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Financial industry fallout demands state spending cuts, reforms
September 23, 2008

The Wall Street/mortgage and investment banking rollercoaster ride of the last few weeks, while inevitably having a few more (and probably big) loops to go, certainly is extending – at least in New York State – the economic problems of a national/international recession… And it’s doing so as the 2008 federal and state elections campaign season kicks into its highest gear.

While I have no crystal ball as to what future business economics generally will look like (and I strongly suggest disbelieving anyone who says he or she does!), the current situation brings the state’s already troubling budget deficit forecasts even further to the forefront of being a huge problems needing solutions now. With approximately 20% of the state’s tax revenues relying on Wall Street, cutting state spending must begin now. Moreover, cuts need to be connected to thoughtful reforms of the programs and policies which cost New York State so much money.

Even from before the news of the past two weeks, the Partnership and Unshackle Upstate strongly have supported the very responsible posture Governor Paterson has taken regarding curbing state spending; a posture which led to the state legislature last month agreeing to $427 million in budget cuts, and which is even more applicable now.

The state’s solutions for curtailing its expenses must not include shifting costs to local governments. State mandates already make local property taxes too high – which is why the Partnership and Unshackle Upstate are actively in support of Governor Paterson’s proposed property tax cap. We also are pleased to see that Erie County Executive Collins has joined with his counterparts to form an Upstate Mandate Relief Commission, charged with assessing the costs of all unfunded state mandates.

Another unacceptable solution is “revenue enhancements” (which we in the business simply call “taxes”). State and local taxes already have put Upstate businesses in an uncompetitive position, and now with the loss of revenues from recent recession-like dynamics, our businesses cannot afford to take away from their fragile bottom line expenses to support continuing government overspending.

So, what can be done?

First, the state legislature must continue down the path laid out by Governor Paterson to curb spending by cutting and reforming the state policies and programs which require that spending. There continues to be discussion of reform of labor-backed regulations that cripple our economy. “Untouchable” items such as Taylor Law, Wicks Law and the Triborough Amendment are some of the largest expenditures that state and local taxpayers face, but provide some of the greatest opportunities for taxpayer relief. While visiting Buffalo yesterday, the governor indicated he may need to call the state legislature back into session “to establish a consistent, overall plan for the reduction of this budget.” We strongly support that call, as it can be a call for necessary changes in Albany philosophy.

Second, major institutions – in particular, health care institutions – which significantly have depended on their investment earnings to underwrite their operations, will not have those earnings (at least for a while). Thus, the completion of Berger Commission reengineering mandates is more important than ever, especially for our region.

These are the points that I urge you to stress with candidates for state legislature as Election Day approaches.

Andrew J. Rudnick
President & CEO