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One-House Budget Breakdown, NY Campaign Mode, DC Gridlock

Author

Jack O’Donnell
March 18, 2024

Hearing Room B

Good morning from Albany where the OD&A family welcomed a new member on Saturday: Grace Moore.

Congratulations to Annie, Jim, Trey, and Brody. 

Mother and daughter are both well, and like many of us, are eagerly anticipating the end of the budget.  

The rest of us will be in Hearing Room B where the General Conference Committee—aka "The Mothership"—will meet today at 12:00 p.m. New York’s April 1st budget deadline is less than two week away!

Last week, the Assembly and Senate passed their One-House Budget proposals thereby setting the table for final negotiations.  Here is a quick look at the different positions as we enter the final stretch.

NY State Senate

One major difference is the bottom line—the Assembly’s proposal comes in at $236.1 billion, an increase of $13.1 billion over the Executive budget, while the Senate’s plan adds $13.4 billion to the Executive Budget. Both Houses pointed to Medicaid spending and school aid as the main drivers of the higher top line number.  Significantly, both Houses included tax hikes to offset the increased spending while Governor Kathy Hochul has been adamant in her desire not to raise taxes.

More specifically, the Senate and Assembly proposed record-high Medicaid rate increases. 

Both Houses called for a 3 percent rate increase as well as supplementary hikes for hospitals, nursing homes, and assisted living facilities. The Assembly included a further 7.5 percent for providers, while the Senate adds 7 percent more for hospitals and 6.5 percent more for nursing homes, assisted living facilities and hospice services.  That is about $1.6 billion in additional spending per year for the Medicaid program, a collective challenge to Hochul’s efforts to rein in the program’s growing costs.  To pay for these increases, the Legislature proposed a new tax on managed care organizations that would trigger the release of additional federal matching funds.  The roundabout financing mechanism would generate an additional $4 billion annually over three years, pending federal approval, according to Assembly estimates — at no added cost to state taxpayers.

NYS Senate and Assembly reject proposed changes to school aid formula.

Education funding is the most contentious issue.  Hochul wants to change the school aid formula, ending the “hold harmless” policy that ensures schools do not receive less aid in the budget than in the previous year. Hochul’s proposal faces serious pushback from teachers unions, as well as leadership throughout the Legislature. Senate Majority Leader Andrea Stewart-Cousins (D-White Plains) offered, “Almost half of the school districts in the State will be receiving less funding than they would have anticipated. We're very, very concerned about that.” State Budget Director Blake Washington hinted that the State could potentially use the excess $1.3 billion tax revenue to reach a compromise, but Hochul has since doubled-down, insisting that the current level of support, given declining admission, is not financially tenable. The Senate and Assembly both omitted Hochul’s changes in their budgets, instead proposing a $1 million study to examine how changes to the aid formula would impact school districts. Hochul blasted that idea: “That is how you would define kicking the can down the road.” 

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“Almost half of the school districts in the State will be receiving less funding than they would have anticipated. We're very, very concerned about that.”

Senate Majority Leader Andrea Stewart-Cousins

Housing is another issue where Governor Hochul and the Legislature remain at odds. Hochul's current housing proposal is muted compared to last year’s ambitious plan to build 800,000 new housing units that included the ability for Albany to override local zoning decisions. Hochul did include a “placeholder” proposal to replace 421-a, a tax break for affordable housing development, but the different sides still do not agree on the details. While the Senate and leadership in the Assembly have both signaled support for a new affordable housing development tax credit, they would like to see more concrete details over what qualifies as “affordable.” The Legislature is also again pushing language that is in line with Good Cause Eviction, drastically increasing tenant protections that have yet to be accepted by the Executive Chamber. Similarly, both Houses proposed a $250 million rental voucher program to aid New Yorkers at risk of eviction and homelessness. Any final deal also will need to include provisions supporting affordable housing landlords to unlock over 26,000 vacant apartments.

Taxing the Rich, School Funding, Housing: N.Y. Budget Battle Begins.

What do free bus rides, new taxes on the wealthy and a stiff drink in a movie theater have in common?

Both the Senate and Assembly are pushing for a tax hike on the wealthy despite Hochul’s pledge to keep tax rates where they are. The proposal would increase the corporate tax rate by 1.75% and would up the personal tax rate by .05% for those making more than $5 million a year. Hochul has called the proposal a “nonstarter” and has been adamant that New Yorkers are taxed enough already.  Senator Liz Krueger, chair of the Senate Finance Committee, says the policy would raise an estimated $2.2 billion per year and offered, “We do not believe it will have a negative impact on their lives, or on their income, or on their policy positions as New Yorkers.” 

LISTEN ON YOUR FAVORITE PLATFORM!

Jack is back ‘From the Lobby’ with analysis on the budget bargaining in New York.

Tune in as he breaks down the issues in the Governor’s 2025 spending plan and the Legislature’s One-House Budgets:

→Taxes, School Aid, Housing, Healthcare, Crime, Technology

The Senate advanced the New York HEAT Act, a provision that would reverse the rule requiring nearby ratepayers to cover the costs of a new gas hookup within 100 feet of an existing line. The proposal also caps monthly utility payments for low-income New Yorkers at 6%. The Assembly included the 6% cap in their proposal, but omitted the 100 foot rule while Hochul’s budget included a reversal of the 100 foot rule, but omitted the cap. The Senate is also pushing changes to the state’s Tier 6 pension program, proposing the final average salary calculation window change from five to three years for payouts. The changes to Tier 6, which covers most state employees, is a major priority for the New York State United Teachers as well as the AFL-CIO. 

Governor Hochul has made a concerted effort to crack down on organized retail theft, proposing to increase the penalties for assaulting a retail worker. Neither the Assembly nor the Senate accepted that proposal, but Hochul said, "History will show that this is when the conversations begin.”

Both Houses will now begin negotiations in earnest with the hope of enacting a final budget ahead of the April 1st deadline. Assembly Speaker Carl Heastie offered, “hope springs eternal” about the possibility of getting a budget passed by the March 31 deadline. This year’s timing is complicated by the fact that Easter falls on April 1, meaning everyone would need to wrap everything up by Thursday, March 28.  “We have 15 days,” Heastie said. “You can look at it both ways: As Yogi Berra used to say, ‘It’s getting late early.’ Or you could say, ‘15 days in Albany time is a lifetime.’”

There was more evidence this week that New York State continues to be the center of the national campaign to win control of the House of Representatives.  After President Joe Biden’s State of the Union address last week, Rep. Nancy Pelosi (D-CA) told Hudson Valley Republican Rep. Mike Lawler (R-NY) that he should thank Gov. Kathy Hochul both for helping propel him and other GOP candidates to victory two years ago and for approving a House map with minor changes to district lines.  “We all had a great laugh,” Lawler told New York Politico Playbook adding, “I think Nancy Pelosi is a very astute observer of politics and understands that on a fair set of maps, Republicans have a big opportunity in New York. Pelosi’s office returned fire on Lawler with a statement that pointedly did not include a reference to Hochul.  “Lawler is right about one thing — Speaker Pelosi knows politics,” Pelosi spokesperson Aaron Bennett said in a statement. “And she knows that next January, Mondaire Jones will be back in the House, Democrats will be back in the majority and Hakeem Jeffries will be speaker.” 

Hochul spokesperson Jen Goodman in a statement said the Governor has always been focused on “electing Democrats up and down the ballot.”  Hochul has backed that up by raising millions for the New York State Democratic Committee and training her fire on New York House Republicans as a foil on contentious immigration issues, blasting them for not supporting the Senate-negotiated border security bill.  Hochul’s prudent budget—and tough on crime and no new taxes refrain--was also a reflection of these political realities and the fact that in many parts of the State, the migrant crisis and public safety are driving politics.

Budget was also the focus in Washington D.C. this week. President Biden released his FY 2025 budget, very much an aspirational document given that Congress has the power of the purse. Still, the proposal provides an insight into Biden’s priorities and lays out a roadmap for policies he will be pursuing in a second term. If enacted, Biden’s budget would reduce the deficit by $3 billion over the next decade, mainly due to a minimum tax of 25% for billionaires. Getting billionaires to pay their fair share has been a frequent talking point for Biden, and he offered, “A fair tax code is how we invest in things that make this country great: health care, education, defense and so much more.”

The proposal solidifies and increases the child tax credit and provides a $10,000 tax credit for first time homebuyers. Biden has long said Americans are paying too much for prescription drugs. His budget would enact a $2,000 annual cap on prescription drug payments and would bring down the cost of insulin to $35. Seemingly responding to the public’s concern about the economy, many of Biden’s proposals are centered around affordability. His plan would earmark over $250 billion to build or rehab 2 million new homes in the hopes of bringing down costs around the country. The proposal also takes aim at the childcare shortage, ensuring that parents who make less than $200,000 annually pay no more than $10 a day in child care costs. 

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“A fair tax code is how we invest in things that make this country great: health care, education, defense and so much more.”

President Biden on taxing billionaires

While President Biden is looking ahead to 2025, Congress is still trying to iron out the details for fiscal year 2024. Congress passed the first six spending bills last week, but the last six remain and must be passed by Friday to avoid a shutdown. Among the outstanding appropriations bills are thorny issues including Defense and Homeland Security spending where Democrats and Republicans remain at odds. 

Biden signs a package of spending bills passed by Congress just hours before a shutdown deadline.

Congressional leaders and the White House are scrambling to finish up talks on a massive six-bill “minibus” spending package in the next day or two. There’s a March 22 shutdown deadline, and House GOP leaders need a deal by this weekend in order to stay in compliance with their 72-hour rule before voting on legislation. That would allow a House vote by mid-week. The Senate would then need several days to process the legislation without a time agreement. House and Senate appropriations staffers also need one to two days to do a line-by-line read-through of all six bills — a herculean task —before an agreement is finalized. 

DHS funding might be the most controversial.  Sen. Susan Collins (R-ME), the top Republican on the Senate Appropriations Committee, warned that she doesn’t “see a path” for a bipartisan deal on the FY2024 Homeland Security funding bill. 

As a result, a year-long continuing resolution for the Homeland Security Department – at current funding levels – is being drafted as a backup plan.  That would be several billion dollars less than DHS would get under the Fiscal Responsibility Act, but could be necessary to avoid a partial government shutdown. The other option would be to pass another short-term DHS extension to allow more time for negotiations.

The Homeland Security bill is always politically difficult, especially because of the immigration and border security issues involved.  This year, the bill is especially fraught after House Republicans impeached Homeland Security Secretary Alejandro Mayorkas, though that effort has largely stalled in the Senate.  That came after Senate Republicans — under pressure from former President Donald Trump and Speaker Mike Johnson — rejected the bipartisan border security compromise.  The two sides are clashing over increased Border Patrol funding, how much to spend on detention facilities and shelter for undocumented migrants, and an effort to zero out Mayorkas’s salary and deny other funding that will hamper Mayorkas’s ability to do his job.

Despite the disagreements, Rep. Rose DeLauro, the top-ranking Democrat on the House Appropriations Committee, is still optimistic they will avoid a shutdown saying, “We are on target and on track to meet that deadline.” 

The two sides are clashing over increased Border Patrol funding, how much to spend on detention facilities and shelter for undocumented migrants, and an effort to zero out Homeland Security Secretary Alejandro Mayorkas’s salary and deny other funding that will hamper Mayorkas’s ability to do his job.

More broadly, obviously a divided Congress brings disagreement and drama. Still, there are three pieces of major bipartisan legislation stuck between the Senate and the House, increasing the tension between Senate Majority Leader Chuck Schumer and Speaker Mike Johnson.  Most notable, these bills each passed one chamber on a sweeping bipartisan vote. However in 2024, that is not enough to get done, further evidence of Congressional divide.

No. 1: Supplemental funding. The Senate passed its version of a national security supplemental over a month ago to fund U.S. aid to Ukraine, Israel, and Taiwan. It has been stuck in the House ever since.  Johnson last week offered a glimpse of hope in an interview with POLITICO, saying he expects to put a “stand-alone” Ukraine bill — as in, not attached to a must-pass vehicle — on the House floor under suspension of the rules. That means it will require a two-thirds majority, and thus many Democratic votes.  The details remain sketchy; including the timing of the votes and how the bill, or bills, will be structured. Meanwhile, Democrats and a handful of Republicans have taken things into their own hands and have filed discharge petitions to try to put pressure on Johnson to act.

No. 2: Tax relief. A carefully crafted compromise forged by the top House and Senate tax writers passed the House with resounding bipartisan support nearly two months ago, and now it sits languishing in the Senate amid bicameral tensions among Republicans.  A clash between House Ways and Means Chair Jason Smith (R-Mo.) and Sen. Mike Crapo (R-Idaho), ranking member of Senate Finance, has been the main holdup. Now Republicans and Democrats in the Senate have not agreed on what measures should be changed to make the bill more to Crapo’s liking.

No. 3: The TikTok bill. Despite passing Wednesday with more than 300 votes in the House, Senate leaders are pumping the brakes on a bill that would force a sale — or potential ban – of TikTok. Schumer has put the onus on his committee chairs, at least one of whom — Commerce Chair Maria Cantwell (D-Wash.) — has former staffers now working for TikTok.  Asked about the huge bipartisan vote in the House, Cantwell said: “We're gonna look at it. We've just been so busy, we just didn't have the chance.”

Finally…

A special shout out to one of our younger associates, Thomas O’Donnell.  Thomas was in Albany last week to participate in Dyslexia Awareness Day.  Special thanks to Jo Anne Simon (D-Brooklyn) and her colleagues for organizing the event.  Thomas was an excellent advocate and will be taking on more clients after he finishes 3rd grade.

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Employee Spotlight

What do you do at OD&A?

I work closely with a wide variety of clients and do a little bit of everything! From executing research on a particular topic or coordinating with legislative offices, I fill in wherever our clients need. Sometimes that looks like a lot of scheduling coordination and other times, it’s crafting personalized legislative strategies.

What do you like most about your work?

I like the problem-solving aspect and how every day is just a little different. You never really know what new thing is going to be thrown at you, which can come with challenges, but always brings something new and interesting to tackle. In the same vein, it's great feeling like you can solve an issue that is important to people whether it’s a union worker who is having trouble locally or a larger company bringing innovative solutions to problems facing New Yorkers.

What are your proudest accomplishments/achievements at OD&A?

Helping our clients build their own relationships with legislators and other advocates. For example, we sometimes have clients join us in Albany who have never had the opportunity to converse directly with legislators’ offices, and I am enormously proud when I or another member of my team are able to facilitate that. Introducing people to the world of lobbying and empowering them to advocate for the issues closest to them are always rewarding.

Extras:

I grew up in North Carolina and am a graduate of UNC Chapel Hill where I received my B.A. in American History and Conflict Management and became an NCAA Basketball fan. At Carolina, I was also the President of UNC Democrats and worked closely with talented Dems in NC local, state, and national campaigns prior to joining OD&A. I currently live in Brooklyn, NY and love being able to spend time in Albany and Buffalo as well.

This Day in History

March 18, 1766: The British Parliament repealed the Stamp Act of 1765 after violent protests from American colonists. The tax on all paper documents to raise revenue for Britain, which was deep in debt, is considered one of the major causes of the American Revolution: taxation without representation.

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