The discussion over Governor Patterson's projected State budget cuts and tax increases has started. His plan is being offered to deal with the projected $15 billion budget gap facing New York State in 2009.
On the revenue side, the plan describes tax increases such as a range of 4% taxes on items like itune downloads, taxi and limo rides, movies, concerts, sporting events, cable TV and certain "personal Services," like massages and gym memberships. The Governor also proposed increasing fees at the Department of Motor Vehicle and taxes on beer, soda, clothing and shoes.
On the spending side, the plan describes cuts of about $9.5 billion eventhough the overall budget will still grow $1.4 Billion to more than $121 Billion. Many of the cuts seem to be in the healthcare and education area, which makes sense because these items comprise nearly 50% of the state's overall expenditures. Also, the Governor is asking state workers to give up a 3% wage increase for the upcoming year and defer one week's pay.
Surprisingly omitted from the Governor's revenue proposals are tax increases on the rich, which I would argue is a negotiating tactic, at best. There is little doubt that such a tax increase will be ultimately part of this plan. Assembly Speaker Sheldon Silver has expressed significant interest in this action for months now and I doubt he will put aside this important part of his wish-list when the "three men in a room" sit down about this proposal in the next few weeks.
On the other-hand, surprisingly again, a part of the Goveror's proposed spending reduction plan is a change in the State's public worker's pension program, which includes reducing benefits for new hires, increasing the minimum retirement age from 55 years of age to 62, asks for employee pension contributions and proposes increasing the minimum years on the job a worker must work to start collecting a pension from the State from 5 years to 10.
Although the road to enact these changes to New York State's finances is a long one - as many of the interest groups losing funding and adocates for a variety of issues are already starting to cry foul - these draconian moves appear necessary on the surface at this exact moment in time. The state just does not have the resources in the pipeline to pay for previously planned 2009 expenditures and, to the Governor's tremendous credit, he's proposed very important pension and state worker reforms that can and will save taxpayers exponential amounts of funds in the out-years of this plan.But this proposal, as necessary as it is, will be a hard pill to swallow.
The average New Yorker will be forced to pay more in taxes, pay more for public services and recieve less overall benefits from the State of New York. This at a time when many residents are losing their jobs, fighting to keep thier homes from going into foreclosure and, in general, are falling further behind the economic-eightball. If there is no way to avoid these painful measures in the present, it is then one of the most critical jobs for our lawmakers in Albany to conceive of ways of avoiding the same situation in the future.
The Governor has made a good start by proposing to reduce the pension liability facing the people of New York and by asking state workers to foregoe a wage increase at a time when many New Yorkers are losing pay and jobs across-the-board. He also has scored points by proposing to cut an already overly generous funding stream for the State's hospitals and schools - funding that is often squandered by both the union representing workers in healthcare and education. This is a good start, but much more needs to be done.
For decades, New York State, and City, have been proverbial pawns in the budgetary chess match. The King is this game is the "boom and bust" Wall Street economy and the tax collections, or lack-there-of in this case, that are intertwined with the financial world of Downtown Manhattan. Therefore, the most important action New York lawmakers can take today, besides balancing the 2009 budget properly, is to come up with a plan to handle the negative ramifications the cyclical nature of New York State's economy has on government budgeting. To accomplish this task, the state, and city's, insistance on an annual "balanced budget" needs to change.
Going forward, the State should be able to reserve billions of dollars during the boom periods on Wall Street specifically to cover the gaps created during the bust periods. I would suggest proposing legislation that enables a rainy-day fund that can only be used during times of economic contraction. The determination of such a time can be made fixed to a definition of a certain number of quarters of recession or certain levels of economic activity. The key to this proposal would be that there would be no way for the greedy lawmakers in Albany to touch these funds in other situations. This move would ensure that New York doesn't have to make such radical moves in both spending and taxation during the next tough macro-economic period.
Secondly, everyone recognizes that the uncontrolled growth in government spending over the last two decades is the central problem facing Albany today. Governor Patterson took the time to accurately discuss this fact when he said, "Unfortunately, we have lived beyond our means...We have to recognize that we've made too many promises and unfortunately asked for too few sacrifices. We are going to have to change our culture as we know it." Sobering words from a Democrat in the most fiscally liberal state in the union - words I wish would have come out of the mouth of a Republican.
(Coincidentally, the GOP's leaders are reacting in an opposite manner to the Governor's proposal. State Sen. Marty Golden (R-Brooklyn) was quoted in the NY Post today as saying, "The pain in this budget seems to be strictly for the middle class...You name it, [Paterson] taxes it. If anybody's contemplating leaving the state of New York, this should push them over the top." He may not be wrong in his assessment of where the pain will fall in this budget crunch, but where was he and other Republican leaders when the GOP was running the State Senate and Pataki and Bruno were spending like there was no tommorow?)
Therefore, to deal with the out-of-control inclination for Albany legislators to spend beyond OUR means, a provision should be added through referendum to limit the growth of State spending to the rate of inflation with a provision that the public can over-ride that limitation in a particular budget year if another referendum is passed. Even-still, that second referendum would only allow Albany to raise spending 2% above the rate of inflation. A measure such as that will force Albany to live within it's means during both good times and bad.
Lastly, there needs to be a committment in the legislature and the Governor's mansion to reduce state expenditures when times are good. One of the key problems with our state's largesse is that we spend when times are good because we have the free resources and we spend when times are bad because there is such a "public need." Essentially, our budget policy only goes in one direction - UP.
Thererfore, for the State to become fiscally solvent for the near and far future, a new movement needs to arise from the people of New York. I would hope, and will work dilligently to see it happen, that the Republican Party and the candidates we select to represent us electorally will be cut from that cloth. Small government is the bedrock of this nation. New York is, arguably, America's most visable and influential State - both here and abroad. The Empire State should have a delegation of office-seekers and elected representatives who understand that recklessly spending beyond our means today leads to economic and personal calamity in the future.
Governor Patterson deserves much credit to date for the effort he is making for the future of New York State - both through legislation and through the bully-pulpit. We will see in the next few weeks whether this is just political posturing or a real effort to change the fiscal state of the State. Either way, New York needs budgetary and fiscal reform. For all our sakes, I hope we will get it this year and the next legislative session.
TrackBack URI for this entry
Subscribe to this comment's feed
written by swmirsky , December 18, 2008
All good proposals Jay, and long overdue for this State. I would add the need for a zero based budgeting process (where every program and state agency needs to justify every budget dollar requested annually) as well as a sunset provision for discretionary programs with the possibility of renewal only if the case can be made. There also needs to be more transparent budgeting so that dollars can be traceable to their end users and not disappear into a dark bureaucratic abyss.
More, we need to get borrowing authority returned to the legislature and voters by ending the reliance on various semi-independent bond-issuing "authorities" at the state and county level which have the ability to issue debt without approval of voters in referendum but which the state remains on the hook for anyway (in much the same way as the feds were on the hook for Fannie and Freddie debt despite their alleged non-governmental status).
The reliance on off-the books borrowing is a ticking time bomb in New York, just as Fannie and Freddie were for the nation and it is NOT too soon to start addressing that. This reliance allows our state lawmakers to spend without accountability because of the unrestricted borrowing of these presumptively non-governmental entities, thereby raising our obligations and debt service costs.
State taxpayers face a huge bubble that everyone seems to have forgotten about. New York has to cease its big spending, high taxing ways because eventually you just can't tax enough to buy your way out of real economic problems as the recent nationwide fiscal and economic crisis is telling us.
Alas, the real problem is that these kinds of issues don't register with voters who pull the lever in the voting booth for familiar names and faces and out of short term self-interest, without any real regard for structural and operational soundess of the government they are electing representatives to run.
SWM
written by Jay Golub , December 18, 2008
"Alas, the real problem is that these kinds of issues don't register with voters who pull the lever in the voting booth for familiar names and faces and out of short term self-interest, without any real regard for structural and operational soundess of the government they are electing representatives to run."
Stu, you need to have some hope - to coin a phrase.
The GOP can offer the message you alluded to and it can be successful in doing so. Republicans just need to commit to that type of message - both in good and bad times.
Resisting massive spending increases when the economy is flourishing and government budgets are overflowing with funds is the key to New York's economic future.
New York is blessed with a unique funding stream. The fact that we can't live within our means is a joke and politicians like Bloomberg who claim to be financial experts should be able to plan for the cyclical nature of our tax collections. Mayor Mike failed miserably in this regard and deserves to be thrown out of office for it.
But the GOP shouldn't take the present administration as an example of what "works" for NYC and should get back to it's roots, supporting a smaller more efficient government that manages its business at the most local level possible.
Sadly, at the time when the city, state and Country needs the GOP's central principles, they are no where to be found. Unfortunately, these principles have been sold off by our President, our last majority leader in the House, our last governor and our present and past State Senate leadership and, last but not least, our city's Mayor.
For any progess to be made in getting our budget woes under control, a true and effective opposition party needs to exist. The GOP needs to step back into that role and can only do so by supporting innovative and fiscally conservative programs...
written by spunky , December 21, 2008
NY's budget is a mess because we overspend. I agree that the first and only cure for our problems is reduce spending over the course of time, but make it mandated.
On the other side, most people don't even know how or why the sales tax exists or other taxes. They can't even calculate it on a transaction. They don't know what items do not apply to it. it's all a distraction.
written by Jay Golub , December 22, 2008
That is why, Spunky, some usage taxes may be one of the answers to NY's fiscal woes.
Take for example the MTA. Only a fraction of the overall costs of public transportation in NYC comes from the farebox - a much lower level than most cities here and around the world.
If people paid more to get onto a subway or bus, they may be more demanding of the service and they may hold the MTA more accountable for the quality of service. More specifically, if the 2nd Avenue line was paid for directly by the commuter, they may deem it unnecessary because it's too expensive. But if mortgage transfer taxes and .375% sales tax surcharges keep paying for a large chunk of the system's expenditures, than people don't see the money coming out of their hands, essentially making them incorrectly feel like "they" are not paying for it.
This is true for the roads, bridges, etc...
Now i'm not proposing a toll on the bridges under the present circumstances and i'm not proposing increasing the fares for the MTA. I would support a transfer of liability from indiscrete tax collections to the farebox only if the system could demonstrate that they not collecting more than they were before. With the system in disarray, I doubt it's a good time to try to accomplish this...
written by Jay Golub , January 07, 2009
http://www.nypost.com/seven/01...htm?page=0
great piece by Stephen Kagann on the effect of tax increases historically on NYC's budget and economy.
"The special interests are now running TV ads claiming it is "fair" to tax those earning over $250,000 and give the money to them.
Yet the so-called "rich" are employers and investors. The public may buy the pitch that we're not taxing you, just your boss - but only because few realize that "tax the rich" means perhaps a 15 percent chance of losing your job."
NY State can't afford to follow the path of the past...
written by Jay Golub , January 07, 2009
http://www.nydailynews.com/opi...ent_a.html
Good piece on Brennen Center reform proposals and past actions on previous reccomendations.
"The good news is that the Senate Democrats, who fully embraced every call for legislative rules reform while in the minority, may take control of the Senate in the coming days. Last year, Senate Minority Leader Malcolm Smith introduced a one-house resolution that included many of the rules reforms recommended by the Brennan Center. The measure failed along a party-line vote. Smith, the likely incoming leader of the majority, has expressed a commitment to rules reform. He has repeated that commitment, publicly, on several occasions. We hope that ifthe Senate leads on rules changes, the Assembly will follow."
It will be interesting to see if Malcolm Smith actually follows through with reform measures now that he's majority leader. I would put my money against such an outcome and if the Dem's can find a way to do this, the GOP will be left out in the cold on an issue that was in their control for the last few years...
| < Prev | Next > |
|---|
