Gov. Spitzer won’t present his first Executive Budget for another four weeks, but the essence of New York’s financial situation could be distilled from three sentences in his first State of the State Address yesterday:

“Despite a momentary cash infusion, we are operating in a deficit environment, with out-year deficits conservatively estimated in the tens of billions of dollars.”

“Recurring expenses this year and in the fiscal years ahead are much greater than recurring revenues.”

“Either we raise taxes and place an even greater burden on New Yorkers, or we end the culture of spending that is out of control.”

This was the kind of fiscal straight talk legislators needed to hear – and not a moment too soon.

Moreover, Spitzer said his budget “won’t raise taxes” and “will significantly reduce our rate of spending growth, which has increased at three times the rate of inflation over the last four years.”

But at other points in the same speech – and to generally louder applause from his audience – Spitzer called for significantly higher state spending in several areas, including:

“A new, transparent school-funding formula that dramatically increases investment over the next four years throughout the state, targeting the investment where we need it most.”

An immediate guarantee of health-care access for 500,000 children and expedited Medicaid enrollment of 900,000 uninsured adults.

Infrastructure projects, such as the Second Avenue subway and East Side Access from Long Island to Grand Central Station; a new Peace Bridge connecting Buffalo to Canada; a new Tappan Zee bridge; completion of Interstate 86 in the Southern Tier; and expansion of Stewart Airport.

To pull it all off, Spitzer pledged to “make hard choices and begin to fundamentally reform and restructure programs that have become needlessly expensive” and to “finally learn to say ‘no’ to budget requests we simply cannot afford.”

Details to follow in the budget, due Feb 1. Then we’ll find out if there’s less than meets the eye in Spitzer’s spending promises. For example, under existing law, school spending automatically grows by billions of dollars over the next four years. Perhaps he doesn’t mean to significantly boost school aid far above that baseline.

Similarly, before Spitzer even took office, the growth in Medicaid spending had fallen from over 7 percent to just 2.8 percent, creating slightly more breathing room. And most of the infrastructure projects he cited are already underway, if not fully funded.

In any case, reducing the rate of spending growth won’t be difficult – not after this year’s double-digit hike.

But the budget isn’t the only problem, as Spitzer recognized. He proposed attacking local costs through the consolidation of 4,200 governmental units across the state. This is a political tall order that could better be achieved by leaving local governments in place, but doing more to goad them into consolidating services, which relatively few have done effectively.

Spitzer repeated his campaign call for “reform” – but not repeal – of the wasteful Wicks Law, which drives up public-works costs by requiring multiple subcontractors on construction projects. But he failed to make a frontal assault on other state-mandated costs, especially ones relating to public employees.

Tax-funded pension contributions in New York have soared by nearly $6 billion a year since 2000. Looming just over the horizon is a $150 billion to $200 billion unfunded liability for health benefits for retired state and local government workers. Yet, for the past two years, the Legislature has been rubber-stamping union-backed bills to further sweeten pension benefits and weaken government employers at the bargaining table. Then-Gov. George Pataki vetoed the worst such measures, but similar bills will no doubt soon resurface.

For all his outspoken criticism of Albany’s “army of the status quo,” Spitzer carefully avoided identifying unions as part of New York’s problem. But if he is serious about change, he needs to start sending explicit signals to the Legislature that its pandering to public employees has got to stop. And he needs to promote the kind of pension and benefit changes that Mayor Bloomberg has been pushing for several years.

The ethical and political reforms Spitzer advocated yesterday – especially the end of partisan gerrymandering – would be genuine breakthroughs for New York. But several of his other major proposals – the expansion of STAR property-tax breaks, workers’ compensation reform, added municipal incentive aid, the siting of new power-generation plants – merely build on or replicate Pataki initiatives.

All of which points to the biggest change that occurred in Albany on “Day One”: This governor is expected to deliver.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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