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November 4, 2009

Hon. William Stachowski (sent to all members of the WNY state delegation)
New York State Senate
918 Legislative Office Bldg.
Albany, NY 12247

Dear Bill:

The public hearing held by the NYS Senate Finance Committee in Buffalo on November 2 to evaluate the governor’s proposed deficit reduction package was distressing in a number of ways.

First, of course, was the venue – that the Committee chose to conduct its business at a union hall, allowing a specific lobbying interest to host the state’s official business, is a clear indication of where Albany’s priorities lie and is a slap in the face to taxpayers. It’s clear that the Senate Majority’s “public outreach” has been designed to elicit a certain type of response, and the blatant nature of that scripting is insulting.

Second, employer groups such as the Partnership and the Unshackle Upstate coalition are quickly getting used to being the only entities at the various public hearings throughout the state actually supporting cuts to the state budget. Unfortunately, cuts to unsustainable spending are going to have to be made, so, despite our minority opinion, the conversation and subsequent activity will have to turn in this direction.

It is imperative, however, that the right cuts be made to state spending. When the governor released his $5 billion, two-year deficit reduction proposal in October, the Unshackle Upstate coalition called it “a good start,” with a caveat that some of the proposed cuts, such as those to Medicaid and education, could have a disproportionate effect on Upstate schools, hospitals and nursing homes. We acknowledge the governor for addressing the state’s $4.1 billion budget deficit without resorting to raising taxes, but also see definitive opportunities for smarter and more effective cuts. I have enclosed for you the comprehensive list of Unshackle Upstate’s proposed cuts, released on September 23.

Governor Paterson was correct to focus on ways to reduce the state’s spending in its three biggest areas - Medicaid, personnel costs and education. Collectively they represent 67% of state controlled spending:

According to the Citizens Budget Commission, Medicaid spending is expected to grow by 36% over the next three years. This is on top of expenses of $7,746 per beneficiary - a figure that is 67% above the national average and the fourth highest among states. And although New York’s spending tops the chart, its quality of care does not; a 2009 Commonwealth Fund scorecard ranked us 21st among the states in health system performance.

Expenses for compensation of state employees are expected to grow by 24% over the next three years, states the CBC. On top of contractual increases that will take wages up by 13.6% from 2007 to 2011, this growth is driven by New York’s overly generous and costly fringe benefits. Employee health care expenses are expected to increase by 29%, while required pension contributions are expected to grow a staggering 55%. The Comptroller has stated that in 2011 property taxes will rise by 10% simply to cover the under-funded aspect of the state pension.

Education aid to local school districts, a $26 billion outlay, has more than doubled in the past 10 years. Additional increases of another 20% are planned over the next three years. New York now spends 65% more than the national average per pupil. According to the Center for Applied Economic Research more than a third of all other states schools outperform New York’s, while New York spends the most of any State per student. Including Medicaid, New York has found a way to spend more than any one else and get less in return.

Please remember that taxpayers are still reeling from last year’s disastrous Deficit Reduction Plan (DRP) and the 2009-10 state budget, which will cost families thousands of dollars a year in taxes, fees and assessments, and are driving employers out of business and out of New York. The last DRP increased the burden on taxpayers by $1.6 billion, and the state budget increased taxes, fees and assessments by $8 billion.

The Partnership and Unshackle Upstate are concerned that, in addition to non-strategic cuts affecting health care and education, the DRP is heavily dependent on one shot budget gimmicks and backdoor borrowing, such as the $300 million sweep from Battery Park City, the transfer of an additional $43 million from 18-a assessments to the general fund (these revenues should be returned to public utility customers), and RGGI proceed dollars are being swept to the general fund, amounting to a new carbon tax. We do not support these revenue enhancers that mask state government’s addiction to overspending.

On behalf of the 2,500 employer members of the Partnership, I urge you and your colleagues to return immediately to Albany to address the state’s $4.1 billion budget deficit. I also encourage you to take the enclosed document – the Unshackle Upstate recommendations on strategic short- and long-term spending reductions – with you and make these recommendations the basis of your input to Majority Leader Smith/Speaker Silver.

Sincerely,

Andrew J. Rudnick

enc.