The following appears in the March 25 – April 3, 2011 issue of the Long Island Business News:

To close the state’s $10 billion budget deficit, Gov. Andrew Cuomo  realized he had to curtail the spiraling costs of the special interests’ No. 1 sacred cow: Medicaid.

Projected to cost $54 billion in New York’s 2011-2012 fiscal year and covering 20 percent of state residents, Medicaid was created in the heyday of Lyndon Johnson’s Great Society. Title 19 of the Social Security Act of 1965 established guidelines for a Medicaid program that states could adopt to provide medical services for welfare recipients. The federal government would cover half the cost and the states would have to pay the other half.

Seeing this as an opportunity to receive huge sums of federal dollars, then Gov. Nelson Rockefeller quickly sent a Medicaid bill to the Legislature. Legislators had a field day. They added numerous amendments that offered coverage not just for welfare recipients but also for those they more broadly defined as “poor.” What’s more, the Legislature decreed that Albany would pick up only half of the state’s portion of Medicaid costs; the rest of the financial burden would have to be shouldered by local governments. So, Albany could in future years expand benefits but only pick up 25 percent of the tab. Local governments would have no say in whether chiropractic care was covered but would have to pay 25 percent anyway.

In essence, the law written in April 1966 mandated that welfare officials must seek out potential beneficiaries, and it exempted all relatives from any responsibility for the care of “indigent” family members. It was designed to make dependency a way of life in New York. The program succeeded in achieving that goal.

Since that time, Medicaid has been New York’s fastest growing budget item – rising at the alarming rate of approximately 11 percent annually. New York spends more than twice the national average and more per capita than the combined expenditures of America’s most populous states, California and Texas.

For years, Albany politicians have watched the oncoming fiscal train wreck without alarm. They viewed the expenditures as constituency services – keeping happy hundreds of thousands of health-care workers, health-care providers and those receiving medical and nursing home benefits.

Because Govs. George Pataki, Eliot Spitzer and David Paterson failed to get a grip on the Medicaid leviathan, the program has had a disjointed, sprawling administrative structure, has been plagued by rampant fraud and has had a payment system that creates financial disincentives for the delivery of cost-effective, quality health care and a caseload that has continued to swell. As a result, taxpayers have had to pony up more money every year to cover the state and county portions of the tab, which grew on autopilot each year.

To fix this mess, Cuomo appointed on Jan. 5 a Medicaid Redesign Team with the mandate to propose concrete formulas that would contain costs and could be attached to the 2011-2012 executive budget.

Because the membership of the team included representatives of every facet of the health-care cartel that has benefited from the status quo, I was skeptical about the outcome. However, when the report was released on Feb. 24, I was pleasantly surprised to learn that many of my fears were unfounded. While not a perfect solution, the recommen-dations are a solid first step because they include genuine cost-cutting initiatives and reform measures that do not impede patient care.

The task force’s report contained 79 recommendations that will generate $1.14 billion in cuts. The permanent statutory cost drivers will be eliminated, medical malpractice awards will be limited to $250,000 and an annual 4 percent growth cap will be imposed. Total savings for the fiscal year that begins on April 1 is anticipated to be $5 billion. George Gresham, president of Local 1199, pointed out that the team succeeded because the recommendations “resulted in pain, but it was shared pain.”

If New York’s county governments and local municipalities are serious about fixing their fiscal plights, they should look to the Medicaid Redesign Team for inspiration and heed the words “shared pain.” If they don’t, expect some local governments to hit the fiscal wall.

The following appears in the March 11-17, 2011 issue of the Long Island Business News:

Because there weren’t any consequences for irresponsible fiscal behavior by Albany’s power brokers during the Pataki, Spitzer and Paterson administrations, state spending over the past decade has increased on average 5.7 percent annually while revenue during the same period rose only 3.8 percent. As a result, the Paterson budget adopted for the present fiscal year that ends on March 31, which included ridiculously unrealistic tax revenue projections and over $16 billion in one-shot revenue (an astounding 30 percent of General Fund spending), is out of balance to the tune of $750 million and has caused the state’s structural deficit to surge to levels that threaten the very solvency of the state.

With a projected deficit for the fiscal year beginning April 1 of $10 billion, Gov. Andrew Cuomo decided it was time to put an end to the fiscal follies that are responsible for New Yorkers paying the highest combined state and local taxes in the nation. Declaring the state “functionally bankrupt” and the budget a “special interest protection program,” the governor exposed a sham budget process that includes codified formulas – designed by lobbyists – that automatically increase Medicaid and education spending every year with no regard to revenue availability, an astounding 13 percent – five times the inflation rate. He pledged to terminate these “deceptive practices” with the same vigor he used as attorney general to end such practices in the private sector.

To address the fiscal quandary he inherited, Cuomo proposed a budget that not only radically changes the way Albany does business, but tackles this year’s deficit and the state’s structural deficit as well.

According to state Comptroller Thomas DiNapoli, the proposed Cuomo financial plan brings “recurring spending into better alignment with recurring revenue” and reduces out-year deficits by $13 billion, $15.4 billion and $17 billion in state fiscal years 2012-13, 2013-14 and 2014-15, respectively.

The comptroller’s report also made these observations:

• The Executive Budget avoids significant new tax increases and largely avoids borrowing for operating expenses to close the projected $10 billion deficit. The budget primarily uses recurring spending reductions (totaling 89 percent of the gap-closing plan) for budget balance.

• The proposed budget is less reliant on temporary and nonrecurring actions than in previous years. The financial plan relies on $7.7 billion in temporary and nonrecurring actions in (State Fiscal Year) 2011-12, a 54 percent reduction from the $16.7 billion used in 2010-11.

• The governor proposes to create or restructure several grant programs to be competitively and/or performance-based in many substantive areas including education, local governments, economic development and energy.

• The current year (SFY 2010-11) General Fund deficit, largely caused by lower than anticipated General Fund tax collections, is expected to be closed with revenue received earlier than anticipated, including an accelerated payment (or spin-up) of existing temporary utility tax revenue, and reduced spending, some of which may include changing the timing of payments.

To eliminate the $10 billion deficit, Cuomo calls for shared sacrifice and spares no facet of state spending. Savings and spending reductions in state operations are projected to be $1.37 billion. This could include 9,800 layoffs and the elimination of 3,500 prison beds. As for assistance to local municipalities and school districts, proposed spending reductions and savings total $7.48 billion.

If the governor continues to stand firm, rallies the overtaxed public to his side and fully utilizes his broad executive budgetary powers, he can change the political culture in Albany, checkmate legislators and their union masters, and put the Empire State on the road to fiscal and economic recovery.