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"Deficit-reduction" - Heavy on taxes; nonexistent on reform
February 11, 2009

The state's "deficit-reduction" package (DRP) passed last week demonstrated that not much has changed in Albany. In fact, without an Upstate voice or even a "customer" involved in the decision-making process, it feels as though it's gotten worse. At the very least, employers and every other taxpayer have to be disappointed. Again not only in the way the legislation was passed, but also in the end result. This is especially the case with the Paterson administration which up to last week has been so on the mark with what has to be done.
 
In that context, we've been evaluating the DRP in two ways - what's in it, and what isn't. As bad as new taxes and cost-shifting are, what's worse is the continuing lack of reform measures. While generally we do not expect to see reform coming out of Albany, it's especially troubling that even the current and projected huge budget deficits don't seem enough to get state government to buckle.
 
Some of the most onerous pieces of last week's deficit-reduction package are:

• New health insurance taxes and cost-shifting in the amount of $420MM, which actually is a double-hit on taxpayers. Rising insurance costs will make health insurance unaffordable for many employers and working New Yorkers, which will increase the load on Medicaid. This action was taken despite the urging of many groups around the state (including the Partnership) to wait for Washington's economic stimulus package before acting rashly.
• A transfer of $306MM from the New York Power Authority (NYPA) to the state's general fund - money that was in part designed for low-cost electricity through the Power for Jobs program. That amount could balloon to over $750MM in the next year. This is potential "economic stimulus" money that Upstate New York is seeing essentially stolen away - as you know the Partnership has long advocated for these NYPA proceeds be used for economic development within a 30-mile radius of the Niagara Power Project, including within the 2009 Regional Agenda.
• Pilfering of $61MM of a recent SUNY tuition hike into the state's general fund - money that was agreed to by SUNY's student government for the purpose of reinvestment in the system.

Absent from the DRP were state spending reductions, reform of excessively costly programs such as Medicaid, and other changes in the way Albany does business. In fact, according to the Albany Times-Union (Feb. 4), pet project spending such as $25,391 for the Capital District Gay and Lesbian Community Council and $5 million for the Hudson-Fulton Champlain Quadricentennial celebration remains. The overused phrase "everyone will have to feel some pain" has not been followed up with action - in fact, state government, itself, as well as the Albany special interests appear to have weathered the deficit reduction "storm" unscathed.
 
Which raises, of course, a critical point moving forward - is the "pain" that "everyone will be feeling" at all a responsible long-term fix to Albany's problems? Some of the painful measures might be more tolerable if we were assured they were a true and effective response to the problem. However, without a doubt, that is not the case - raising taxes without reform may mitigate the state's financial woes for today, but will only leave us revisiting the same problems in the future. Albany must take this opportunity to make real, cost-saving reform.
 
All of this raises additional concern that Washington is already worried that states such as New York will use stimulus money coming from the current legislation to fill gaps in state budgets, rather than putting people to work. In fact, we are in Washington DC this week, leaning heavily on the WNY congressional delegation to put pressure on Albany that stimulus discussions are not steered by a downstate "three men in a room" philosophy.
 
Please join us in expressing your disappointment with Albany's actions last week and urging real cost-saving reform by clicking here to send a message to the WNY state delegation.

Andrew J. Rudnick