ICYMI – Transformation, not

ICYMI – Transformation, not
NY’s still-ugly finances

New York Post
By: E.J. McMahon
December 20, 2012

By the time they near the end of their second year in office, it’s not unusual for first-term governors to shift their focus from tackling problems to taking bows – and Gov. Cuomo certainly has been no exception.

Buoyed by record-high poll ratings, Cuomo is crediting himself with nothing less than a transformation of New York – and legislative leaders are happy to echo the claim.

But the State Budget Crisis Task Force yesterday presented a report detailing just how much remains to be done to put New York on a financially sustainable footing. It duly recognized that Cuomo has made significant strides in both reducing and capping state spending in the short term – while also noting the persistence of more deeply seated, long-term problems.

For example:

* New York’s state government “has had a structural deficit, papered over with gimmicks, for decades.”

* The state has been deferring a chunk of its annual pension contribution, effectively borrowing hundreds of millions from its pension fund.

* It faces “staggering” infrastructure expenses that far outstrip its current capital resources.

* It’s very deeply into debt, having regularly sidestepped a constitutional requirement for voter approval of bond issues.

* And, thanks to its extremely heavy reliance on federal Medicaid reimbursements and taxes generated by the wealthy, New York could be clobbered by an impending deficit-reduction deal in Washington.

This isn’t exactly news to Albany watchers – in fact, with a few details altered, many of the same findings could have been issued 25 years ago, when Mario Cuomo was governor. Still, the Task Force provided a sobering and realistic frame for the challenging fiscal issues with which Andrew Cuomo still must grapple.

Headed by former New York Lt. Gov. Richard Ravitch and former Federal Reserve Chairman Paul Volcker, the privately organized, privately funded task force has looked at the finances of six major states. In terms of fiscal messes, the Empire State essentially ranked in the middle of the pack – in better shape than California, Illinois and New Jersey, but not nearly as solid as low-cost Texas or fiscally prudent Virginia.

The task force emphasized the deterioration of county, municipal and school-district finances around the state – pointing out that “fiscal stress runs downhill” and “local governments are badly strained in New York.”

In the case of our schools, the nation’s highest-spending, the governor has (to his credit) now capped state aid while also capping local property taxes. This, the task force said, “puts school districts on notice that they will have to control costs” – costs dominated by employees’ salaries and benefits, which in turn are driven by collective bargaining and personnel rules set in Albany.

Yet Cuomo has ignored the clamor among school districts for relief from state laws such as the Triborough Amendment, which locks in automatic pay hikes for teachers in the absence of a contract. In fact, just hours after the task force issued its report in Manhattan, a state Mandate Relief Council dominated by gubernatorial appointees met in Albany – and refused to classify Triborough or other aspects of employee compensation as cost-driving “mandates” at all.

Meanwhile, the task force also warned – in effect, if indirectly – that state tax policy is on the wrong track.

One year ago, Cuomo was celebrating a special-session deal with the Legislature to temporarily extend a nearly 30 percent personal-income tax hike for individuals earning at least $1 million. Just last week, the governor finally got around to appointing a promised “tax fairness” commission, which could set the stage for making that increase permanent.

In reality, as the task force put it, “Albany has increased [its] dependence on a small group of very wealthy taxpayers to keep the state going, which worsens revenue volatility and budget instability and heightens the state’s exposure to risks outside its control.” Those risks include a federal deficit-reduction deal that is likely to combine higher rates with tight new limits on state and local tax deductions for the very same wealthy households that now pay a hugely disproportionate share of New York’s taxes.

Fittingly enough, the Ravitch-Volker task force unveiled its findings in an Upper East Side townhouse that was once the New York City home of Franklin Roosevelt. Here in the cradle of the New Deal, the cost of state and local government clearly has far outrun the ability and the willingness of New Yorkers to fully pay for it.

If Cuomo can even begin to make these problems disappear, he’ll have accomplished a real transformation.

E.J. McMahon is a senior fellow at the Manhattan Institute’s Empire Center for New York State Policy.

Bazzo 12/20/12

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