Forget all the spin about “reform,” “fairness” and “job creation” emanating from Albany during last week’s lightning-fast special session of the New York state Legislature.

The deal ultimately was all about spending.

Gov. Andrew Cuomo and the Legislature agreed to raise an added $2.6 billion a year in taxes from a relative handful of individual filers who earn at least $1 million, or married couples with income of at least $2 million. Out of that total, the governor and lawmakers are redistributing $690 million in tax cuts to middle-class taxpayers and $250 million to reduce the mass transit payroll tax in the New York City region. Another $140 million will be spent on targeted business tax cuts, upstate flood relief and a youth jobs program.

The remainder, roughly $1.5 billion, will effectively be funneled into school aid and Medicaid spending increases Cuomo already had promised for fiscal 2012-13, which begins next April 1. And all this will still leave him with the task of closing a budget gap he projects at nearly $2 billion.

Rising spending is a well-established trend in New York, as shown in the accompanying chart. Adjusting for average inflation during each fiscal year, the State Operating Funds budget — excluding the permanent, recurring federal share of Medicaid — rose by about 43% under Gov. Mario Cuomo, 35% under Gov. George Pataki and 5% during the combined single term of governors Eliot Spitzer and David Paterson.

In real terms, spending slumped in the early 1990s recession, after growing to unsustainable levels during the boom of the 1980s. But it kept growing after the more severe downturn starting in 2008, thanks mainly to temporary federal stimulus aid that is counted as State Operating Funds spending in our chart.

Pataki temporarily knocked the real spending trend down a few notches early in his tenure, and Andrew Cuomo has now done the same. Unfortunately, Cuomo hasn’t permanently made the growth trend flatter — which is why he just needed to break a promise by increasing taxes, and why he will feel continued pressure to raise taxes even higher in the future.

The growth in the state budget will never be tamed unless and until Cuomo and the Legislature address the structural drivers of growth, which include public employee pensions and benefits, costly capital contracting guidelines and the nation’s most bloated Medicaid program. Because much of the budget consists of transfers to local governments and school districts, including New York City, these structural reforms must apply to them as well.

Political resistance to needed changes will remain intense. Within a day of the tax hike’s passage last week, Assembly Speaker Sheldon Silver was expressing his reluctance to make further spending reductions. Indeed, many of the same people who were advocating an extension of the misnamed “millionaires tax” — backed by public-sector unions — believe the state income tax still hasn’t been raised high enough.

Meanwhile, by jacking up tax rates on wealthy households to one of the highest levels in the nation, the Empire State has harmed its economic competitiveness. Tax increases are simply plowed into higher spending. And, absent reform, spending will continue to grow faster than the economy’s ability to support it.

About the Author

E.J. McMahon

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

Read more by E.J. McMahon

You may also like

Cuomo’s caving will cost the rich even more

The only question left was how far the once-domineering, now politically damaged governor would go to make a deal. We now know the answer: pretty far. Read More

The addiction Cuomo can’t quit: The governor keeps giving the state’s hospitals what they want

The lobbying powerhouse behind two of Gov. Cuomo’s nastiest scandals is back with another big request from Albany. Read More

New York Needs to Release Its Covid Data

Albany has kept New Yorkers in the dark for months about Covid-related deaths in nursing homes, and someone finally needs to pull back the curtain and let the sun shine in. The necessary reckoning should start with a bold exercise in transparent governmen Read More

Democrats’ bid to turn screws on New York’s richest

Just a year after the Empire State was clobbered by the coronavirus, New York’s Legislature confronts an embarrassment of revenue riches. Read More

NY officials covered up more than just nursing-home deaths

Gov. Cuomo’s coverup of nursing-home deaths revealed the stunning lengths to which he and his staff go to keep damning information from the public. But few New Yorkers may realize that such behavior is actually standard operating procedure throughout mu Read More

Will Cuomo Crisis Open Door to Fiscal Madness?

Gov. Andrew Cuomo’s political meltdown couldn’t have happened at a more critical time in New York state’s budget process. Read More

It was like pulling teeth: On Tish James’ nursing home report and Gov. Cuomo playing games with the truth

The most shocking thing about state Attorney General Letitia James’ report on the coronavirus pandemic in New York nursing homes is what it did not contain: a definitive count of how many thousands of residents have died of COVID. Apparently, not even the highest-ranking legal official in the state was able to pry that elusive number out of the Cuomo administration’s clutches. Read More

Vast public-construction plans come at a huge price for NY

"These are not ordinary times,” Gov. Andrew Cuomo intoned Thursday as he began a State of the State follow-up speech devoted to New York’s infrastructure needs — without accounting for the fact that Empire State infrastructure spending is uniquely prone to boondoggle. Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo "...the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo's government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it (the Empire Center) sued, Team Cuomo finally started coughing up some of the records." -Wall Street Journal, February 19, 2021

SIGN UP TO READ ABOUT THE ISSUES IMPACTING NEW YORKERS.