There’s some good news and some bad news from the New York state Comptroller’s office. The state’s nearly $200 billion pension fund is doing well, thanks in part to the booming stock market, but there are some worrisome signs for the future of New York’s finances.
Comptroller Tom DiNapoli says the pension fund is up this quarter by 2.9 percent, and has increased 11.5 percent from last year. DiNapoli says he likes to think that he and his staff have invested wisely, but he says a major factor is the booming stock market.
“The stock market rally continues,” DiNapoli said, in an interview with public radio and TV. “It’s been going on longer than most people would have ever projected, but we’re benefiting from that right now.”
But there’s a drop in the state’s finances. The Comptroller’s monthly report finds collections of personal income taxes are down around $1.2 billion from the same time period last year.
DiNapoli says Governor Cuomo’s Division of the Budget has already revised down collection estimates and made some spending cuts back in May, so the actual gap is closer to $350 million.
He thinks wealthy investors may be holding back on cashing in their capital gains, hoping for tax reforms from President Trump and the Republican led Congress that will result in lower tax rates.
“For many higher income New Yorkers, everyone is still waiting to see what’s going to happen with the federal tax proposals,” DiNapoli said. “Tax reform hasn’t happened yet.”
Governor Cuomo’s budget office, in its most recent quarterly financial report released Wednesday, has similar findings. It says tax collections overall were down by nearly three quarters of a billion dollars, but that was partially off set by a $350 million bank settlement. But the report says budget analysts are watching it all closely.
A big wild card for the state budget is the potential federal changes. The possible repeal and replacement of the Affordable Care Act could reduce the state’s funding for health care by several billion dollars, and the tax reform proposals could eliminate state and local tax deductions. Because New York is a high tax state, those changes could disproportionately affect state residents. Comptroller DiNapoli says the worry can keep him up at night.
“Everything is really like an outline, and there’s not a whole lot of specifics,” he said. “When they say ‘trust us, it’s not going to hurt the middle class’, well the opposite happens.”
DiNapoli says many of the proposals benefit the wealthy at the expense of middle and working class Americas.
Cuomo’s budget office agrees that there is uncertainty over possible federal changes. The governor and legislature laid out a plan as part of the budget package in April to cope with any potential short falls, due to a dramatic decrease in federal funds. Under it, the governor would come up with a plan to balance the budget. The legislature has 90 days to challenge or change it, or the governor’s plan automatically becomes law.
For now though, a spokesman for Cuomo’s budget division, Morris Peters, says the state budget remains in balance.