Cuomo’s $135.1 Billion N.Y. Budget Passes Extended Tax

New York lawmakers passed a $135.1 billion fiscal 2014 spending plan that extends a higher tax on top earners, giving Governor Andrew Cuomo his third consecutive on-time budget.

The plan raises the state’s minimum wage to $9 an hour over three years and provides about $1.1 billion in tax cuts and credits to businesses and middle-income families that will be phased in by 2016. The credits will be paid for in part by an extension of a tax surcharge on couples earning more than $2 million annually, which was set to expire next year.

From 1985 to 2004, the budget was late 19 out of 20 years. Before Cuomo took office in January 2011, there hadn’t been a timely budget since 2006. This year’s on-time passage marks three in a row, which hasn’t happened in almost three decades, when Cuomo’s father, Mario, was governor. The timeliness has the state on the verge of gaining its highest Standard & Poor’s credit rating since 1972.

“I’m hap-hap-happy,” Cuomo said in a March 27 radio interview, the day his proposed budget was approved by the Senate. “These three years in a row getting the budget passed on time and the integrity of the budget is better, I think it is irrefutable proof that government is working.”

The first-term Democrat has worked with lawmakers to close more than $13 billion in budget gaps over the past three years, partly by getting the state’s largest unions to agree to wage freezes. This year’s talks were complicated by a new arrangement in the state Senate, where a group of five Democrats now shares leadership power with Republicans.

DiNapoli Opposition

The spending plan is also notable for what it didn’t achieve. In his January proposal, Cuomo had called for raising the minimum wage to $8.75 from $7.25 this year. That won’t happen until the end of 2014, with the final increase to $9 by 2016. A measure aimed at speeding recovery from Hurricane Sandy by allowing private companies to finance public infrastructure projects was rejected by lawmakers.

Cuomo also pressed a plan meant to give pension-cost certainty to local officials by stabilizing annual contribution rates for 25 years. The approved pension mechanism is similar to one Comptroller Thomas DiNapoli has had in place since 2010, which allows localities to defer a portion of their annual bill.

The 55-year-old governor also wasn’t able to get lawmakers to agree to a measure allowing New York City to decriminalize the possession of up to 15 grams (0.5 ounce) of marijuana, which Cuomo floated during negotiations after he failed to get it done last year.

Magazine Limit

The budget did include a change to Cuomo’s signature gun bill that rolls back a ban on the sale of seven-round magazines. No manufacturer makes a seven-bullet holder. The change allows up to 10-round magazines to be sold, though permits them to be packed with only seven rounds.

The budget closed a $1.35 billion deficit without adding new taxes. It also creates a two-year spending and revenue framework, which Cuomo said March 20 is “a more intelligent way to actually plan a budget.”

By extending the tax on New York’s highest earners for three years, which raises about $1.9 billion annually, Cuomo was able to avoid dealing with the issue during an election campaign in 2014 and use some of the funds to pay for the tax cuts and credits that Republicans wanted in return for their approval of the minimum-wage increase.

Business Credits

Small business will get up to a $5,000 credit for hiring a veteran -- up to $15,000 for those who are disabled. Another measure provides an extra credit designed to draw NBC’s “The Tonight Show” back to New York from Los Angeles.

The state also will spend $375 million to give a $350 tax credit for families with at least one child and earning from $40,000 to $300,000 a year. That rebate will be available for three years and won’t begin until 2014, with the first checks being sent a few weeks before the November election that year when Cuomo may be running for a second term.

The extra time for the higher tax that funds the givebacks is drawing the ire of some business groups, including the Partnership for New York City, which supported the temporarily higher rate in 2011 when it was approved along with cuts for couples earning less than $300,000. The higher rate was set to end next year.

“Extension of the surcharge at the time is the worst possible message New York state could send to our most important job creators and revenue generators,” Kathryn Wylde, the partnership’s president, said in a letter to Cuomo. Her group has previously backed his spending plans.

Before it's here, it's on the Bloomberg Terminal.