IRB Application - Fiscal Policy



514352540000News from theFiscal Policy InstituteFor immediate releaseContact Ron Deutsch, Executive Director518-786-3156 (o) 518-469-6769 (c)James Parrott, Deputy Director and Chief Economist212-721-5624 (o), 917-880-9931 (c)FPI Policy Brief: Federal Funding Cuts Could Cause Significant Budget Woes For NYS New York State faces gargantuan budget challenges if the current federal administration is successful in pursuing the many cuts in funding to states proposed thus far. In it’s most recent policy brief, the Fiscal Policy Institute points out that over one-third of New York’s All Funds budget is comprised of federal funds and billions in additional funds are also sent to local governments, schools, and transportation. Altogether, over $70 billion in federal aid flows to the state and its local governments. The policy brief discusses the importance of federal funding and details the broad range of programmatic areas in which the state receives federal categorical funds.“This year’s New York State budget negotiations take shape against a worrisome backdrop. The president and congress are poised to dismantle the Affordable Care Act, make drastic cuts to programs that help millions of New Yorkers, and create a hostile environment for the state’s four million immigrants,” said Ron Deutsch, Executive Director of the Fiscal Policy Institute (FPI). “This should be New York State’s cue card to step up and prepare for significant budget shortfalls.”Perhaps the most immediate risk to the state budget is the potential repeal of the Affordable Care Act (ACA.) James Parrott, FPI’s Deputy Director and Chief Economist asserts that “repeal of the ACA jeopardizes health insurance for more than roughly 2.7 million New Yorkers.” Parrott continues, “With the ACA, the portion of the state's population without health insurance has fallen from 10 percent to five percent. Repeal would entail a direct state budget loss of $3.7 billion in federal Medicaid dollars associated with expanded health insurance coverage in New York, and it would result in the loss of nearly $600 million of federal funding that goes directly to counties.” One “replace” proposal is to block-grant Medicaid — favored by the new U.S. Secretary for the Department of Health and Human Services, Tom Price— which would only destabilize a system that covers 6.2 million New Yorkers, nearly a third of the state’s population. Block-granting would reduce Medicaid’s value as a counter-cyclical program helping families of individuals who lose health insurance when they lose jobs in a downturn. Deutsch notes, “The history of block grants is one of locking states into lower funding rather than ensuring delivery of services based on the level of need of individuals.” Moreover, the progress the federal government made under President Barack Obama in using federal tax policy to reduce income inequality very likely will be undone. As FPI has repeatedly pointed out, New York leads the country in income inequality. As the latest Economic Report of the President demonstrated, Obama’s policies delivered the most significant reduction in market-generated inequality since the Great Society programs in the mid-1960s. According to James Parrott, “The combined impact of his tax policy changes and taxing the wealthy to pay for expanded health coverage under the Affordable Care Act, cut by 20 percent the ratio of average income of the top 1 percent to the bottom 20 percent.” While a detailed proposal has not yet been made public, the broad outlines of Trump’s tax policy priorities are fairly clear from campaign and other documents. Priorities include scrapping the century-old estate tax, which likely would shower almost all of its benefits on the wealthiest 1 percent. Using data from the Tax Policy Center, it appears that New York State’s top 1 percent could get a $20 billion windfall if the presidents proposed tax policies are enacted. Eliminating the deductibility of state and local income taxes, hinted at by recently-confirmed U.S. Treasury Secretary Steven Mnuchin, could decrease the tax windfall for the rich in New York by $8 billion. In the event that federal spending cuts threaten the well-being of millions of New Yorkers, the state should consider a special tax to recapture some of the federal windfall that would flow to the state’s richest 1 percent. New York State already has in place the millionaires’ tax, whereby the state would be able to recapture some of the federal windfall that would flow to the state’s wealthiest 1 percent. “Whatever happens in Washington, Albany needs to extend and enhance the state’s millionaires’ tax,” says Ron Deutsch. “Without it, New York would be inflicting harmful budget cuts on itself.”###The Fiscal Policy Institute () is an independent, nonpartisan, nonprofit research and education organization committed to improving public policies and private practices to better the economic and social conditions of all New Yorkers. ................
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