If it’s indeed better to give than receive, New York City and its suburbs can count their blessings by the billions of dollars.
City residents and businesses paid about $4.1 billion more to Albany in taxes and fees than the state returned in spending for education, health care, transit and other services in 2009-10. For the near suburban counties (Nassau, Suffolk, Rockland and Westchester), it was $7.9 billion more in taxes than came back in spending, a new study by the Rockefeller Institute of Government finds.
Where did the extra $12 billion go? North and west, up the Hudson River and along the Thruway corridor to Upstate regions that have struggled economically for much of the last half-century.
In fiscal 2010, the Upstate region generated less than 28 percent of the state’s taxes and other non-federal revenues (SUNY tuition, Lottery and other gambling profits, etc.). By contrast, Upstate got a much larger share of state-funded outlays, 42 percent.
Look Downstate, and the ratios reverse. New York City generated 45 percent of state revenues in 2010, but received 40 percent of spending. The gap is even larger for those four suburban counties: a collective 24 percent of revenues paid to Albany and 18 percent of expenditures received in return.
Regional disputes, often bitter, have haunted New York since colonial days. City and suburban taxpayers might take some comfort simply in knowing that their basic sense of the state’s budgetary balance — we’re paying more than our share! — is, by the numbers, absolutely correct.
Upstaters also have a point when they say that Downstate political sensibilities drive up local taxpayer costs everywhere in New York. Thus, the state sets the rules for programs such as Medicaid and special education — helping to make them far more costly here than in most states — but requires localities to pick up much of the cost, which helps explain the Empire State’s extraordinarily high property taxes.
Nor does the apparent imbalance among regions necessarily mean the current division of dollars is unfair.
For a century or more — certainly since the days of Franklin Delano Roosevelt — Americans, and especially New Yorkers, have believed that redistribution of wealth is a central purpose of government. FDR defined the measure of progress itself as “whether we provide enough for those who have too little.”
Thus, Albany will distribute some $20 billion in education aid this year based partly on how many children in each school are poor enough to qualify for free lunch. Individuals’ age and need will help drive more than $50 billion in Medicaid and welfare spending.
On the other side of the ledger, the state’s major source of revenue, the personal-income tax, is designed to take more from individuals who have more.
And not just a higher number of dollars, but a larger proportion of upper-level incomes. In 2008, for example, the typical taxpayer with an income of $500,000 paid about 15 times as much (rather than 10 times) as the average taxpaxer earning $50,000.
By definition, such income-sensitive tax rates and spending formulas redistribute dollars from relatively wealthier people and communities elsewhere — in this case, from the city and its suburbs to Upstate. The balance of payments outlined above comes close to matching regional shares of personal income.
Those who have more, pay more — and get less in return. Most voters seem to think this is, at least broadly, the right approach.
That said, big trouble is brewing in the suburbs that generate so much revenue for Albany. Three of the four counties where residents make especially large transfers into the state budget — Nassau, Rockland and Suffolk — face extreme fiscal stress as a result of elected leaders’ refusal over many years to limit spending or raise taxes. (Westchester has its own challenges, but is in somewhat stronger condition.)
Disruptive times often produce new thinking. Pressure from the suburbs may encourage state leaders to consider a new approach involving more freedom for localities on both the revenue and spending sides of the budget. Albany might allow broader options for local taxes where counties or municipalities so choose — perhaps linking this step to the scheduled expiration of the higher state income-tax rate just enacted. At the same time, the state could make good on its perennial promises of mandate relief, allowing local leaders more flexibility to cut costs as they see fit.
Upstate and Downstate are very different in their economies, and in their giving and getting from the state budget. But all localities in the Empire State have something in common: They need stable budgets, so they can preserve key services at affordable cost. A new fiscal partnership with Albany could be one step toward those goals.
Robert B. Ward is deputy director of SUNY-Albany’s Nelson A. Rockefeller Institute of Government.