Counties tell state to increase sales tax rate, legalize marijuana to help close budget gaps
Increasing the sales tax by a penny per dollar for the next three years and legalizing (and taxing) marijuana are among recommended 80 actions presented by the New York State Association of Counties to help the state and local governments close budget gaps during the Covid-19 pandemic.
The counties want permission to collect an extra penny in sales per dollar the next three years, with the state and county splitting that additional revenue. In Orleans, that would mean increasing the sales tax from 8 to 9 cents per dollar. In Orleans, the county receives 4 cents and the state the other 4 cents of the sales. Each penny generates about $4.25 million in sales tax in Orleans County.
NYSAC also said legalizing adult-use cannabis would provide the state and counties with resources for public health education and technical assistance. Counties should be allowed to apply their local sales tax rate on these transactions, NYSAC said. In addition, the cannabis cultivation tax should be shared with the county in which the product is grown.
NYSAC officials today announced the group representing 62 counties in the state has submitted to the New York State Division of Budget a series of county recommendations for overcoming the budget crises.
“When Covid-19 arrived in our communities, counties mobilized and led the response efforts that were essential to stopping the spread of the virus,” said NYSAC President John F. Marren, the chairman of the Ontario County Board of Supervisors. “Now, as the economic aftershocks from the pandemic rock our local economies and the federal government stands idly by, counties are once again mobilizing to provide creative solutions that will place local governments on improved fiscal footing and protect essential services.”
The NYSAC proposals would allow counties to preserve local services in the face of massive declines in local revenues and the withholding of state aid.
The recommendations include programmatic reforms to lower costs both the state and local level, the creation of a Blue Ribbon Commission to Redesign State-Local Service Delivery, short term revenue options, temporary bonding authority, and property tax cap flexibility.
The report was submitted to the Division of Budget for consideration as Administration officials explore mid-year cuts to localities and begin the process of developing the budget recommendations for the 2022 State Fiscal Year.
It will also serve as a tool for state legislative leaders should they return to Albany to consider additional relief legislation to aid counties and other entities in Covid-19 response efforts.
“With this report we’re sending a message to the state that we’re ready, willing and able to be constructive partners in the economic recovery from the coronavirus pandemic,” said Dan McCoy, Albany County Executive and President of the New York State County Executives Association. “While these recommendations are a positive step in the right direction, they are no substitute for the federal action that is needed to provide states and local governments with the resources we need to fully recover from this pandemic and get our economy moving again.”
As the state adopted social distancing measures to stop the spread of the virus, counties and New York City saw massive declines in sales tax revenues which comprise a significant portion of their annual budgets.
Currently, counties and New York City are facing a $14.5 billion revenue deficit over the next two years—and towns, cities and villages are also facing shortfalls.
Compounding the impact of local revenue shortfalls, New York State is facing a current year revenue decline of $14.5 billion, and a four-year shortfall of $62 billion. In the absence of federal funding, the state has reduced spending through June by nearly $4 billion by holding back 20% of payments to localities, among other actions.
“When this pandemic first swept across the state, local governments stepped up with innovative solutions to manage a crisis that none of us were prepared for,” said NYSAC Executive Director Stephen J. Acquario. “Now counties are providing the essential services that New Yorkers depend on during this recession, and we need the state to consider these recommendations to help us address the lack of revenue and their budget cuts. ”
Among the recommended actions to help counties includes no more diverting local sales tax revenue for what was an entirely state-funded Aid and Incentives for Municipalities (AIM) and a new distressed hospital fund.
These diversions take more than $484 million annually in locally raised revenues from counties and New York City. Local sales taxes are intended to provide the least burdensome way of financing local government operations, support state required spending and keep property taxes lower, NYSAC said.
To see the report and all the recommendations from NYSAC, click here.