Thoughts on Cuomo’s Budget – By George J. Marlin

 The following appears in the February 10-16, 2011 issue of the Long Island Business News:

Gov. Andrew Cuomo’s executive budget for the state’s fiscal year that begins on April 1 is an intriguing document that on the one hand addresses some fiscal and policy issues long ignored while on the other hand placates some special interests. Here’s my take on his proposals.

The all-funds budget calls for total spending to be about the same as last year, $132.5 billion. If enacted, this will be a major victory for taxpayers. It will be the first flat budget since 1996 when the nationally renowned Patti Woodworth was Gov. George Pataki’s budget director. Since she left Albany in 1997, annual state spending has increased on average about 2.5 times the inflation rate.

Cuomo’s claim that his budget will be balanced without raising taxes and fees is true but disingenuous. That’s because Albany raised state income taxes in December 2011. The so-called tax reform bill that was embraced by both the Democratic-controlled Assembly and the Republican Senate actually imposes higher taxes on top earners to the tune of $2 billion compared to what would have been paid under the permanent, pre-2009 tax rates.

The tax increases were necessary to fund Cuomo’s unfortunate 2011 pledge to raise school aid and Medicaid funding by 4 percent in this year’s budget. If, however, the 2 percent property tax cap law that municipalities and school districts must follow applied to state spending in these areas, there would have been no need for additional tax revenue.

According to a Tax Foundation study released in January, New York has the second highest combined income, sales, corporate and property tax rates of all the states. And the Cuomo tax increase won’t help improve our ranking next year.

Cuomo’s call for the state to take over Medicare local cost increases is a step in the right direction. But much more relief from unfunded state mandates is needed to prevent many municipalities from falling into a fiscal abyss.

The proposal to create a new pension tier that would offer future state and local government workers a 401(k)-style defined contribution pension plan as an option and would save state and municipal governments $113 billion over 30 years is a first bold step to contain unsustainable defined-benefit pension costs. (In New York City, for instance, pension contributions, which totaled $1 billion in 2000, will be $8 billion this year and are expected to continue increasing annually.) While the proposal, if enacted, will not be enough to contain the pension cost explosion, nevertheless, as the Manhattan Institute’s Ed McMahon stated, “Cuomo deserves credit for finally putting real reform on the table.”

Cuomo threw down the gauntlet to the United Federation of Teachers and the New York State United Teachers by demanding the unions drop in 30 days their lawsuit against the state Education Department concerning teacher evaluations that is imperiling $700 million in federal education aid. If they refuse, the governor will include his own evaluation plan in his revised budget resolution.

The governor also informed school districts that if tougher teacher performance standards are not implemented by January 2013, they will lose state aid increases in next year’s budget. “The equation is simple at the end of the day,” Cuomo said. “No evaluation, no money. Period.”

If he follows through by effectively using the powers of his office to implement his budget proposals, it will be a battlefield victory in the war to tame Albany’s entrenched special interests.

Nevertheless, if the Empire State is to become economically competitive and is to stop people from voting with their feet and moving to tax and job-friendly states, Cuomo will have to continue to contain spending and enact genuine reforms that slash taxes, regulatory burdens and unfunded mandates.

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