Kathy Hochul, unelected governor, has no mandate from voters. Nor does she have any experience in managing a large government, negotiating with a state legislature, crafting a budget or setting public-works policies.
And she still may be the best thing that’s happened to New York state in decades.
The first governor to hail from outside of the New York City commuting orbit in a century, she may understand the city’s woes better than the city itself.
New York City is distressed. As of June, we were missing 461,900 jobs, compared to the pre-pandemic year. That’s more than 11 percent of the total, whereas the US as a whole is only missing 3 percent of its pre-pandemic jobs. At $62.4 billion, city tax revenues for the current year are 8 percent below the $67.6 billion the city expected them to be this year, pre-pandemic.
But city and state officials don’t think of the city as in trouble. Before the pandemic began, the de Blasio administration had expected to spend $98.6 billion in 2022. Instead, we’ll spend $104 billion (after local tax revenues, the rest of the money comes from state and federal grants). The state, too, is powering ahead, with its operating budget up more than 8 percent this year, to $112 billion, as the Empire Center’s E.J. McMahon has written.
Now, de Blasio is falling all over himself about the 2020 Census numbers. “The Big Apple just got bigger!” he crowed. Never mind that there’s no evidence of a pre-COVID growth surge in subway and bus ridership or school enrollment, which have been falling for years, and never mind that residential vacancy rates are at modern record highs, with 7 percent of Manhattan rental apartments empty.
Hochul may be more disposed to see reality. She’s from Buffalo, which saw its population fall by 52 percent between 1950 to 2020, from 580,000 people to 278,000.
No one is saying Gotham will end up like Buffalo. But the complacency — when only a quarter of Midtown and lower Manhattan office workers, the linchpin of tri-state wealth creation and distribution, are back at their desk — is jarring.
What should she do? She can’t be a caretaker for the next 16 months — and doesn’t appear to want to be. Voter mandate or not, she must act like she just won in a landslide.
First, transportation. People are not going back to their Manhattan offices until they feel comfortable on subways, buses and commuter rail. Weekday subway ridership is still less than half of normal; commuter-rail ridership is down 60 percent.
At the MTA, she should keep Janno Lieber, the new acting chairperson, and ditch most of Cuomo’s board members. Lieber is a Cuomo appointee, but he’s not a “Cuomo guy”; he had a long career in complex real-estate development, in rebuilding the World Trade Center for Larry Silverstein, and knows just as much as anyone else does how state, local, and federal transit policies and politics work.
MTA board members Robert Mujica, Larry Schwartz, and Linda Lacewell are Cuomo people. Lacewell stepped down last week. Hochul should quickly ask the other two to step down, and ask the Senate to confirm her own folk.
She doesn’t need to do a worldwide search. Picking random people off the streets would be an improvement over current board dynamics. But there are plenty of independent downstaters to choose from: Rachel Haot of the Partnership for New York City, Rachael Fauss of Reinvent Albany, and even Kathryn Garcia, who understands the real world of labor relations. Or, just smart people whom she trusts.
The MTA’s No. 1 job is getting people back on the trains and buses, including through creative fare promotions: giving out 10-ride cards coupled with a 20 percent Midtown dining discount that expires within a month, in neighborhoods and towns with the lowest commuting rates right now? Cheaper bus service along more bus-only lanes, to keep pressure off the subways as the MTA scrambles to add new operators?
One thing is for sure: the longer office workers stay away, the more working-from-home, or working-from-anywhere, becomes a habit, not an aberration, and the state risks losing the tax money that New Jersey and Connecticut commuters pay.
These new habits, in turn, impact both city and state budgets. The city has powered state population growth, and jobs and tax revenue, for decades.
Two weeks ago, the state Financial Control Board, which oversees New York City’s finances, signed off on de Blasio’s blowout budget with the usual timid remarks that he’s leaving deficits for the future major.
Just as at the MTA, Hochul should replace Cuomo’s FCB appointees with her own, and appoint a full-time executive director, as well. Then, the FCB should open up both the state and city budgets for savings.
Every city department should have to prepare three scenario budgets: one for if the city’s economy and tax revenues improve quickly, one for if things stay the same, and one for a doomsday.
Doomsday budgets shouldn’t threaten immediate layoffs of front-service workers; how many admin workers, rather, can de Blasio’s education department cut?
Third, Hochul should make clear, too, that her bias toward state taxes is in the downward direction, not the upward direction. Earlier this year, the state overreached in hiking the state’s top income-tax rate by nearly a quarter, to close to 11 percent.
A governor from upstate, which has long competed with the rest of the country for jobs, Hochul may understand better than someone from downstate that this is a prohibitively high tax levy. Combined with New York City’s tax, it’s the highest in the country. Downstate has lived in a financial and tech bubble for four decades, and doesn’t quite grasp this fact.
Next year, the state should have an early idea of how many superrich taxpayers have moved out of town in the past two years, and how many have moved in to replace them. Hochul could remind people that tax rates can go down as well as up.
Fourth, public safety. Cuomo’s 2019 bail reform still needs reform. Judges must be allowed to consider whether or not a defendant poses a threat, and must have far more options to divert first-time violent offenders to mental-health treatment. The state shouldn’t be paroling ex-offenders to homeless shelters.
Finally, on many of the above problems, Hochul must work with — or against — the increasingly left-wing state Legislature. This may not be as hard as it would have been last year. Within New York City, voters chose a moderate mayoral candidate, Eric Adams, making it clear that they think the city’s left has overreached.
Outside of the city, the state is more moderate. The state is only just now seeing the real-world effects of the Legislature’s utopian fantasies, enabled by Cuomo — in addition to the hastily enacted bail law and higher tax rates, decriminalization of marijuana with no study on car-crash deaths and young-adult mental-health.
Hochul is more conservative than city mice are used to. She once opposed issuing drivers’ licenses to unauthorized immigrants.
But just as it may get in January with Adams, Gotham could use another dose of Democratic realism, right now. The state’s ability to levy taxes on its wealthy downstate residents in return for a poorer quality of life is not infinite, especially as white-collar workers have proven, over the last year and a half, that they have other options.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.
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