THE most noteworthy aspect of Gov. Pater son’s news confer ence yesterday wasn’t the detailed breakdown of his $2 billion in proposed changes to close a projected shortfall in the current state budget. It was his effort to make sure New Yorkers realize that many of the “cuts” he’s seeking aren’t cuts at all, but reductions in a rate of spending growth the state couldn’t afford in the first place.
And it was his continued rejection of an across-the-board in- come-tax hike – which, he explained, would actually lead to further shrinkage of the tax base.
Paterson’s straight talk is a refreshing contrast to the mushy evasiveness of George Pataki and the preening self-righteousness of Eliot Spitzer. And it’s the furthest thing from the cult of fiscal victimhood promoted by Mario Cuomo during the crisis of the early 1990s.
Like Cuomo nearly 20 years ago, Paterson could have appealed to his political base by simply blaming New York’s budget gaps on the economic policies of a GOP president named Bush. Instead, without downplaying the crisis-triggering impact of broader economic factors or Wall Street’s virtual collapse, Paterson consistently cites Albany’s own fiscal irresponsibility – in which, of course, he shared as a member of the Legislature for 21 years before his election to statewide office.
“This is the result of our increased spending over years and years. And now the downturn on Wall Street, which has bailed us out for a number of years. And now the well has run dry,” Paterson said yesterday, in as pithy a description of the problem as you’re likely to hear from any longtime Albany insider.
The numbers bear him out. Adjusting for inflation, the state will spend $17 billion more this year than it did in 1998-99 – even if all of Paterson’s proposed changes are adopted.
Closing next year’s projected $12.5 billion gap is a matter of rolling back two-thirds of the real increase in state spending that has occurred since Pataki began the second of his three terms a decade ago.
Unfortunately, for all the doomsday headlines and special-interest caterwauling that will greet his latest emergency budget-reduction plan, the governor’s proposals don’t go nearly far enough or fast enough in some areas.
In seeking to reopen labor contracts with state employee unions, Paterson has reached out and touched one of the capital’s hottest third rails. Too bad he’s doing it so gingerly – asking the unions to consider a pay freeze, a modest reform in health insurance for future retirees and a gimmicky paycheck “lag” that will yield only one-time savings.
The governor needs to do a better job of framing the workforce issue as a choice between the contractual status quo and massive layoffs. Avoiding disruptive cutbacks will require significant reform of work rules (for example, a shift from a 37.5-hour to a 40-hour week); greater flexibility for agencies in hiring, firing and promotion, and larger employee contributions to retiree-health benefits than the governor has been willing to suggest up to this point.
In asking school districts to cope with less than they anticipated – on average, a 5 percent, rather 9 percent, aid hike – Paterson still isn’t offering the kind of mandate relief districts are justified in demanding.
His proposed Medicaid savings would be achieved mainly through blunt cuts in reimbursement rates and – worse – counterproductive cost-shifting to the private sector. He’s generally not attacking the structural factors behind the high cost of Medicaid or of health care in general in New York.
All these issues (and more) must be tackled much more effectively in the governor’s 2009-10 budget, due for presentation in mid-December.
From a wobbly start in tough circumstances eight months ago, Paterson has earned the credibility to push harder for bigger budget savings and more fundamental reforms – through his unstinting willingness to honestly confront Albany’s role in the crisis.
The governor says he needs at least $1.5 billion in reductions to balance the budget for the current fiscal year, which ends next March 31. But with the state Senate facing a transition from Republican to Democratic control within two months, achieving any real budget savings before the end of this year will be a very tall order.
At the very least, Paterson’s straight talk has highlighted the increasingly higher stakes of failing to act soon to clean up the mess.
As he put it yesterday, “We’re not going to get out of this quagmire we’ve built until we reduce our spending.”
E.J. McMahon directs the Manhattan Institute’s Empire Center for New York State Policy. ejm@empirecenter.org