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Tax rebate check is on the table as state eyes budget cuts

Members of the New York State Senate discuss

Members of the New York State Senate discuss legislation in the Senate at the State Capitol in Albany on June 20. Credit: AP / Hans Pennink

ALBANY — The state’s $6.1 billion projected deficit for this fiscal year may be getting personal for 2 million New Yorkers because the annual tax rebate checks they are receiving are “on the table” for items that could be axed, state officials said.

Qualified homeowners will receive property tax relief checks that average $357 to $490 statewide, including an average of $674.94 in Nassau County and $596.32 in Suffolk County, according to the state tax department. Those checks are arriving in mailboxes now and will continue for several weeks.

The $1.3 billion program started mailing property tax relief checks in 2016. The checks are intended to cushion school property tax growth, but the law expires this year. The State Legislature and governor already chose not to extend the program once, in the budget deal adopted April 1. Since then, the state’s finances have become far more troubled and the deficit has grown by billions of dollars, blamed primarily on spending overruns in the Medicaid health care program.

“All options are on the table,” said Gov. Andrew M. Cuomo’s budget spokesman, Freeman Klopott, of the property tax relief program.

The Property Tax Relief checks go to homeowners with a household income of under $275,000. The homeowner must live in a school district that kept its growth in the tax levy to 2 percent or less. Legislators at the time thought that if taxpayers knew a rebate check was at stake, they would pressure their school districts to comply with the cap.

The benefit has grown from an average check of $185 for upstate residents and $130 for the suburbs around New York City including Long Island, which include some of the highest taxed counties in the nation. The largest checks each year go to low-income homeowners and seniors.

The property tax relief checks are an outgrowth of the more lucrative STAR tax exemption, which continues and can also come in the form of a check for some taxpayers. Legislators have said the many changes in the programs have confused taxpayers. Klopott said STAR benefits "will not be changed." 

The deficit comes despite good fiscal times for the state and tax revenues meeting expectations. The difference is led by more than $4 billion in added spending for Medicaid. That cost was driven in part by recent progressive measures in Albany to raise the minimum wage, which increased health care labor costs, and the drive to insure more New Yorkers. Additional factors include the rising cost of caring for more older New Yorkers.

“The middle class is going to be stuck,” said Senate Republican leader John Flanagan (R-East Northport). “The Democrats are letting lapse the property tax rebate program that we put into place, that we fought for, that was very hard to get, and they won’t even talk about it.”

Senate Democratic majority spokesman Mike Murphy wouldn’t comment on the tax relief checks, but said in a statement: “The Senate Democratic majority … will continue to make tax relief a priority next session.”

The Assembly’s Democratic majority also wouldn’t comment on the future of the tax relief checks.

Because the current state budget didn’t extend the program, the projected deficit of $6.1 billion doesn’t include the cost of the tax relief checks. That means that if the tax rebate program is extended, the deficit could grow another $1.3 billion, creating the biggest spending gap since the $10 billion deficit in 2011 as the state dug out of the recession. Cuomo said he is determined to whittle, not raise, the deficit.

“The budget, when introduced with all of its many proposals, whatever they may be, will be balanced,” said Klopott. Cuomo’s budget proposal to the legislature is scheduled for January.

“Under this administration, everyone pays a lower state tax,” Klopott said. “We’re continuing to look at ways to lower taxes further in New York as we develop next year's budget. All options are on the table.”

Klopott notes Cuomo has addressed past budget deficits nearly as big as the one the state faces now. That includes a $5.2 billion gap for the current fiscal year and $4.4 billion a year ago. Klopott said Cuomo’s budget proposal that is being crafted now will “limit New York state’s Medicaid spending growth and continue high quality care for 6 million New Yorkers without raising taxes to cover the cost.”

In March, Cuomo postponed more than $1 billion in Medicaid payments to hospitals and for health care that was to be paid in the last fiscal year. By moving the payment three days — to after the start of the fiscal year on April 1, 2019 — the state was able to comply for the last fiscal year with a cost-containment cap on Medicaid spending required by law. But that created a bind for this year. Cuomo has already said he will postpone $2.2 billion in Medicaid payments due this year into 2020 and future years, again to meet the cost-containment cap.

“It’s a shame the governor may need to take away property tax rebate checks to fix the budget disaster he created,” said Assembly Republican leader Brian Kolb (R-Canandaigua).

Earlier this month, Moody’s Investors Service issued a “credit negative” caution over the deficit.

“The state has a spending problem,” said David Friedfel of the independent Citizens Budget Commission. “The state simply did not keep spending in line with budgeted amounts and is now facing the music. The budget should be balanced through spending control.”

The checks were popular with New Yorkers because it was money into their pockets, and taxpayers often complained to their legislators and local news media if their checks seemed late. The checks were started by Senate Republicans who held the majority in 2016, and often arrived at homes in the Senate battlegrounds on Long Island and upstate during the fall elections.

“Five or six hundred bucks is a lot of money for a family and even though it might have the appearance of playing politics is an election season, I’m not sure they care,” said Lawrence Levy, executive dean of the National Center for Suburban Studies at Hofstra University.

Fiscal analysts were less enamored with the checks.

“It was a political gimmick beloved by Senate Republicans,” said E.J. McMahon of the fiscally conservative Empire Center think tank. “They couldn’t possibly afford to continue that … It’s basically a helicopter drop mainly on downstate suburbs to benefit Republican senators to get them all reelected.”

Friedfel also finds the checks ineffective when the funding could be better aimed at paying for infrastructure, paying down debt or as partial payment on broader tax relief.

“It should be allowed to expire,” Friedfel said.

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