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A Bloodless Budget

New York Post

By E.J. McMahon

December 18, 2008

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Shortly before Gov. Paterson unveiled his 2009-10 Executive Budget, one of his aides
reportedly warned of "aggressive . . . cuts" that would leave "blood in the streets."

However - despite what he calls "staggering" deficits this year and next - the governor is
not eviscerating Albany's bloated budget. In fact, state spending would grow slightly
under his proposal.

The bellwether State Funds portion of the budget - including all operations and capital
spending, but excluding federal grants - would rise by 1.7 percent, to $86 billion,
compared to a projected inflation rate of 1.2 percent. The core General Fund, where the
budget gap is centered, would be held flat.

This is a welcome improvement over the budgets proposed by former Gov. Eliot Spitzer,
which called for State Funds spending hikes of 8 percent and 6.2 percent - more than
double the then-prevailing inflation rate.

But Paterson's plan falls short of the fiscal-restraint benchmark set by then-Gov. George
Pataki's proposals after he first took office in the mid-'90s.

As shown in the nearby chart, Pataki called for actual reductions in both State Funds
and General Fund spending in each of his first two budgets. Inflation was averaging
closer to 3 percent at the time, so Pataki's proposed cuts were even larger in real terms
than they appear in nominal terms.

The governor's opening budget bid is vitally important: It sets a floor for negotiations
with a Legislature that is inevitably bent on spending more.

In Pataki's case, low-balling the initial proposal led to two consecutive years of no
growth at all. Paterson, by comparison, has inherited a much more severe crisis and thus
needs to do more.

But, disappointingly, this governor's "spending restraint" consists mainly of avoided
spending increases. This takes care of only half of the budget gap.

If New Yorkers are now experiencing "the greatest economic and fiscal challenge of our
lifetimes," as Paterson's budget presentation appropriately called it, it's hard to justify
such items as:

* $45 million for the state Council on the Arts (twice the per-capita average for such
agencies in other states).

* $78 million for the chronically troubled Statewide Wireless Network.

* $58 million for added park and open-space land acquisition.

* $46 million for stem-cell research (already heavily funded by private firms and the
federal government).

* $65 million in tax credits for (mostly wealthy) film producers.

* $8 million for a scenic pedestrian walkway over the Hudson River.

Paterson's budget message is marred by missed opportunities and odd omissions. For
example, the proposal to eliminate state-financed school-property-tax (STAR) rebates
highlighted the need for a statewide school-property-tax cap - but Paterson didn't seize
the chance to link the STAR cut to passage of a cap, though he's been the cap's chief
booster.

Similarly, the governor proposed (inevitable) cuts in school aid, yet failed to call for
giving school districts the added leverage they need to negotiate givebacks from teacher
unions.

Paterson has taken an important step in the right direction by proposing a new, less
expensive pension tier and asking state workers for wage and benefit concessions. But in
repeatedly disavowing the possibility of mass layoffs, he's been unwilling to play
hardball with union leaders who otherwise have no reason to deal with him. Oddly
enough, the budget also includes $424 million to finance salary hikes for unions that
haven't settled their contracts yet.

Executive branch agencies - the only ones Paterson can directly control - shouldn't be
alone in the spending-cut spotlight. The Legislature's proposed budget of nearly $221
million (more than $1 million per member) is also ripe for reduction, especially now that
control of the state Senate is up for grabs.

Then there's the $2.4 billion state Judiciary budget, which has more than doubled during
the 15-year tenure of now-retiring Chief Judge Judith Kaye. Paterson should appoint a
successor who is willing to trade a long-overdue judicial pay raise for an equally
overdue effort to economize in the court bureaucracy.

The headlines on the budget have been dominated by Paterson's enormous package of
proposed taxes and fees - some so petty that they conjure an image of budget analysts
competing to come up with the idea most likely to win mention by Jay Leno. But there's
nothing funny about the biggest items on the governor's revenue wish list: expanded
"assessments" on health-care services and energy, both of which are already far too
costly in New York.

While the Wall Street crisis was the tipping point for New York state's fiscal miseries,
Paterson has shown a refreshing willingness to finger Albany's own excessive spending
as the root of the problem. Unfortunately, on balance, his first budget is not the best
solution.

©2008 New York Post

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