From the Right: Gov. Hochul’s ‘Big Ugly’ budget

From the Right: Gov. Hochul’s ‘Big Ugly’ budget

In my last column, I noted that Gov. Hochul’s $237 billion spending plan—which is up 35% since 2019—is unsustainable due to anemic economic growth.

The state’s economy, which grew by only 0.7% last year vs. 2.5% nationally, is not expected to grow much this year and the state’s monstrous $16 billion structural deficit will escalate.

Adding to the bleak economic picture is the never-ending exodus of Wall Street firms to Florida, which unlike New York does not have a state income tax or estate tax.

The New York Post reported May 8 that “160 Wall Street firms have moved out of the Big Apple in recent years—56 of which took their business to Florida, sucking a whopping $1 trillion in financial assets under management out of Manhattan.” That shift, according to Bloomberg News, “has paved the way for a ‘Wall Street South.’”

Financial moguls who ditched New York included Carl Ichan and hedge fund giant Paul Singer of Elliott Management.

While New York’s commercial real estate 20% vacancy rate is at an all-time high, Florida’s office rentals are booming, particularly in Palm Beach, West Palm Beach, and Boca Raton.

If the wealthiest continue to rush to the exit doors, New York’s income tax collection will take a major hit. Why?  Because 1% of households—76,000 out of 7,600,000—pay nearly 50% of the state’s total income tax revenue.

Think about it. If another 10,000 to 15,000 of those households move out in the next couple of years, New York will be in even deeper financial trouble.

Its tax base will be shattered.

The state’s share of Medicaid costs, which have spiraled from $22 billion in 2021 to $36 billion in 2023, is budgeted to increase by only $900 million. However, estimated costs in recent budgets have consistently been wrong. And there is no reason to think that this budget year will be any different. Cost overruns will further exacerbate the structural deficit. (To cover themselves, Albany pols buried in the budget a new $4 billion tax on Managed Care Organization health insurance plans.)

There’s more bad budget news.

The resurrection of the 421-a tax break, that incentivizes the construction of new apartment rentals, is a shadow of its former self.

To keep that item in the budget, the governor surrendered to the radical leftists in her party.

The new program has two flaws that will be construction project killers.

First, it significantly lowers the income threshold for eligible tenants of “affordable” apartments in any new development. This policy will make it more difficult for new housing projects to be profitable.

Next, according to Two Trees Management, a major apartment building developer, the program imposes “certain wages that are consistently higher than the past, whether with union or non-union labor.” Newsday, stating the program increases wages and benefits to be at least $40 per hour, called it a “boon for unions.”

Real estate journalist Steve Cuozzo at the Post has reported “that the misbegotten measure has killed plans for River Ring, a $1 billion four-acre complex on Brooklyn’s East River Waterfront” that was to be built by developer Two Trees management.

The budget’s “Squatter” law is more hype than substance.

The Empire Center’s Cam Macdonald, in an analysis titled “A Squatter ‘Fix’ That May Fix Squat,” concluded, “The new provision that makes it certain in statute that squatters are not tenants may reduce confusion about the rights of persons who occupy property for more than 30 days. And such clarification may give property owners greater confidence to enlist assistance from police in self-help evictions, but it didn’t change the rights they already had prior to this month.”

In other words, Macdonald wrote, “property owners unwilling or unable to use self-help must endure the same expenses and delays in eviction proceedings that a clearer definition of squatting does not help.”

So, despite all the claims by Hochul and her legislative confreres that they passed a responsible budget, it appears it is another “smoke and mirrors” plan that panders to special interests while increasing spending, taxes, and pork.

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