Keep Local Taxes Local By Dave Lucas, NYSAC Director of Finance and Intergovernmental Affairs
I
n the SFY 2019 budget, New York State began a troubling and unprecedented practice of intercepting and diverting local sales taxes to fund state programs; first to backfill $59 million in state cuts to the AIM local government assistance program, and again in the SFY 2021 budget to finance a temporary state controlled $250 million per year distressed health facilities fund in response to the COVID pandemic. This practice of funding state programs with local sales taxes is counterproductive, undermines transparency and accountability to taxpayers and results in highly regressive tax policy. The primary result is that it increases pressure on property taxes, compromises the delivery and availability of local services, and has cost local taxpayers $677 million to date.
One Step Forward… Thankfully, the Governor’s SFY 2023 budget proposes to reverse diversion of local sales taxes for AIM-related payments and returns fiscal responsibility for this program back to the state. County elected officials and local taxpayers are thankful for the Governor’s partnership in addressing this issue.
Ten Reasons Why We Should Stop Diverting Local Taxes for State Spending Purposes 1.
The Distressed Provider Assistance Program was meant to be a temporary program to address emergency needs related to the COVID-19 pandemic.
2.
As of January 26, 2022, nearly two full years into the pandemic and through multiple waves of COVID infections, hospitalizations, and deaths, no funding has been provided to health facilities through the Distressed Provider Assistance Fund despite the state having diverted $500 million in local sales tax for this program. In fact, on March 31, 2021, the last day of the state fiscal year, the state moved $250 million out of the Distressed Provider Assistance Fund and deposited it into the state general fund.
3.
For more than 50 years, aiding distressed health facilities has been a state and federal responsibility. This policy is nothing more than a cost shift from the state to local governments.
…One Step Back But with the good, comes some bad. The Executive Budget also proposes to make a temporary COVID emergency program that was intended to help fiscally distressed health facilities through the unknowns of the pandemic a permanent program using $250 million in local taxes to pay for it ($50 million from counties and $200 million from New York City). The state should sunset the diversion of local sales tax to support state spending for a distressed health facilities pool as scheduled (March 31, 2022), or end it no later than the expiration of the federal public health emergency declared for the COVID-19 pandemic.
Funding state programs with local sales taxes • increases pressure on property taxes, • compromises the delivery and availability of local services, • and has cost local taxpayers $677 million to date. 14
NYSAC News | Winter 2022
