When it comes to budget problems, the story never changes in New York.
While revenues are rolling in during good economic times, elected officials spend like drunken sailors. When the economy falters, well, they still spend like drunken sailors.
Assorted tax increases follow, like the big hikes passed last year, which only make matters worse by chasing people and businesses away from the state. And when things reach so-called crisis levels, budget gimmicks are dressed up as serious reform.
That’s where we are now. With state budget deficits projected at $9 billion for the budget year starting on April 1 and tallying up to $60 billion over the coming five years, Lt. Gov. Richard Ravitch is turning to flimflammery. That includes $6 billion in additional borrowing to cover operating expenses over the next three years, and a toothless financial review board appointed by the very political leaders who have gotten the state into this mess.
As for the real problem — out-of-control government spending — Ravitch says it should be cut, but offers no suggestions. In fact, Ravitch argues for more borrowing because, as he put it, “It is not in my judgment possible to cut $9.5 billion out of this budget this coming year.”
Really?!
Nothing like giving up before you even try. It isn’t hard to figure out that cuts can, and should, be made to the state budget this year:
* Put an end to the various programs, departments and handouts that fall under the umbrella of government “economic development” schemes that amount to nothing more than taxing businesses in order to dole out favors to politically connected groups. Gov. Paterson’s budget proposes merging the Empire State Development Corporation with the Department of Economic Development to form the Job Development Corporation. A better idea would be eliminating these bankrupt programs ($178 million in 2009-10 appropriations), and privatizing whatever assets they control. After all, the only reliable economic development tools are low taxes, a light regulatory touch and limited the size of government.
* In addition, the stated mission of the Division of Housing and Community Renewal ($899.5 million in 2009-10) is “the supervision, maintenance and development of affordable low- and moderate-income housing in New York State,” including overseeing public housing, administering rent control regulations, and doling out subsidies. But since the private sector is more than capable of building affordable housing for all levels of income if allowed to do so by the government, this is another area of state government that needs to be eliminated.
Moreover, why is the state in the business of running Olympic facilities, along with the Gore and Whiteface Mountain ski facilities? Close up the Olympic Regional Development Authority ($8.2 million in 2009-10), and privatize them.
* For good measure, get the state out the arts handouts business by eliminating the Council on the Arts ($53.8 million in 2009-10). This amounts to little more than welfare for the well-to-do.
* Of course, there is New York’s notoriously lavish public support system. Just consider Medicaid spending. In 2007, according to data from the Kaiser Foundation, New York’s total Medicaid expenditures were highest in the land — $44.3 billion. Texas was less than half that amount, even with 4 million more people than New York. Florida, with a population just a shade smaller than New York’s (yet older), had Medicaid expenditures less than a third of New York’s. The program needs to be dramatically restructured, including paring back on the optional services offered in New York.
For example, the Empire Center for New York State Policy notes: “The most costly of the optional Medicaid services is ‘personal care,’ a category of in-home assistance including personal hygiene, dressing and feeding. At $24,762 per recipient, personal care expenditures were 234% of the national average in 2008.”
* As for the number of government employees, they not only need to be reduced, but New York has to move away from public-sector defined-benefit pension plans (guaranteed income based on longevity and salary), with costs accelerating at a frightening pace, and shift to the defined-contribution, 401(k)-style plans that most private employers offer.
This handful of ideas barely scratches the surface of savings that can be found in New York’s wasteful, bloated government. Keep in mind that, according to the US Census Bureau’s latest 2008 data, per capita state spending in New York topped the US average by 41% — $5,709 nationally versus $8,076 here.
On the larger scale, New York needs new rules for the budget game that will serve as much-needed checks and balances.
For example, according to the National Conference of State Legislatures, 13 states have legislative super-majority requirements (three-fifths, two-thirds or three-quarters) in order to raise taxes. And some kind of spending checks must be put in place, such as limiting spending increases to the combined rate increases in state population and inflation, with any larger spending hikes subject to voter approval.
Will we ever make such necessary, fundamental changes in how the government does its budget business? Not with the current crew of politicians. But let’s be clear: Without getting serious about doing so, New York’s death cycle will never be broken.
Raymond J. Keating is a Long Island-based economist and writer.