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N.Y. Fight Over Pre-K Threatens Chance of Credit Upgrade

Downtown Manhattan
Standard & Poor’s has said New York may win an upgraded credit rating if Democratic Governor Andrew Cuomo can produce a fourth on-time budget for the fiscal year starting April 1. Photographer: Ron Antonelli/Bloomberg

Feb. 10 (Bloomberg) -- A battle between legislative leaders over Mayor Bill de Blasio’s plan to tax New York City’s wealthy to fund universal pre-kindergarten threatens the chances of a fourth on-time budget and the highest state credit rating since 1972.

Dean Skelos, the Long Island Republican who co-leads the New York Senate, said today he won’t let de Blasio’s plan get a vote. Jeff Klein, who leads three other breakaway Democrats in a coalition with Skelos, responded that if de Blasio’s measure isn’t part of the budget, he’ll block it. Both must agree to any bill that comes to floor.

“I will not approve a budget that fails to realize the vision Mayor de Blasio and I share of providing high-quality, universal pre-K,” Klein said in an e-mailed statement. “Mayor de Blasio’s plan is the only one that provides New York City with the funding it needs to achieve that goal.”

Asked at a news briefing in Albany whether de Blasio’s plan would get a vote, Skelos said “no.”

Standard & Poor’s has said New York may win an upgraded credit rating if Democratic Governor Andrew Cuomo can produce a fourth on-time budget for the fiscal year starting April 1. If New York gets a bump up from its AA rating, the third-highest level, it would be at its highest since 1972.

Cheaper Alternative

Skelos said he supports Cuomo’s alternative plan, which would provide pre-kindergarten statewide. He’s also said he’d like to pass the budget on time. Over five years, Cuomo would spend more than $2.2 billion on pre-kindergarten and after-school programs.

The governor has said his plan wouldn’t require higher taxes; indeed, he has promised to cut them.

De Blasio’s five-year effort would raise $2.5 billion to provide classes to more than 50,000 New York City 4-year-olds and after school activities for middle schoolers.

The mayor has been gearing up for a fight in Albany, where lawmakers and the governor control most local levies. That’s led him into conflict with Cuomo, a friend of 20 years. De Blasio won office in November after promising to raise taxes on the rich to provide early childhood education.

The dueling statements by the senate leaders happened as de Blasio visited LaGuardia Community College in Queens to give his first State of the City address. He said the city couldn’t let Washington’s gridlock or the “limits of Albany” stop his mission of reducing the gulf between rich and poor. In a statement e-mailed after the speech, he thanked Klein.

Minor Burden

“To deny a vote on something as urgently needed and as widely supported as funding universal pre-kindergarten is just plain wrong,” de Blasio said. “It’s time for Albany to give New York the home-rule right to ask the wealthiest to pay just a little more in taxes.”

Klein’s hard line may create pressure for Skelos to bend, or for a third option to gain traction, said Ian Vandewalker, a counsel for New York University’s Brennan Center for Justice.

“It seems at least possible to convince Skelos to withdraw his objection and let it come to the floor,” Vandewalker said.

The tax has the support of Sheldon Silver, the Manhattan Democrat who leads the Assembly. He has said there may be room for both Cuomo’s and de Blasio’s plans.

“The governor put forth a viable option; the mayor put forth a viable option,” Silver told reporters in Albany today. “I don’t understand why Senator Skelos would remove a viable option from the table at this stage.”

Big Winner

De Blasio won election by the biggest margin for a nonincumbent in city history with a campaign that depicted a metropolis divided. New York’s richest 1 percent took home almost 39 percent of all earnings in 2012, up from 12 percent in 1980, according to the Fiscal Policy Institute, a nonprofit research group in New York.

The mayor would raise taxes on income above $500,000 a year, to 4.4 percent from almost 3.9 percent. For the 27,300 taxpayers earning $500,000 to $1 million, the average increase would be $973 a year, according to the Independent Budget Office, a municipal agency.

For those making $1 million to $5 million a year, the average extra tax would be $7,793, the budget office said. At incomes of $5 million to $10 million, the increase would be $33,518.

A married Manhattan couple with two children jointly filing with an income of $700,000 and taking standard deductions currently pays about $25,000 to the city.

Skelos was unswayed by De Blasio’s argument that the increase wouldn’t mean much for the wealthy.

“The last thing we need is to see high earners leave New York state because then we lose their tax dollars,” Skelos said today.

To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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