Testing a Four-Day School Week

Testing a Four-Day School Week

School districts in certain parts of the country have adopted a four-day school week, primarily in response to staffing shortages and recruiting challenges. In some instances, local districts that were losing teachers and other staff to those offering the four-day school week had no choice but to do the same. With this trend picking up steam, especially following COVID, is it only a matter of time before it becomes a nationwide norm?

As an accountant, a partner in an accounting firm, and a working mother of two children in elementary school, I definitely have my own perspective on the topic. Before jumping to conclusions, I wanted to do some research to see if there’s something I’m missing and to better educate myself on the issues.

As reported by the Rand Organization, 257 U.S. schools operated on a four-day week in 1999. Within just 20 years that increased by over 622%, growing to more than 1,600 schools across 24 states by 2019. More than 70% were in rural locations that deal with higher costs for transportation and operations while struggling to attract and keep talent due to lower pay. Still, one big question – perhaps the most important one – remains: How does it affect students?

A study of student achievements in grades 3 to 8 shows students with a shorter school week fall a little bit behind their five-day-a-week peers each year. After about eight years, the total learning loss is similar to the loss experienced during COVID.  What’s more, results showed the five-day-a-week peers progressing faster.  (Source: Doss, C; Kilburn, R; Phillips, A. The Four-Day School Week: Are the Pros Worth the Cons? April 2023. Rand.org.)

That’s not to say there aren’t positives to the approach. Rural schools, in particular, find it to be a potent solution to attract and retain talent, improve job satisfaction, reduce burnout, and offset lower pay. It also reduces operational costs related to buildings, buses, school meals, substitute teachers, and more (although the savings is not much – just an estimated 1% to 2%). Teachers have more time to plan for lessons and complete grading. Overall, school morale appears to improve, but what about the students?

When I read the data available on the four-day-school-week, I was struck by how most of the benefits discussed don’t have anything to do with the students. I struggle with that. After all, the whole reason a school exists is for the children to learn, grow, and prepare to live successful lives.

As a business leader, it just feels counter-intuitive to promote an approach that doesn’t benefit clients. In truth, any business that doesn’t put its clients first won’t be in business for long. As noted by Rand, “A better approach to improving outcomes for both students and teachers would be to address the root cause of the challenges schools and districts face, including insufficient and inequitable funding and teacher and student stress.”

Numerous other studies are starting to come out on the issue. One showed fifth-grade students losing about five to six weeks of gains in math for each year of four-day schooling. Another study found it harms certain students more than others, with elementary school students showing a slower pace of growth on standardized math tests than their peers going to school five days a week; reading results were worse. In a minority of cases, when students make up time lost by attending school for more hours Monday through Thursday, learning doesn’t seem to be impacted.

One other point worth noting is that while the four-day-a-week saves schools money, it actually drives up costs for students’ families. A report on CNN indicated the shorter school week can result in an annual increase of $5,000 to $9,000 in childcare costs, which is between 5% and 9% of the median family income.  It feels like cost-shifting to me.

Personally, given global competition, the rapid growth of technology, and the ever-quickening pace of change, I would prefer to see children having more learning opportunities and time – not less. They already lost learning and socializing opportunities to COVID. Solutions to recruitment, retention, and costs absolutely need to be addressed, but not at our children’s expense. There just has to be a better way.

If your school district is facing financial challenges and looking for opportunities to save or manage funds better, perhaps RBT CPAs can help. Our firm has been serving clients in the Hudson Valley and beyond for over 50 years – including numerous school districts. In addition to accounting, tax, and audit services, our team is also available to provide advisory services to help you make the most of the money available. Perhaps there’s something we can do for you. Interested? Give us a call today.

ERISA: What to Know & Do as a Benefit Plan Fiduciary

ERISA: What to Know & Do as a Benefit Plan Fiduciary

If you are a private employer that sponsors an ERISA-covered health and/or retirement plan for employees, it’s a good idea to review your responsibilities – and deadlines – to ensure compliance.

The Employee Retirement Income Security Act of 1974 or ERISA is a Federal law that protects retirement and welfare employee benefit plan participants’ and beneficiaries’ interests. As stated on the Department of Labor website, ERISA “sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.”

Generally, ERISA applies to private employers, but not government entities, churches, or plans that comply with disability, unemployment, or workers’ compensation laws. The Department of Labor’s Employee Benefits Security Administration, the Treasury Department’s Internal Revenue Service, and the Pension Benefit Guaranty Corporation work together to enforce the law, which:

  • Requires plans to provide important information about a plan, its features and funding to participants;
  • Has minimum standards for participation, funding, benefit accruals, and vesting;
  • Defines fiduciary responsibilities for the people who manage plan assets;
  • Requires a plan to have an appeals/grievance process for participants to get benefits;
  • Allows participants to sue for benefits and fiduciary breaches;
  • For a defined benefit plan that is terminated, guarantees certain benefit payments.

Fiduciaries include people and companies with discretionary control or authority over a plan’s management, assets, administration, or investments. Overall, fiduciaries must operate a plan in the best interest of participants and beneficiaries; otherwise, they can be subject to court actions and held personally liable.

If you’re not sure if your plan is covered by ERISA or if you’re a fiduciary, the ERISA Fiduciary Advisor – developed by the Employee Benefits Security Administration – enables you to get answers by responding to a few simple multiple-choice questions. Access it by clicking here. (While you’re at it, you may want to check out the other advisor tools the DOL developed for employers, employees and small businesses.)

Among the many responsibilities fiduciaries are required to uphold, providing timely and ongoing disclosure about a plan is a big one, with regular annual deadlines. Click here to see PlanSponsor.com’s 2023 ERISA Plan Compliance Calendar. (Source: PS. 2023 ERISA Plan Compliance Calendar. December 13, 2022. PlanSponsor.com.)

If you are a plan fiduciary, it’s always a good idea to consult an ERISA attorney with any questions. For more information, the Employee Benefits Security Administration has a “Getting it Right – Knowing Your Fiduciary Responsibilities” campaign and website with a variety of resources to help promote compliance, including webinars, tools, and publications.

While you focus on ensuring you meet disclosure deadlines and other ERISA responsibilities that may apply, you can depend on RBT CPAs for accounting, tax, audit and business advisory services. We’re a leading accounting firm in the Hudson Valley and we believe we succeed when we help our clients succeed. Interested in learning more? Give us a call.

Can Your Business Benefit from the Enhanced Alcoholic Beverage Production Credit?

Can Your Business Benefit from the Enhanced Alcoholic Beverage Production Credit?

Along with a new New York State budget for fiscal year 2024 comes an expansion of certain Alcoholic Beverage Production Credits (ABPC), which can be good news for eligible distillers, wineries, and farm-based beverage producers.

Each year, New York State alcohol manufacturers pay an excise tax to the state. This can be offset by filing for an ABPC. Until recently, the credit was the same regardless of whether you manufactured beer, cider, wine, or liquor. It equaled $.14/gallon for each of the first 500,000 gallons plus $.045/gallon for each gallon above 500,000 (up to a maximum of an additional 18 million gallons for beer, cider, or wine and an additional 300,000 gallons of liquor).

For most beers and ciders, the credit equaled the excise tax. For wine and liquor, however, the credit was lower than the excise tax.

Effective immediately for tax years on or after January 1, 2023, under New York Tax Law Section 37, if the following is produced in New York, the ABPC equals:

  • Beer: $.14/gallon (no change).
  • Certain cider products: $.14/gallon (no change). Applies to cider, artificially carbonated sparkling cider, and natural sparkling cider containing more than 3.2% alcohol.
  • Certain wine products: $.30/gallon. Applies to still wine, artificially carbonated sparking wine, and natural sparking wine.
  • Certain liquors containing 2% to 24% alcohol: $2.54/gallon.
  • Certain liquors containing less than 2% alcohol: No credit.
  • All other liquors: $6.44/gallon.

You will still need to pay the excise tax and then file for the ABPC to receive what equates to a rebate. Corporations need to file Form CT-636; all others need to file Form IT-636.

Your business is eligible for the ABPC if you are a registered distributor under Article 18 of the Tax Law and during the tax year produced 60 million or fewer gallons of beer or cider; 20 million or fewer gallons of wine; and 800,000 or fewer gallons of liquor. Certain recordkeeping requirements apply. For details, visit the New York State Department of Taxation & Finance website.

If you have any questions about how the ABPC change may impact your accounting and taxes, please give us a call. We’re RBT CPAs, a leading accounting firm in the Hudson Valley and beyond for over 50 years, and we believe we succeed when we help you succeed. Let’s start today!

Is Your Vet Practice Under the Weather? Maybe the Cloud Can Help

Is Your Vet Practice Under the Weather? Maybe the Cloud Can Help

As an owner and/or manager of a veterinary practice(s), the last thing you need is to add a growing list of IT responsibilities to an already full workload balancing the talent shortage, ever-changing customer demands, and a wonky financial environment – not to mention taking care of animals, their caretakers, and your business. While changing your IT environment may be the last thing on your mind, perhaps you should consider making it the first, as cloud computing solutions help manage and/or address many of the challenges facing veterinary practices today.

Say goodbye to IT responsibilities.

When you move to a cloud (a.k.a. Internet) solution, your web-based solution provider takes on responsibility for keeping the system updated, working at its peak, and secure. You’ll no longer be required to buy, install, and monitor equipment like a server or manually install patches (or pay someone to do it). You won’t have to worry about backing up data, a system going down, or protecting data – that’s all on your provider, too. Rather than keeping an IT person on call, most cloud-based service providers include customer service and IT assistance as part of their fees.

Increase productivity and decrease stress.

Help yourself (and your team, if applicable) cut down on administrative work so you’re free to focus on what you do best – whether that’s boarding animals, providing same day care, and/or running a pet hospital for longer-term needs. Cloud-based software can help you communicate with animal owners; send reminders about visits, care, or prescriptions; bill for services (or follow up on bills); and more. Self-scheduling tools save time for both you and your customers. You can even operate more efficiently by accessing and updating health records and treatment plans within seconds from any examination room with just a few keystrokes.

Better manage finances, inventory, and staff.

Cloud-based services are usually by subscription, so you know how much it costs each month and can budget accordingly. Some solutions include tools that will allow you to perform back-office responsibilities (like billing, payment processing, and collections) while gathering data that can help you analyze different aspects of business (i.e., inventory). What’s more, you don’t have to be tethered to a desk, as cloud-based solutions can be accessed from anywhere there’s an Internet connection and from any Internet-enabled device (i.e., phone, tablet, or laptop).

Prepare to grow.

Cloud-based solutions are oftentimes scalable, so you can add to them, add users, or make changes as your business needs change. Plus, even if you have multiple locations now or add locations in the future, data stored in the cloud can be viewed and updated in real-time from any location.

Making the transition to a cloud-based solution may mean some short-term issues you may want to be prepared for, just in case.

  1. Shop around. There are a wide variety of vet-focused cloud-based solutions available. Consider exploring several options so you can understand the full breadth of opportunities available, evaluate pricing and contracts, and make the best choice for your business.
  2. With the implementation of new software comes new training needs. Support your staff leading up to and through the transition by hosting training to promote their comfort with new software. Also, make sure you have a point of contact at the software provider’s who can be available to answer technical questions, especially during the transition.
  3. Check data for accuracy. Upon transitioning to a cloud-based software, make sure client information and other data transferred correctly (i.e., Did your clients’ open accounts receivable balances transfer correctly?). Data accuracy will be vital to making the most of financial reporting tools. It’s easiest to identify and fix any issues identified early.

While you’re busy considering cloud-based solutions, remember, RBT CPAs is here to help free you up to concentrate on your business. We have been providing accounting, tax, audit, and business advisory services in the Hudson Valley and beyond for over 50 years, and we believe we succeed when we help you succeed. Interested in learning more? Give us a call today!

New Funding Available to Boost Quality and Reduce Energy Costs of Multi-Family HUD Homes

New Funding Available to Boost Quality and Reduce Energy Costs of Multi-Family HUD Homes

On May 11, the U.S. Department of Housing and Urban Development (HUD) announced the availability of new funding through the Green and Resilient Retrofit Program (GRRP). Eligible owners of HUD-assisted multifamily properties serving low-income residents can apply for funds to retrofit solutions that reduce greenhouse gas emissions; increase energy and water efficiency; and boost climate resiliency.

The Inflation Reduction Act provided HUD with $837.5 million in grant and loan subsidy funding and $4 billion in loan commitment authority for GRRP to make HUD multi-family homes healthier, more energy efficient, and more climate resilient.

Funding can be invested in technologies like solar panels, heat pumps, wind-resistant roofing, insulation, low embodied carbon materials, and more. It’s intended to enhance quality of life, while providing safer and healthier living environments and keeping residents safe during natural disasters and extreme weather events.

There are three award cohorts available:

  • Elements Award: $40k/unit or $750k/property. Use funding to add elements to planned renovations that measurably help with climate resilience, energy efficiency, electrification, and renewable energy. For example, install electric HVAC heat pumps, Energy Star windows, fire resistant roofs and clean energy generation systems. HUD expects to make approximately 200 awards with $140 million in funding.
  • Leading Edge Award: $60k/unit or $10 million/property. Use funding for retrofit activities that result in net zero, renewable energy generation, building materials with lower Embodied Carbon, and climate resilience. Complementing the owner’s existing finance strategy, awards enable recapitalization to the highest standards of energy efficiency, emissions reductions, and climate resilience, under programs like LEED and PHIUS. HUD expects to make approximately 100 awards with $400 million in funding.
  • Comprehensive Award: $80k/unit or $20 million/property. Use funding to upgrade properties with the highest need for climate resilience and utility efficiency upgrades, regardless of prior development or environmental retrofit experience. Awardees will have support commissioning property assessments and planning a redevelopment that meets the property’s specific needs and GRRP retrofit objectives. HUD expects to make approximately 300 awards with $1.47 billion in funding.

Funding will be provided in tranches, providing a few opportunities to apply. Funding will be in the form of grants or loans. Additional information and resources are available:

While you’re considering whether to apply for funds, also consider whether you can free up some time by partnering with RBT CPAs for your accounting, tax, audit, and financial advisory needs. We’re a leading firm in the Hudson Valley and our professionals believe we succeed when we help our clients succeed. Interested in learning more? Give us a call, today!

5G Gaining Traction Among Large Manufacturers; Middle Market Companies Are Next

5G Gaining Traction Among Large Manufacturers; Middle Market Companies Are Next

For years now, there has been a lot of discussion about the transformative powers 5G will have on manufacturing and the world. There have also been numerous discussions questioning whether its capabilities have been overexaggerated. As we enter year five of the discussion and transformation, it looks like 5G is taking hold, especially in large companies. Some sources even suggest that companies that don’t start planning for 5G will be at a significant competitive disadvantage in the future.

Admittedly, I am a CPA trying to talk future technology, so bear with me. To take this story forward, I took a step back to get my grounding. First, what is 5G? Literally, it stands for the fifth generation of cellular wireless technology. 1G allowed for voice. 2G allowed for digital voice. 3G allowed for data. 4G brought streaming. 4GLTE allows all the things up through 4G, but faster and better than ever before. Enter 5G, which appears to be a game changer that will take the world leaps and bounds ahead of where it is now.

With 5G, communication will be significantly faster (transmitting data 20x faster than 4G). Everything and everyone will be connected — more machines, objects, and devices (handling 100x more traffic) than ever can operate on the network and perform without issue, making it available to more users and more reliable. The delay in data traveling and an action occurring (latency) will be much lower, thanks to higher radio frequencies allowing data to be transported much faster. And, it supports wireless operations, allowing the imagination to run wild on configuring a shop floor. (Source: Stone, Mark. What Will 5G Cost My Business? Verizon.com.)

So, where does everything else – like IoT, edge computing, robots, augmented reality (AR), virtual reality (VR), automated guided vehicles (AGV), sensors, machine vision, and more – fit in? Wi-Fi just can’t handle all of it or maximize what their combined abilities are capable of; 5G can. It’s basically where everything is going to come together and be able to do all of the things we’ve been hearing about for years. What’s more, there will be more data available to help with decision-making.

As an end game, 5G is expected to transform how work gets done and data gets used, driving productivity, competitiveness, quality, cost savings, and profitability. It will impact virtually every aspect of the manufacturing process, from inventory tracking, facility security, warehousing and logistics inside facilities, and quality control to assembly, maintenance, safety, and even employee training.

In a 2021 study, the Manufacturing Institute learned, “Nearly all manufacturers (91%) believe 5G connectivity will be important to the overall future of their business, with three-fifths (61%) indicating it will be extremely important.” In addition, the study found companies expect 5G to deliver significant value to enable new applications, increase automation, enable AR/VR applications, enable use of mobile robots and AGV, redesign factory spaces and machines, allow for remote line of sight into operations, and decentralize decision making.

As reported by Accedian.com, “One of the most profound properties of 5G is the ability to allocate network capacity to private enterprises. This is network slicing. It gives enterprises the means to set up high speed, low latency connections in a self-contained environment.” The Accedian report includes Analysys Mason data indicating that by 2024 76% of manufacturers will adopt private 5G networks to improve network security, performance, and application.

Metrology News reports “By 2030, more than 50% of the major manufacturers will have 5G implemented on their shop floors.” What about the middle market? The high cost, infrastructure, and talent demands that accompany the move to 5G seem to put it out of reach, for now. Still, there are opportunities for more middle market and smaller manufacturers to upgrade infrastructure in preparation for 5G. For example, adopting multi-access edge computing (MEC) that enables ultra-low latency via wireless technology can be launched on LTE networks today and integrated with 5G later. (Source: Yee, Bernard. How Manufacturers Can Prepare for the 5G Revolution. ATT.com.)

Finally, as reported by RSMUS.com, “While today private 5G networks are not widely deployed in the middle market manufacturing space, we see this marketing growing as companies continue to integrate 5G use cases into their business and look toward digital innovation to maintain competitiveness in the market, offset staffing challenges, and deal with increased labor costs.”

Like I said at the start of this article, I am a CPA, not a technology person. So, please take this information for what it’s worth (and not as advice). However, as a CPA, the RBT CPAs team and I can help you explore potential tax credits for research and development, as well as other potential tax saving opportunities related to your investments in future technology. Interested? Give us a call because we believe we succeed when we help you succeed.

Is Technology Going Too Far, Too Fast?

Is Technology Going Too Far, Too Fast?

Originally, I was going to write about six technologies that are changing healthcare, but as I started researching the topic, I realized two things. One – I’m an accountant not a healthcare professional and no amount of research is going to ever position me to advise a doctor or a medical practice CEO on the latest in healthcare technology – the field is simply too vast and too complicated, and understanding it requires medical education, training, experience, and a lot more. And two – I think Elon Musk may be onto something.

Imagine having a Supreme Court Justice robot using AI to “hear” an important case and rendering a decision based on algorithms that helps it scour and analyze an abundance of historical data…A professional football coach robot quickly analyzes all of the data about the players and teams on a field to predict the next play, counter-play and game outcomes before the first whistle blows….An accounting robot automatically gathering data for tax season, synthesizing it, and generating your filing so it’s in your email for signing without you or any other human doing a thing. Actually, forget that last example. Just kidding, but also not kidding considering where AI is with the release of CHAT GPT, and where it may go.

Seriously, when researching health care technology trends, my heart started racing a bit and I began to give real consideration to Elon Musk’s recent call to pause artificial intelligence (AI) development until we understand it a little more and put some governance around it. What if people start querying symptoms, increasingly use it to self-diagnose, and follow outdated or wrong information?

I have learned when reading and researching topics like this that much of the talk about technology does focus on a future state that doesn’t exist yet, but may become reality sooner than we’d think or like. Even though we’ve been hearing about the potential of AI for years, at this point it feels like perhaps the pace of its development and potential is outpacing our ability to wrap our minds around such radical transformations and their broader implications.

Still, I have an article to write about technology and healthcare. Out of intellectual curiosity, I conducted a little experience. I gave CHAT GPT, the AI technology taking the world by storm this prompt: Write an article about six technologies that are changing healthcare. See below to see the results.

Without looking at the output, I continued working on the article the old-fashioned way, and after “following the story and research” found myself landing in a different place with a different discussion.

I realized there are two types of healthcare technology – one that can fall in the bucket of impacting health and outcomes, and one that falls in the bucket of running a health care related business.

As I said earlier, out of respect for health care professionals’ education, training, knowledge, abilities, and passion, I don’t even come close to being qualified to talk about healthcare technology as it relates to actual care and outcomes. It’s mind boggling to learn about things like using 3D print technology to create hearing aids or replacement joints faster and at lower costs; AR/VR to help doctors practice procedures; or smart bandages monitoring and promoting healing. I can even wrap my mind around technologies enabling collaborations, predictive analytics, data sharing, and care equity while reducing environmental impacts. However, when research starts leading to ideas about cutting out strands of DNA and things of that nature, the discussion is clearly over my head, and one better left to the experts. Still, there is a technology discussion to be had, and it falls into the second bucket: technology developments that are reshaping the business side of healthcare.

HealthcareDive.com reports, “As 2022 drew to a close, several factors suggested that technology adoption was slowing down, including a cooled landscape for digital health funding and a drop in virtual care utilization. In addition, a flurry of cyberattacks and concerns over the privacy of sensitive medical data highlighted the hazards of new technology adoption. Despite this, experts remain upbeat about the potential of technology to improve U.S. healthcare in 2023.”

The article goes onto predict that with so many individual technology solutions in the market, health care organizations are going to prioritize tech investments and strategies to focus on basics, like patient intake, revenue management, physician enablement, care coordination, patient engagement, and data security. Concurrently, there will likely be consolidation and integration among healthcare tech providers.

HealthTechMagazine reinforces a similar thought process, with predictions that 2023 healthcare technology uptakes will largely focus on security, data analytics, and workflow automation. I even came across one story talking about “robots” walking patients to exam rooms and handling the disposal of hazardous materials so medical staff can spend time on value added activities.

Now, I have to admit, after coming to this point in the thought process, I stepped back and looked at the content generated by CHAT GPT. I was pleasantly surprised by the clarity of its writing abilities. While I think it’s accurate, I’m not sure it would add much value to you – the content is pretty basic, and I fathom to guess most people reading it wouldn’t walk away with anything new. So, for now, at least, I’m going to stick to doing my articles the old-fashioned way (even if my son is telling me I’m wrong and it’s because I don’t understand prompt engineering – that’s another discussion for another day).

Now onto simpler things, like if you need accounting, tax, audit, or financial advisory services…You can continue to count on the humans at RBT CPAs to deliver an exceptional customer experience with the highest of ethics. If you’re interested, give us a call. A human will even answer the phone!

Are You Getting Mixed Messages About New York’s Budget?

Are You Getting Mixed Messages About New York’s Budget?

New York has a 2024 Fiscal Year Budget! It comes to $229 billion, a $7 billion increase over last year. After scouring numerous articles to learn more, the main things I walked away with are that there will be a minimum wage increase; no new personal income taxes; no gas hookups in future construction; judges will have a little more flexibility; a handful of inactive charter schools will be reactivated; more people will be eligible for childcare support; the cigarette tax will go up $1; and there are some changes to the MTA. However, it felt like for $229 billion something was missing, so I decided to take a closer look.

I started with New York’s five-year financial plan.  The Executive Summary reviews the state’s economic strength pre-COVID, briefly mentions the pause that occurred on many levels during COVID, and then notes that “States finances, however, have fared better than expected.”

From FY 2020 to FY 2021 – the acute phase of COVID, tax collections declined .6%. By the following FY (2022), tax collections grew by 27% (“equal to about seven years of typical tax receipts growth compressed into a single year”). This year, tax collections are expected to increase by almost $115 billion or almost 10%. There will be a General Fund surplus of $8.7 billion.

The summary notes, “The surplus is used to strengthen the State’s capacity to weather the economic downturn on the horizon.” Some of that money is going into reserves for the future. Some of it is prepaying Retirement Health Trust Fund benefits. Some is for debt recapitalization. The balance is for “prepaying expenses and managing budget gaps.”

So, we will end the FY with a cushion of about $19.5 billion and will have prepaid over $10 billion in future debt service costs from 2024 to 2027. Tax receipts are still coming in strong, but there’s an expected “mild national recession” in 2023.

Financial challenges are expected in 2024 to 2027. Wage growth is expected to slow, decreasing from 3.3% and 4.3% in the May 2022 forecast to 2.8% in FY 2023 and 2.3% in FY 2024. Bonus income will take a big hit, declining 27% in FY 2024 from FY 2022. General Fund tax receipts before the actions in the recently approved budget are reduced by $2.1 billion in FY 2024; $7.4 billion in FY 2025; $7.8 billion in 2026 and $5.2 billion in 2027. Still, it sounds like we’ll be in a good position to “weather the storm.”

Moving onto the Financial Plan Overview, it says the budget addresses three of the most pressing issues facing the state at the start of 2023. Can you guess what they are? Basing my guesses on the Governor’s playbook and media coverage of the budget, I was way off base. The three most pressing issues: the Metropolitan Transportation Authority’s solvency; the State’s health care system; and caring for asylum seekers coming to the State. I’m pretty sure I would’ve noticed those if they had been part of any of the media stories I scoured.

The overview goes on to state there’s a “comprehensive financial plan to put the MTA on stable financial footing”; “substantial new capital and operating aid for healthcare” and a commission looking at how to improve quality while reducing costs; and “extraordinary funding to local governments that are providing services and assisting with the resettlement process for asylum seekers.” There’s also funding for State of the State priorities like mental health, housing, public safety, and SUNY. The overview ends talking about significant projected budget gaps for 2025, 2026 and 2027 due to reduced tax receipts and without using any reserves.

I’m still stuck on what some could perceive to be mixed messages. So, I went to the Executive Budget Highlights and decided to do some math. Based on investments from largest to smallest, here’s where the spending priorities appear to be:

  1. Students and schools: $34.5 billion
  2. Public transportation: $450 million plus $17.7 billion (Note: These numbers do not include $400 million in operating efficiencies expected from the MTA; generate an additional $800 million by increasing the top rate of the Payroll Mobility Tax; and increase NYC’s share of funding to $500 million; share in licensing fees and annual revenue from three possible casinos)
  3. Childcare: $7.6 billion over four years plus $418.8 million in targeted investments
  4. Climate crisis: $5.5 billion plus 2022 Environmental Bond Act spending of $1.5 billion
  5. Healthcare: $2.34 billion
  6. Assistance to asylum seekers: $1.1 billion
  7. Mental health care: $1 billion multi-year plan
  8. Gun violence & public safety: $787.9 million
  9. Economy: $610 million
  10. Housing: $378.8 million

Then I turned to the 2024 Budget Executive Briefing. Page 15 defines three key initiatives as mental health, affordable housing, and public safety. Okay, I had heard those being among priorities. Then I turned to page 31 talking about ongoing infrastructure investments and see that there’s a $52.1 billion capital program for the MTA from 2020 to 2024. I think that may mean that public transportation bumps students and schools from the #1 spot above.

I decide to go back to where I started, skimming the five-year plan and slow down when I come to the section on local assistance, which indicates two-thirds of state spending goes toward local programs (see pages 46 and 47) where the priorities again appear to be education, healthcare, mental health, transportation, and social services.

So, I hoped my article helped clarify things. Just kidding – it looks like you have your hands full. If you need some extra time to get your arms around the budget and what it means to your municipality, RBT CPAs is here to help. Let our accounting, audit, tax, and financial advisory service professionals assist you so you can focus on other priorities. To find out what we can do for you, give us a call.

Residential and Commercial Real Estate Update

Residential and Commercial Real Estate Update

Depending on the type of construction your company does, it’s always valuable to understand what’s going on with real estate so you can consider implications on your strategy and business and make adjustments to plan accordingly.

Norada Real Estate Investments recently issued its 2023 New York Housing Market: Prices, Trends & Forecast for 2023. Comparing February 2022 to 2023, closed sales decreased by 34.3%. Median sales prices dropped 6.3%. New listings were down by 15.8%. Pending sales were down by 8.1%. Home inventory was down by 8.2% (the 40th straight month of a decrease). Days on the market went up by 4.7% (to 67 days).

Then, the New York State Association of Realtors® (NYSAR) released a report on April 20, providing insights through March of this year. The report indicates the housing market was slowing even further when for the 41st consecutive month, year over year comparisons showed inventory dropping across the state. Inventory decreased 12.4%. Closed sales were down 28.4%. Pending sales decreased 11.2%. New listings were down 22.9%. The 30-year fixed rate mortgage was up from February’s 6.5% to March’s 6.54%. Median sales price was down 6.1%.

According to the Norada report, “The New York State housing market is likely to continue struggling in 2023 due to the low inventory of homes and rising mortgage interest rates. However, as the interest rates start to decline, they can increase demand for real estate and raise home prices. The National Association of REALTORS® predicts that interest rates will gradually decrease in the coming months, reaching around 5.0 percent by the end of 2023. This could help boost the housing market by making it easier for buyers to obtain mortgages and increasing demand for homes.”

So far, interest rates aren’t cooperating. According to FinTechBuzz.com, “The slowdown in residential construction is the result of myriad factors, including labor and materials shortages and lingering red tape from Covid-19. But also, interest rates work like gravity; as they rise, they pull asset values back down. Lower asset values translate to lower profit margins. Thus, many investors and buyers are holding onto their money as opposed to pursuing slim profit margins on a single-family build.”

When it comes to the commercial market, FinTechBuzz.com reports, “Demand is also drying up in some corners of commercial real estate, while projects are taking 24 to 48 months longer to complete. A higher employment rate will manifest greater demand for office space, while greater consumer spending power results in more demand for hospitality and retail. Currently, retail and hospitality are seeing reduced demand, while projects like multifamily housing complexes and infrastructure remain promising. While higher rates will still reduce profit margins on such projects, they will likely become the core focus for commercial real estate and construction companies as the government attempts to stabilize inflation.”

As for the commercial market in New York, CostarNews.com reports: “Commercial property sales in New York, driven by a decline in Manhattan, slumped by more than half in the first quarter from the end of last year as higher interest rates and worries about a looming recession seized up lending and investment across the country. The plunge is setting the city up for its worst annual commercial property sales expected since 2009, according to a study from real estate firm Avison Young.”

All of this is underscored by growing concerns about pending commercial real estate debt coming due, with financial leaders sounding some alarms but the Fed holding fast to the position that regional and local banks are in a good position to handle what’s coming. Stay tuned…

While you focus on the myriad of factors impacting real estate and ultimately construction, you can depend on RBT CPAs to focus on your accounting, tax, audit, and financial advisory needs. We believe we succeed when we help you succeed. Learn more. Give us a call today.