NY Needs Answers

What gov rivals should say

by E.J. McMahon |  | New York Post

Tonight’s seven-way, 90-minute New York guber natorial debate sounds more like the premise for a TV reality show than a forum for airing the most critical issues facing the Empire State.

Andrew Cuomo and Carl Paladino will be sharing a crowded stage with everyone from the self-proclaimed Manhattan Madam to the candidate of the Rent Is Too Damn High Party. Think of it as “Top Chef” meets “Last Comic Standing” — with voters as the ultimate judges.

Assuming they can get a word in edgewise, this would be a good time for Cuomo and Paladino to move beyond the standard bromides and bluster. New Yorkers need to hear more from the major-party candidates on how they’d clean up the fiscal mess awaiting the next governor.

That mess is as big and bad as ever. Next year’s state budget gap is $8.2 billion, and the projected red ink over the next three years totals $37 billion. For all his battling with the Legislature, Gov. Paterson has barely made a dent in the problem. In fact, counting appropriations temporarily supported by stimulus aid from Washington, state spending has increased by 11 percent over the last three years, in the teeth of the Great Recession.

This year’s state budget includes $5.9 billion in Medicaid and education outlays underwritten by federal stimulus cash. Next year, all but $712 million will disappear. Projected tax-receipt growth will make up for only part of the stimulus drop.

The upshot, as depicted in the nearby chart: Balancing the next state budget will require an immediate cut of $1 billion from this year’s combined general fund and stimulus-fed spending.

Paladino’s pledge to slash the budget by 20 percent may sound reckless to Albany insiders. But if Cuomo intends to keep his own promise to cap state spending and hold the line on state taxes, he’ll need to cut the current-law baseline by at least 20 percent over the next three years. In this sense, Paladino and Cuomo have the same goal — but neither has put forward a cogent plan for achieving it.

Take Medicaid. Making up for the disappearing stimulus would require an unprecedented 20 percent reduction in current Medicaid spending. But Medicaid inflation and utilization are rising by 8 percent a year — and strings tied by Congress to the last few stimulus dollars will complicate efforts to curb the growth.

Paladino’s pledge to cut $20 billion from the program is simply implausible — as is his promise to convert the savings into a 10 percent tax cut. On the other hand, at least the Republican recognizes that New York’s generous and unaffordable Medicaid benefits will have to be dramatically scaled back. Cuomo’s solution — “Make Medicaid more efficient” through various administrative reforms — is simply inadequate.

When it comes to school aid, the largest single category in the budget, the Democratic attorney general has a similarly unimpressive prescription: “Make education more efficient” through shared services among school districts. Paladino says he’d consolidate school administration at the county level and use the savings to expand the school day and year. How this would help close the state budget gap is anyone’s guess.

As for the state bureaucracy, Cuomo’s promise to freeze state employees’ salaries will produce zero savings, because their union contracts all expire early next year and the financial plan already assumes no more pay hikes. Paladino assumes he can save huge amounts merely by cutting loose “dead weight,” “parasites,” “management moles” and “politically connected brothers-in-law” — which sounds like a disgruntled state worker’s fantasy. If only it were that easy.

The centerpiece of Cuomo’s platform is his proposal to cap the growth in local property-tax levies at 2 percent a year — which Paladino has dismissed as “gutless” but grudgingly endorsed. Yet the cap will be a sham if it isn’t coupled with the sort of mandate-relief “tool kit” Gov. Chris Christie is promoting in New Jersey, including reform of lavish public-sector wage and benefit deals.

There’s no shortage of good toolmaking ideas out there. Just last week, Suffolk County Executive Steve Levy (a Democrat-turned-Republican who failed in his own race for governor) issued a solid proposal for overhauling pensions, including a shift to 401(k)-style defined-contribution retirement accounts.

Cuomo and Paladino need to state more clearly where they stand on mandating defined-contribution retirement plans for all new government workers. Beyond that, they need to lay out detailed plans for curbing public-sector compensation — including retiree health benefits, which loom as a $205 billion unfunded liability for state and local governments.

Standard answers, such as “everything must be on the table” or “I’m taking a baseball bat to Albany,” won’t suffice. And no looking over to the Manhattan Madam for help.

Read article at Manhattan Institute