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Economics

Council of Industry Roundtable with President Williams of New York Federal Reserve Bank

On Wednesday, July 10, members of the Council of Industry met with John Williams, the President of the New York Federal Reserve Bank for a roundtable discussion of issues affecting Hudson Valley Manufacturers. The event was arranged by the Council of Industry and held at MPI, Inc. It was an opportunity for manufacturing leaders to provide insight on issues such as the skills gap, tariffs, trade, and the overall economy are impacting their companies. They also shared steps they have taken along with Council of Industry programs to address these issues.

This event was part of the New York Fed’s tour of the Hudson Valley and Albany in an ongoing effort to assess economic conditions in the Federal Reserve. Williams is one of the key policymakers on the Federal Open Markets Committee that meet eight times a year and attempt to influence the U.S. economy. They review economic and financial conditions, determine the appropriate stance of monetary policy, and assess the risks to its long-run goals of price stability and sustainable economic growth. Williams is a career economist with a doctorate in economics and was previously president of the Federal Reserve Bank of San Francisco.

Williams began the discussion by asking for an open dialogue about each company’s present obstacles and opportunities so he could get a better understanding and perspective of what New York manufacturers, Hudson Valley ones specifically, are facing.  The current labor shortage was a clear issue that was addressed throughout the discussion. The aging workforce the absence of vocational and technical training makes it a struggle to find experienced workers.

Williams asked what was being done to address these issues and several members volunteered examples of how they are working with the Council of Industry to help find solutions through a wide variety of initiatives including the apprentice program, the Collaborative Recruiting Program, working with local schools and colleges, and using training programs provided by grants in association with the Council of Industry and the Community Colleges.

One member shared his experience with the Council of Industry’s apprentice program and how it is helping him maintain and further develop the talent he currently has within his company. He believes that investing in his employees will encourage them to stay and grow with the company after the completion of the program.  Another member described the relationship his company has cultivated with local P-Tech schools and colleges to find young people with an interest in engineering and manufacturing. There was discussion of technical and supervisory training offered by the Council that members have utilized and how it has been affordable for many of our members because of grant funding provided by the state.

Other topics that were discussed included international trade, the new tariffs, and rare earth materials. There were varying opinions on tariffs and trade. While some members spoke positively about the new tariffs and the hope that it would result in more production within the United States and cut down on intellectual property theft. Others had a slightly different point of view and noted that certain industries rely heavily on the global supply chain, which has been negatively impacted by tariffs. Immigration, especially the H1B Visa program was also discussed.

President Williams thanked the group for their input. The roundtable provided insight on the local economy, business expansion, and workforce development programs in addition to the needs and challenges of advanced manufacturers in the Hudson Valley. While the Federal Reserve Bank cannot address all the challenges discussed, they can leverage their convening power, build connections within the District and utilize their research capabilities to provide support wherever possible.

Council of Industry members that took part in the event included: Bruce Phipps, President, MPI Inc.; Aaron Phipps, VP of Sales & Marketing, MPI, Inc.; Fabio Alvarez, CFO, MPI, Inc.; Elisha Tropper, Principal and CEO, Cambridge Security Seals, Tim Cunningham, VP Manufacturing, Bell Flavors & Fragrances, Julian Stauffer, Chief Operating Officer, PTI – Packaging Technologies & Inspection, Steve Pomeroy, Owner/President, Schatz Bearing Corp., Justin Lukach, President, Micromold Products, Inc., Cedric Glasper, President & CEO, Mechanical Rubber, Neal Johnsen, President, Stanfordville Machines, Steven Efron, CEO, Efco Products, John Yelle, Operations Manager, Pratt & Whitney, Devon Luty, President, Dorsey Metrology, and Diana Tomassetti, President, Pietryka Plastics.

Pictured above: Fabio Alvarez, CFO, MPI Inc.; John Williams, President of the New York Federal Reserve Bank, Johnnieanne Hansen, Director of Workforce Development and Apprentice Coordinator, Council of Industry; Bruce Phipps, President, MPI Inc.; Aaron Phipps, VP of Sales & Marketing, MPI, Inc.

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State $hortfalls shrinking

By E.J. McMahon,  Founder and Research Director, The Empire Center for Public Policy

New York State’s budget outlook for fiscal 2020 is improving, according to the FY 2019 Mid-Year Update issued today by Governor Cuomo’s Division of the Budget (DOB).

The Mid-Year Update—released 10 days past the Oct. 30 statutory deadline—pegs the budget gap at $3.070 billion for the fiscal year that starts next April 1. That’s down from $4.027 billion as of the end of the first fiscal quarter.

Assuming Cuomo sticks by his pledge to hold annual State Operating Funds budget growth to 2 percent, the state’s projected net revenue shortfall has been cut nearly in half, to $402 million from the previously projected $780 million. And if the 2 percent limit is maintained through FY 2022, the remaining gaps for the following two years would fall to $998 million and $316 million, respectively.

The significant partial gap-closing since the First Quarter Update can be traced primarily to two factors: a $303 million increase in projected miscellaneous receipts and federal grants, and a $579 million decrease in projected disbursements, which in turn stems mainly from reduction in projected debt service.

Notably, DOB hasn’t changed any of its first-quarter projections of state tax receipts—although state Comptroller Thomas DiNapoli’s office this week estimated that taxes will fall short of Cuomo’s previous projections by $116 million in fiscal 2019 and $383 million in fiscal 2020. If DiNapoli turns out to be correct, the gaps will be larger than Cuomo now expects.

An embarrassment of riches

The new numbers cast more doubt on the need to fully extend the state’s temporary higher “millionaire tax” rate, which now raises about $4.5 billion a year.

That tax, boosting the state’s top personal income tax rate from its permanent-law level of 6.85 percent to 8.82 percent, is Cuomo’s twice-extended version of a slightly higher set of temporary surtaxes first enacted under Governor David Paterson to help close budget shortfalls in 2009-10.

The Mid-Year Update, like all DOB financial plans, assumes no change to current state law—which would mean the higher millionaire tax rate expires as scheduled on Dec. 31, 2019, three-quarters of the way through the 2020 fiscal year.

Based on current revenues, this means the gaps projected on the “Adherence to 2% Spending Benchmark” bottom line of the financial plan could be closed with extended millionaire tax rates of roughly 7 percent to 7.5 percent through Dec. 31, 2021. The natural next step in such a phase-down would be to eliminate the tax entirely and revert to the permanent law top rate of 6.85 percent in 2022.

Balancing the budget with no millionaire tax after 2019 would require holding spending growth to 1.6 percent in FY 2020, and slightly below 2 percent in the following two years.

The only way Cuomo could actually spend the entire $4.5 billion raised by the millionaire tax would be to (a) invent a new category of off-budget disbursement, or (b) cut some other tax. In previous years, he’s chosen “b”—other temporary tax cuts, most recently in the form of a temporary “property tax relief credit.”

Then again, New York City Mayor Bill de Blasio, Assembly Democrats, and—last but not least—leading members of the newly elected state Senate Democratic Majority favor raising the millionaire tax even higher, in part to to generate more money for the Metropolitan Transportation Authority (MTA) and city subways.

Proponents of boosting the millionaire tax ignore the impact of the new federal tax law capping state and local tax (SALT) deductions, which has boosted New York’s effective marginal income tax rate to an all-time high.

Cuomo’s next financial update is due with the first Executive Budget of his third term, next February 1. In the meantime, he’s approaching another deadline that he has gotten into the habit of casually ignoring: Nov. 15, when representatives of the governor, comptroller and legislative leaders are required to meet publicly “for the purpose of jointly reviewing available financial information to facilitate timely adoption of a budget for the next fiscal year.”

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