“New York State is broke.”
Blunt but not brief, authors of the 77- page “Blueprint for a Better Budget” at the Empire Center for New York State Policy compare the state to a runaway train, “its budget in danger of running completely off the rails.”
Center director E.J. McMahon and Manhattan Institute”™s Josh Barro trace the root of New York”™s deficiencies to excessive and unsustainable spending. According to their calculations, state spending has risen approximately $35 billion (70 percent) in the past decade, unprecedented growth which slowed slightly from 2001-2003 and then continued on course.
“New York state would be spending $21 billion less if budget growth over the past decade had been held to inflation, and $17 billion less if budget increases had tracked New Yorkers”™ personal income,” say McMahon and Barro.
Spending rose as revenue dropped, with most of the $3.2 billion projected deficit traced to shortfalls in tax collections. Despite the shortfall in General Fund revenues, spending is projected to surge over $5 billion in fiscal 2010-11 and by nearly twice that amount in 2011 when federal recovery funds are due to expire.
The blueprint document projects General Fund baseline spending to rise by 12 percent in 2011, including amounts necessary to offset reductions in disappearing federal stimulus funds. Most categories saw double-digit increases, but triple-digit increases in “other general state charges” (138 percent) and “transfers to other funds from capital projects” (122 percent) were on the baseline spending list, as well. Two-thirds of the unadjusted baseline spending growth is concentrated in school aid and Medicaid.
“Do we really need this? Can we afford this? Is there a better way to do this?” were three questions spurred by the cost to provide education and Medicaid, areas where New York spends an average of $6,579 per person versus $4,948 nationally. Had New York budgeted itself at the national per-capita average in 2008, the report states, it would have spent nearly $32 billion less.
Using a study prepared by Evergreen Freedom Foundation, the Empire Center showed how budgeting based on results, rather than raising taxes or cutting important services, is not just pie-in-the-sky thinking. This “budget based on results” model utilized in 2003 by Washington state Gov. Gary Locke can help lay the foundation for responsible state spending, and in any state, including New York, says the report.
Other sectors were scrutinized for significant savings and cost reductions, including:
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? Health: The state”™s Medicaid program, the most costly in the U.S., is proposed to be reconfigured to rein in hospital spending and provide citizens with incentives to spend less. New York accounted for 14 percent of all Medicaid spending, with the state”™s $44 billion budget larger than the total budgets of 42 states. New York”™s Medicaid surpasses California, whose program covers twice as many people.
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Left unchecked, state-funded Medicaid in New York will grow by 37 percent over the next three years, according to projections in the 2009-10 budget prepared by the state Division of the Budget. Medicaid fraud is estimated at 10 percent, while another 20-30 percent was wasted on non-criminal “abuse of the system,” according to a 2005 New York Times report used to support the report”™s findings.
With a national health care plan projected to add $1 billion to New York”™s health care costs, closing just half the gap in Medicaid per-enrollee costs between New York and the national average would save state and local taxpayers an estimated $5 billion a year. Managed care, consumer choice, capping personal care hours, adopting competitive institutional rates, closing eligibility loopholes for certain services, tightening eligibility screening and reducing excessive hospitalization of the elderly, as well as prioritizing optional services, would save the state nearly $2 billion annually.
The report calls for a cap on mental health: With New York spending twice the national average, it recommends a task force based on the Berger Commission”™s restructuring of hospitals to be applied to the mental hygiene sector.
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? Education: McMahon and Barro advocated early intervention testing for parents applying for programs for infants and toddlers.
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Ways for the state to reduce property taxes were proposed, including the property tax cap passed by the state Senate in 2008 and modeled after Massachusetts”™ Proposition 2 ½. Also recommended: a freeze on teachers”™ salaries for three years; repeal of Taylor law provisions that give teachers”™ unions financial leverage in dealing with school boards, including repeal of step increases teachers collect after contracts expire.
The report calls for a repeal in the provision in the Tier 5 pension bill that prohibits school districts from making changes in health benefits for retirees without seeking permission of active employees; reform to ensure schools with tough staff reduction choices can preserve jobs for teachers who meet the highest professional standards.
The Blueprint calls for a cap in STAR (school tax relief) benefits, which McMahon and Barro say have encouraged more growth in school spending by providing a “matching grant” to schools outside New York City. “The state can save $153 million in 2010-11 ($483 million in 2011-12) by capping STAR appropriation for homestead tax exemption and its current level and by raising the age threshold to effectively prevent any growth in the number of homeowners eligible for enhanced STAR tax breaks,” say the authors.
New York is one of 15 public university systems that does not control and retail its own tuition revenues, and only one of four whose contractual expenditures are pre-audited by the state comptroller. The document proposes to grant SUNY and CUNY greater flexibility to set tuition, sell and lease assets and collectively bargain with employees.
Further, the blueprint proposes to reduce general fund support for both SUNY and CUNY by 4 percent in 2010-11 and to freeze support over the following two years, generating a savings of $285 million and growing to $502 million; enacting a tuition assistance program (TAP) to include an increase in the semester credit load from 12 to 15 to define “full time” students; elimination of TAP for graduate students and students in default on federal loans; elimination of an added nursing scholarship and loan forgiveness program; and requiring non-remedial students meet higher academic standards to qualify for TAP.
This is the first of two stories on the “Blueprint for a Better Budget.”
