Don’t stop thinking about tomorrow. Don’t stop, it’ll soon be here.
Eighteen years ago, Bill Clinton made that the theme song of his successful run for the White House. The theme plays to one of our deepest desires: the hope that we’re making a better tomorrow for our kids.
Gov. Paterson is reprising the song in the budget he delivers to the Legislature today. If left on autopilot, New York’s status-quo spending trends would outpace projected revenues by something around $6 billion in the coming fiscal year. Even in a large, high-cost state like New York, that’s a big gap that requires serious thinking and action — as the governor has said repeatedly.
Yet the budget problem for the fiscal year that starts April 1 is only a fraction of the gap that the governor and Legislature will have to close next year.
That’s where “don’t stop thinking about tomorrow” comes in.
The latest official estimate from the state Budget Division shows a veritable chasm — a $14.8 billion gap — between trend-line spending and revenues for fiscal 2011-2012. No one, in Albany or any other state capital, knows how to close a gap that size without undesirable tax hikes, service cuts or borrowing and budget gimmicks that shift today’s costs to tomorrow’s taxpayers.
The Legislature could impose a 10 percent surcharge on all personal income taxpayers, raise the sales tax by 2 cents on the dollar and cut school aid by 10 percent — each one pretty much unthinkable for any elected official — and still have to find a couple billion bucks more.
The state last faced a similar problem in 2003, after a recession and the devastation of the 9/11 terrorist attacks had knocked revenues down, while spending kept rising by two times the inflation rate or more. The Budget Division projected a $9 billion hole in that year’s fiscal plan.
Lawmakers solved that one with a combination of “solutions” that are either unavailable now, or would be rejected by most policymakers and voters.
Notably, they securitized New York’s share of a national settlement with tobacco companies — turning payments of $1 billion or so each year into a $4.2 billion lump sum. In effect, they took revenue originally intended to balance budgets over the course of decades (including this year’s) and used it to reach short-term balance. This year, no such multibillion-dollar pot is at hand.
The 2003 budget also imposed a $1.6 billion income-tax increase on upper-income earners, bringing the top rate to 7.7 percent. But this time around, the state is already drinking from that well, having raised the top rate to 8.9 percent as part of last year’s budget fix.
Of course, tax rates can always go up still further — but no one in Albany is suggesting another hike from a rate that’s at the highest level in 25 years. Even some supporters of previous increases believe a double-digit rate would be economically damaging and add more volatility to the state’s erratic revenue stream.
Other gap-closers in the 2003 budget included a $460 million increase in the sales tax, several hundred million dollars of new business taxes and $150 million in new gambling revenue. Such steps might be politically achievable again — but few would consider them desirable.
On the spending side, the 2003 budget made some relatively modest reductions; school aid was trimmed by $200 million, or 1.4 percent, for example. Partly as a result of those reductions, school property taxes across the state rose that year by an average 7 percent.
After all that, the 2003 fiscal plan left a budget gap of $5.7 billion for the next year. State leaders have, to one degree or another, rolled over such gaps every year since.
The budget Paterson recommends today will also include unpopular steps — but would likely avert far more damaging options in coming years. It would achieve that goal by moving to stop the rollovers and starting to put the state on a sustainable path.
We’re a long way from there now. Maybe it’s time to start thinking about tomorrow.
Robert B. Ward is deputy direc tor of the State University of New York’s Nelson A. Rockefeller Insti tute of Government.