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Governor Paterson’s proposed 2009/10 state budget – a wake-up call for reform
December 19, 2008

We continue to give high marks to the governor for taking the state’s financial problems and the difficult decisions that must be made and address them head-on, now by presenting his 2009-10 budget a month earlier than required, and more-or-less holding the line on spending (only a 1.1% increase, as opposed to 6%-8% typically). However, the details in the document presented earlier this week contain $3.1 billion in dozens of far-ranging new and increased taxes, fees, assessments and fines, decimates a key economic development program and so far misses this extraordinary opportunity to reform the way Albany operates.
 
The governor’s budget proposal lacks structural changes, reform and creative solutions – relying on a host of new expenses to employers and families, raising taxes and fees on seemingly everything thing the state that could possibly be taxed or fee-ed. By now, you’ve likely heard through the media about new taxes on non-diet soda, movie tickets and auto rentals, and the impositions on business are equally as onerous – starting with increased utility assessments ($651MM) and health insurance taxes, surcharges and assessments ($885MM).
 
Moreover, there is grave concern regarding the governor’s proposal to revoke benefits for current Empire Zone recipients that do not demonstrate a new 20:1 benefit-cost ratio – which was not in place when they received the benefit for the real investment they made. This reneging of existing contracts not only is “bad business,” but it sends an awful message to prospective future business investors. We’ll be the first to point out that the Empire Zone program needs reform, both to make it more fiscally responsible and to ensure that taxpayers’ money is being spent in the most strategically beneficial way – i.e. focusing incentives on companies in target industry sectors, rather than emphasis on location; but if the current overregulated business climate, and the host of new taxes and fees proposed this week aren’t enough to scare business away – this certainly spotlights the state’s uncompetitive business climate.
 
What’s absent from the budget proposal are reforms that Unshackle Upstate has been calling for since its inception – reform of Taylor Law and repeal of Wicks Law. In fact, Wicks Law reform is included in the budget proposal – raising the threshold for New York City from $3M to $10M while keeping Upstate’s at $500,000. Though it does include a 5-year moratorium on Wicks Law for school construction statewide – a good start.
 
There are, of course, some good points, and we hope that when the legislature begins to dissect this budget proposal, they are not lost in the shuffle. The governor proposes definitively reducing the size of the state workforce by streamlining government; creating a Tier 5 of pension benefits for state and local employees; and at least curtailing an increase in Medicaid spending – though the state’s total Medicaid budget will still total $45.4B for 2009-10 (the Medicaid numbers can only be labeled as “tentative,” however, as the proposal also suggests easing requirements to access the program, virtually assuring a greater number of participants and higher costs).
 
Importantly, with the Obama federal stimulus package on the way to New York State, special interests are already lobbying to ensure that aid from Washington is used – not to reduce this catalog of increased taxes and fees – but to refill any cuts! That’s the world in which we live. As the proposed budget (and stimulus package) comes before the legislature, we will need to be equally as loud that the only way out of this financial crisis is a wholesale change in the way Albany operates.
 
In the midst of all this, it is important to remember that the governor’s budget proposal is just that – a proposal. Hopefully the legislature will understand what we still believe the governor’s platform to be: without fixing the broken system in Albany (as he requested legislators do in August and then again in October), the proposed budget entails the heavy-handed measures the state will have to take.
 
The governor has successfully highlighted how costly the status quo can be – and we look to the state legislature to take that outlook and use it for real change. Rest assured, we’ll be calling on you shortly to get involved.

 
Andrew J. Rudnick
President & CEO