Last week Gov. Andrew Cuomo proposed budget amendments to the fiscal year 2020 Executive Budget to restore funds to towns and village that were cut in the Aid and Incentives to Municipalities (AIM) program. According to a Cuomo press release, the proposal would use additional sales tax revenue from the Internet Fairness Act to keep towns and villages whole with approximately $59 million in revenue.
The state will also implement the Internet sales tax requirements earlier, starting June 1 of this year as opposed to Sept. 1, the date originally proposed in the Executive Budget.
“The original proposal only impacted localities receiving a relatively small amount of money, but I have been contacted by mayors and local officials who say in these tough times it would still be a challenge for them,” Cuomo said. “That is why we are revising the executive budget to use internet sales tax revenue to make these impacted localities whole.”
If this tactic becomes reality, it will mean Yates County will be required to disperse Internet sales tax revenues to the towns and villages. The county historically keeps all sales tax revenues.
Yates County Treasurer/Acting County Administrator Winona Flynn says the funding levels for the 12 Yates County towns and villages in 2019 is $167,241 (unchanged from 2017 and 2018). She says the additional revenue the county is expected to receive from the Internet Fairness Act is approximately $278,000 beginning in September.
In 2017 and 2018, the Village of Penn Yan received $40,621, and the Town of Milo received $40,526 in AIM funds.
Penn Yan Mayor Leigh MacKerchar had a measured reaction to the news. “That will help us try to make it under the tax cap, but the state is not making it easy. The source — the internet sales tax collecting process — is still missing,” says MacKerchar.
“We (Yates County towns and villages) are doing great things in shared services,” MacKerchar adds, “but the 5,000 people I represent are already unduly burdened.”
Flynn says there are other unfunded mandates in the governor’s proposed budget that will impact the county, including reduced state funding for community colleges; eliminating monetary bail, forcing counties to fund pretrial services; an increase to the District Attorney’s salary with no matching state funds; increased rates for early intervention provider with no state reimbursement; unfunded 12 days of early voting; elimination of state funding for Persons in Need of Supervision placements.
“These budget proposals are requiring counties to finance more and more state programs without any state reimbursement,” says Flynn.
The Internet Fairness Act was included in Cuomo’s FY 2020 Executive Budget to address out-of-state merchants’ advantage over New York’s retailers. “New York’s brick and mortar retailers are currently at a disadvantage because many online retail competitors are not collecting sales tax,” states the release. “This unequal treatment is unfair to the retailers who do collect sales tax, the customers who pay sales tax, the public at large who is forsaking state and local revenues, and the people who depend on the public services supported by those revenues. As more retail sales migrate to online platforms, the importance of ensuring equal tax compliance has grown. Online providers supply a marketplace for third-party retailers to sell their products to consumers.”
Cuomo believes the proposal provides a consistent framework for collection of required sales taxes by marketplace providers, which he says will simplify sales tax enforcement and ease collection burdens for the retailers who sell through these platforms.
On an annual basis, the elimination of the internet tax advantage is expected to generate $390 million in additional revenue for local governments.
AIM is state aid provided to all of New York’s cities (other than New York City), towns and villages. Though not required in order to receive AIM payments, local government officials are encouraged to use multi-year financial planning as a long-term budgeting tool.
In his 2019–20 proposed Executive Budget released last month, Cuomo unexpectedly called for the elimination of AIM funding for 1,326 of New York’s 1,465 towns and villages.AIM is the largest single source of state revenue sharing for these localities. The Local Government Efficiency (LGE) Program (formerly the Shared Municipal Services Incentive program) was established by the 2005-2006 NYS Budget. It provides technical assistance and competitive grants to local governments for the development of projects to achieve savings and improve municipal efficiency through shared services, cooperative agreements, mergers, consolidations and dissolutions.
In both 2016–17 and 2017–18 fiscal years, $714.7 million in AIM payments were made to cities, towns, and villages.
N.Y.S. Association of Counties Executive Director Stephen J. Acquario commented, “The Governor’s 30-day amendment ‘fix’ to earlier cuts to AIM uses future Internet sales tax revenue that he is taking from counties to cover forced shortfalls. This is a horrible precedent and unnecessarily shifts the state’s burden to local taxpayers who already pay some of the highest taxes in the nation. The state could have used its share of Internet sales tax revenue to make municipalities whole.
“Forcing counties to use a portion of their Internet sales tax revenue to reimburse our municipal partners does not help the state reduce property taxes or help to offset the costs of services to our residents. In the end, local homeowners and businesses just keep paying more for decisions made by the state.”
State Sen.Tom O’Mara (R,C,I-Big Flats) denounced the Cuomo plan as “yet another unfunded state mandate on counties.” O’Mara called the Cuomo cost shift the latest example of a state government that’s “out of touch and out of control.”
O’Mara and many other state legislators join town supervisors, village mayors, and other local leaders to oppose the Cuomo plan to restore the AIM cut by shifting the cost responsibility from the state to counties.
O’Mara said, “Here’s what Governor Cuomo calls a plan: another new tax and another unfunded state mandate dumped on top of what’s already one of the biggest piles of taxes and unfunded mandates in America. This is government out of touch and out of control. Governor Cuomo once again ignores the burden already facing upstate local property taxpayers and shirks another state responsibility.”
Peter Baynes, Executive Director of the New York State Conference of Mayors and Municipal Officials (NYCOM), said, “While we appreciate the fact that the Governor has acknowledged that the elimination of AIM funding would have serious implications for the State’s villages and towns, his ‘restoration’ of this $59 million is in reality a robbing of one property taxpayer to pay another. Rather than playing this shell game, New York State should be fulfilling its obligation to increase its investment in municipal aid and the property tax relief it will generate. Imposing a new mandate on counties to make up for the state’s cut to villages and towns will only further harm New York’s already overburdened taxpayers.”