexual harassment;
- Ensure that nondisclosure agreements can only be used when the condition of confidentiality is the explicit preference of the victim; and
- Amend the law to protect contractors, subcontractors, vendors, consultants or others providing services in the workplace from sexual harassment, among other provisions.
As noted above and in contrast to previous years, much of the legislation was stripped from this year's final budget. Nonetheless, a few significant legislative items survived the budget process, including legislation aimed at pre-empting the potentially negative impact that an adverse ruling by the US Supreme Court in Janus v. AFSCME, which challenges the compulsory collection of dues-like “agency fees” from employees who choose not to join unions, would have on have on union revenues in New York.
The final budget also included legislation that would expand the definition of political communication to include paid Internet and digital advertisements, and would require digital platforms to maintain a file of all political advertisements purchased by a person or group for publication and confirm that foreign individuals and entities are not purchasing political advertisements.