Feb 23, 2018
State legislative session focuses on budget
The 2018 state legislative session continues to remain focused on the passage of a state budget, with efforts being hampered by a substantial budget deficit. Last week, Gov. Andrew M. Cuomo released his Executive Budget 30-day amendments in response to the federal tax-reform bill. The legislation proposes allowing employers to opt-in to a new payroll tax system. In addition, the proposed legislation would create two new funds to accept donations to fund health care and education programs, allowing taxpayers who itemize their deductions to deduct these types of donations from their federal taxes. Finally, budget amendments include provisions to decouple the state tax code from the federal tax code.
Under the first proposal, 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 Jan. 1, 2019. The deadline for the first annual election for employers to opt-in to this alternative system will be Oct. 1, 2018, for the 2019 tax year. The governor’s proposal to allow businesses to assume their employees’ income taxes as a payroll tax has not been favorably accepted by the state Legislature. The budget proposal includes no cuts in state aid for core services. School aid is proposed to increase by $769 million to $26.4 billion (3 percent); Medicaid spending would increase by $593 million to $18.9 billion (3.2 percent); and total Medicaid costs would increase by $1.7 billion to $70 billion (2.5 percent).
In other budget news, the Executive Budget proposal also included another 900 percent increase in insurance fines and penalties. The proposal is similar to the 900 percent increase proposal that PIANY was successful in defeating in last year’s budget, but this time the language was hidden in an unrelated section of the bill. Technically, the proposal would amend Insurance Law Section 109 to increase the maximum fine for entities regulated under the Insurance Law found to have improperly paid a claim or made a false statement to the New York State Department of Financial Services. The text of the proposal can be found in Section 16 on page 104, under Part O—Reform the Early Intervention Program. PIANY continues to oppose the measure, recognizing that one misstep could put a producer with a small agency out of business. Your association will make defeating this proposal a priority again this year.
The proposal is part of an overall plan to raise revenue to close a substantial state budget gap this year. Cuomo blames many of the budget problems on changes in the federal tax law enacted by Congress, and the repeal of the mandate for individuals to buy health insurance. Cuomo said the federal tax changes will cost the state an extra $14 billion per year in net payouts to the federal government.
Gov. Cuomo also plans to call a special election, Tuesday, April 24, to fill 11 vacant seats in the state Legislature—including two key Senate posts. Progressive activists had been urging the governor to call the elections before the state’s March 31 budget deadline. The legislative seats were left vacant after their previous occupants won election to other offices last year. Democratic victories in both Senate races would give the party a numerical majority in the GOP-controlled chamber. A reunification plan recently agreed to by the mainline Senate Democrats and the breakaway Independent Democratic Conference, which shares leadership of the Senate with the GOP, is contingent, in part, on the Democrats winning both vacant seats.