Ralph: “The bills will get bigger and bigger, and I’ll get less to eat. I’ll start losing weight. Then you know what I’ll look like?”

Alice: “Yeah, a human being.”

– “The Honeymooners”

THE officially an nounced spending growth rate of 5 per cent in Gov. Spitzer’s latest state budget proposal was greeted in some quarters as evidence of belt-tightening by New York’s second-year chief executive.

Eat more and shrink your waistline? Sounds like the diet of Ralph Kramden’s dreams. Of course, Alice would have seen right through it.

In fact, Spitzer has not discovered a way to make New York state government slimmer while adding billions to its bottom line.

The increase proposed in his 2008-09 budget is modest only by comparison to the 7.8 percent hike he proposed last year in his first budget – which, in turn, justified the governor’s claims of “spending control” only in the wake of an 11 percent hike in Gov. George Pataki’s last year in office.

By any standard, the state’s budget is growing faster than its economy – despite Wall Street jitters and what Spitzer himself called “a dramatic degree of uncertainty” about economic conditions in the near future. Indeed, the core general fund would already be in the red if it weren’t for reserve funds and one-shot revenues.

An historic four-year boom in compensation, real-estate values and corporate profits brought New York state an enormous surge in tax revenues. But now it’s experiencing what may be just the start of a prolonged and painful fiscal hangover.

So vast was the surge that Pataki, despite the massive spending hikes of his final term, still left a cash surplus of $1.2 billion. Spitzer’s long-term financial plan indicates that most of that will be spent by the end of the decade.

Meanwhile, the budget holds fresh news of how dependent the state has grown on taxes from the sort of wealthier households most likely to be directly affected by turmoil in the financial markets.

The share of all state income taxes paid by the highest-earning 1 percent of filers (whose incomes now begin just below $1 million) rose to 39 percent last year, up from 34 percent a decade earlier. Thus, the economy could sidestep a recession – and the treasury would still be hit hard by a continuing decline in six- and seven-figure bonuses for corporate officers, fund managers and brokers, and by a softening in the real-estate market.

Spitzer’s budget would cut the number of corrections officers to reflect a falling inmate population, but still plans to expand the state workforce by another 1,846 employees. His Medicaid savings program is less ambitious than the one he proposed last year. And even after trimming some promised increases, his $1.4 billion jump in school aid is the largest ever proposed by a New York governor.

While Spitzer largely spares any pain for state employee unions, urban public schools and health-care providers, he’d shift more costs to motorists (through higher fees and fuel taxes), homeowners (through an increase in mortgage-recording fees and postponement of a state-funded school-tax rebate) and the for-profit HMO industry (which he’d hit with a whopping $247 million tax hike).

The governor insists he wants to expand affordable health care, yet his budget also calls for a 16 percent jump in what already amounts to $850 million in state “assessments” on private health-insurance policies.

He also says he wants to lift the burden of state mandates on localities – yet the budget would also stick New York City and county governments with a bigger share of costs for both welfare and juvenile detention.

Even in an economic slowdown, state lawmakers in both parties will find plenty of ways to add more spending to the budget – while pushing another year down the road any effort to cope with the state’s snowballing structural deficit. And, judging from last year, Spitzer is not spoiling for the sort of prolonged budget fight that would be needed to resist in the Legislature’s demands.

A permanent solution to the state’s persistent fiscal problems and massive tax burden can’t be put off indefinitely. As Ralph Kramden’s buddy Ed Norton once put it, “Like we say in the sewer, time and tide wait for no man.”

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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