Billions in red ink on the state ledgers and entrenched obstacles to doing business here are finding sharper focus now that New York”™s always-contentious budget season nears.
A joint report issued last month by the state Division of the Budget, Senate and Assembly, predicted a $4.3 billion budget gap in 2008-09 and a $6.2 billion deficit the following year, based on current projections.
“It was generally agreed that the state faces a period of economic uncertainty that has the potential to present challenges to state finances in 2008-09 and beyond,” the report reads.
“I think there”™s a lack of political courage to get into the issues that need to be dealt with,” said William Mooney Jr., president of the Westchester County Association.
Mooney said factors such as the high number of taxing entities, Medicaid costs, and collective bargaining laws that favor unions need to be addressed in order to retain and attract business to the state.
And these factors also contribute to the state”™s high property taxes, which make it hard for New York, particularly upstate, to attract young professionals, he said.
Some of the issues have begun to be addressed by Gov. Eliot Spitzer, he said, such as the Commission on Local Government Efficiency and Competitiveness he formed to look at consolidating some of the state”™s nearly 7,000 taxing districts.
Mooney also said the worker”™s compensation reform Spitzer brokered earlier in the year was a step in the right direction.
In March, the governor and legislative leaders announced a worker”™s comp agreement between business and labor leaders designed to lower the cost of workers”™ compensation insurance while increasing the weekly benefits for workers.
“But that”™s only the beginning,” he said.
Regarding the projections of budget deficits, Mooney said business owners will simply look at it as par for the course for New York state.
“I think what it means from the perspective of a small-business owner or midsize company is, ”˜Here we go again, we”™re going have to pay for something here,”™” he said. “It”™s becoming increasingly more difficult to do business here.”
The report also predicts that state job growth will grow more slowly in 2008 than in 2007.
“Wage growth is expected to slow even further due to both slower job growth and weaker finance sector bonus growth,” the reports states.
On the bright side, the report predicts that Medicaid spending should actually decrease next year from this year”™s levels.
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In 2006-07, the state spent $12.8 billion on Medicaid, a 9.6 percent increase from 2005-06.
For 2007-08, the governor”™s, Assembly”™s and Senate”™s projections for Medicaid spending range between $12.3 and $12.4 billion.
Carol Smith, the vice-president of government initiatives and special projects for the Orange County Chamber of Commerce, said though New York has many attractive qualities to offer business to locate here, the aforementioned costs may still make them look elsewhere.
“While our quality of life is great, the cost of doing business here may outweigh that advantage,” she said. “Government has many challenges, but everyone, business and government alike, needs to tighten our belts in order to have a healthy economy in challenging times like these.”
The report states the economic outlook it predicts is subject to change based on revised economic and spending performance over the next several months.
“It is generally agreed that this period of economic uncertainty has the potential to present challenges to state finances in 2008-09 and beyond,” the report reads.
The full report can be viewed at: http://www.budget.state.ny.us/pubs/press/2007/QuickStartReport_2007.pdf
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