The Empire Page

Overview:  On January 19, Governor Paterson laid out an ambitious plan to close a projected $7.4 billion 2010-11 budget shortfall and address what he called a $60+ billion "structural imbalance" in NYS's finances.  The Governor has done what he is constitutionally obliged to do -- submit a balanced budget.  He and his staff deserve a lot of credit for taking their responsibilities seriously. That said, let's examine the major pieces of his plan.  I've asked some of the Empire Page's exclusive columnists as well as some other folks to tell us what they like, where they see problems, identify what else might he have done and speculate on how the Legislature is likely to respond.

 

Doug Boettner: Let me start out by stating that I am grateful that it was not I and my team responsible for preparing an Executive Budget for 2010-2011 -- a budget that must address a myriad of issues and controversial problems the people of the once great state of New York are facing.

Don’t get me wrong, I love challenges and have never backed away from one my entire life, and I have the scars to prove it, including resigning from a high level position with New York State for political reasons and finishing my career with a new agency.

Anyone submitting a budget, whether they are a Democrat, Republican or Independent, would be facing the same monumental hills and roadblocks this governor is facing right now.  The problem is that very difficult decisions need to be made, decisions that are going to require cuts in funding and service levels.  Some people will applaud these decisions and some people will criticize.  Some will be happy and some will be furious.

The fact of the matter is we have a governor who was chosen by the people of this state to be where he is.  People claim this is not the case because he was not elected, and this is true, but he was elected as Lieutenant Governor with the full knowledge that if the elected governor could not serve he would be named to serve as our governor.  The next time we New Yorkers go to the polls to vote we might want to pay closer attention to who the gubernatorial candidates choose as their respective running mates -- one of whom could become our next governor.

Another issue is that we are a society that expects instant gratification.  We are facing a projected $7+ billion budget shortfall, or better yet a potential $60 billion shortfall over the next five years, and many of us are saying "Mr. Governor, go ahead and fix the problem, and could you do it within a 6 to 8 month window."  President Obama is facing this exact same scenario at the national level.  The truth of the matter is these problems and issues are extremely deep-rooted and systemic in both New York and on the national stage.  It is going to take multiple years not multiple months to fix them.

So here’s how I see what’s happening. Governor Paterson unexpectedly finds himself governor.  He puts together his cabinet and his “inner team” of advisors and sets out to fix the ills of New York State.  Realizing it is not something they can't fix in the short-term, they develop a multi-faceted plan that will need to be implemented in stages over the next three to five years.  But the people, fueled by an antagonistic Republican leadership in the Legislature, grow restless with the lack of progress, and we saw what that can lead to during the last session.  Nothing gets accomplished. This budget is simply part of the long-term plan to get New York State back on track. Given Governor Paterson’s dismal popularity ratings and lack of support among Democratic Party leaders, there is little hope for this budget being enacted as it has been presented to the Legislature.

I suggest that you may want to read my last entry on my Blog “Keeping It Real” here on the Empire Page to gain more insight into my opinion on the governor’s State of the State address.  I will be chiming back in later in this Roundtable with more specific comments on specific pieces of the Executive Budget including, things I like and dislike about the budget and where I see problems with specific items, and whatever else the governor could have proposed.

 

Lise Bang Jensen: Governor David Paterson wants state employees to defer four percent raises and five days of salary until they retire or quit their jobs. Haven't we seen this movie before?

What makes Paterson think the outcome will be any different than when public employee unions rejected similar proposals last year?

Here's what Paterson is proposing this year:

• Salary Deferral. Personal service savings could be achieved through deferring salary payments in 2010-11 until an employee leaves State service. At such time, employees would be entitled to a lump sum payment based upon the rate of basic annual salary in effect at that time. In no event would the lump sum payment be less than the amount of salary originally deferred. A five-day salary deferral was previously implemented during the 1990-91 fiscal crisis.
  
  
• Delay or Reduction of the April 1, 2010 Four Percent General Salary Increase. A number of bargaining units representing State employees are currently scheduled to receive a four percent salary increase in the 2010-11 fiscal year. The Governor is rescinding, for the second consecutive year, the general salary increase for the State's non-unionized Management/Confidential employees ($28 million in 2010-11).

This year's plan is targeted to save $250 million in the first year and $125 million in the second. Of course, those are temporary savings, because the state eventually would have to repay workers when they leave their jobs.

And here's last year's failed plan:

• Implement Salary Deferral. Defer 5 days of salary payments in 2009-10 until an employee leaves state service or the fiscal crisis is declared to be ended (whichever comes first). At such time, employees will be entitled to a lump sum payment based upon the rate of basic annual salary then in effect. In no event will the lump sum payment be less than the amount of salary originally withheld. A 5-day salary deferral was previously implemented during the 1990-91 fiscal crisis. (2009-10 Savings: $121 million; 2010-11 savings: $0)
  
  
• Eliminate Scheduled 2009-10 Salary Increases. Eliminate salary increases scheduled for 2009-10. These increases were negotiated during better fiscal times. Even after this action, over the four-year life of their contract most workers would still receive a salary increase of 10 percent (3 percent in 2007-08, 3 percent in 2008-09, 4 percent in 2010-11). (2009-10 Savings: $180 million; 2010-11 Savings: $180 million)

The unions called last year's plan dead on arrival when Paterson proposed it in late 2008. Then last March 24--a week before the budget passage deadline--Paterson issued a belated threat: if the unions didn't agree to his plan, he'd lay off 8,900 state workers.

The threats went unheeded.

Instead, Paterson agreed in June to let up to 4,500 employees collect $20,000 in severance buy outs if they agreed not to oppose creating a Tier 5, which turned out to be a tepid "reform" of the pension system.

It later came out that Paterson tied his hands by agreeing not to lay off state workers before December 31, 2010. Lawyers may disagree on how solid the no-layoff clause is.

Having appeared to surrender his biggest bargaining chip--threatened layoffs--Paterson may have doomed his odds of persuading the unions to defer pay raises and five days of pay.

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This first appeared January 20, 2010 on NY Public Payroll Watch.

 

Mike Elmendorf: To be fair, Governor Paterson’s proposed 2010-2011 Executive Budget represents a significant improvement over last year’s enacted budget--which we rightly called the “worst budget ever.”  Unlike that budget, which increased state spending by a record amount, it increases spending by less than one percent, below the rate of inflation.  That budget also increased taxes by more than $8 billion--the biggest tax hike in New York’s history.  This year, the Governor proposes “only” about $1 billion in new or increased taxes and fees.

That said, this proposal represents a missed opportunity.  If ever there was a time for the state to actually decrease spending, it is now.  That is exactly what small business owners throughout New York have been forced to do as they have seen their revenues decline.  Why can’t the state do the same, especially in light of the runaway spending increases of the last several years?  Although the increased taxes and fees proposed in this budget are much more targeted than what was proposed last year, New York should be reducing its tax burden and growing its economy, not making our worst in the nation tax burden even more onerous.  We’ve said it before and we’ll say it again:  New York’s problem is not lack of revenue, it is too much spending.

There are specific proposals in the budget that are of particular concern to small business on which we will comment in more detail at the appropriate time.  Among these are revenue actions that will increase the cost of healthcare--and as a result health insurance.  The Executive Budget would continue the raid of funds appropriated to offset the cost of the “Timothy’s Law” mandate on small business, further increasing the cost of health insurance for small employers already struggling to afford it.  It would subject small business to sales tax audits based on “statistical sampling,” rather than the actual records they keep.  This budget proposal also relies on a fiscal gimmick in the form of a proposal that would allow the sale of wine in grocery stores.  We believe this ill-advised idea will not only not produce the anticipated revenues, but would negatively impact the state and decrease revenue by shuttering nearly half the state’s wine and liquor stores and killing more than 4,000 jobs statewide.

Although this Executive Budget proposal represents a much better starting point than last year’s, NFIB/New York will be working with the Legislature to hopefully improve it and will continue to stand in strong opposition to the inevitable push from New York’s powerful and predictable spending lobby--who remain in complete denial about our economy and fiscal condition--for even more taxing and spending.

Mike Elmendorf is New York State Director of the National Federation of Independent Business.

 

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Brian Sampson: While headlines on New York’s proposed Executive Budget have pointed out some positive steps and modest spending cuts, our analysis of the budget finds that it falls way short of the real reform needed to safeguard New York’s fiscal future.

The budget does include important economic development initiatives and several cuts and savings measures, including agency consolidations, facility closures, and long overdue mandate relief.  However, the increased spending and new taxes and fees will ultimately cancel out any good because the financial burden is simply too much for taxpayers in New York state to sustain.  State spending has increased a staggering 12-percent increase over the past two years…during a terrible recession.

In the past decade alone, lawmakers have allowed the state budget to grow by $60 billion. While this budget attempts to address the current deficit, New York still faces an even uglier budget deficit that could grow to more than $50 billion in three years unless the governor and Legislature begin making significant, yet necessary cuts. Adding to an already complicated issue, New York’s debt level also continues to rise. According to the state comptroller, debt increased from $39 billion in 2002-03 to $51 billion in 2006-07and could rise to $63.7 billion in 2011-12. 

We are calling on the governor and the Legislature – as it works through this budget process – to aggressively seek ways to cut spending to bring this budget in line, just as taxpayers must do in their own households when money is tight. The governor and Legislature must reduce debt and adopt massive statewide fiscal reform.

To further that goal, we will continue to offer solutions.  We have proposed a five-year plan to right-size the budget to a more sustainable $109 billion by 2015.  This initiative proposes returning the state budget to the level it was in 2000 - $77.5 billion and then be adjusted according to the consumer price index to reach $109 billion.  To get the process started, the coalition is developing a list of more than $12 billion in proposed cuts to the 2010-11 budget, a plan Unshackle Upstate expects to release soon.  

It remains unclear to many of us if this elected body understands the financial realities facing New York state and, more importantly, its residents.  But what is abundantly clear is that taxpayers have had enough, and they intend to hold elected officials accountable. Their message to the Legislature: Reject the notion of raising taxes and spending of any kind, and start exercising some cost-cutting discipline.  This is a monumental year in New York politics, with the governor running for election and all 212 members of the Legislature seeking re-election.  Our elected officials should know that the public is watching them and grading them, and there could be ramifications for any elected official who supports increased taxes and spending.

Brian Sampson is executive director of Unshackle Upstate.

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Ken Brynien:

Every time there is a budget deficit the knee-jerk response is to take it out on the state work force by cutting positions, wages or benefits.  As public employees we are cognizant of the fiscal crisis the state is facing.  What few people know is that since March 2008 the state work force under the governor’s control has been reduced by 4,500 positions, an average of 105 every work week; there has been zero growth in state agency budgets including the cost of state employee salaries and benefits; and, over the last decade state agency budgets have grown at a lower rate than any other part of the state budget (a growth rate is equal to the growth in personal income in the state). Additionally, on top of the billions of cuts over the past two years the governor’s budget proposes another $1.2 billion cut.

 

Taxpayer advocates insist state agencies and the state work force are huge contributors to the state’s fiscal woes.  Yet when you look at the numbers it is clearly untrue. 

 

Is there fat and waste in state government?  Yes.  PEF is the first to point out the waste in state agencies.  We have been pointing it out for over a decade.  The state wastes hundreds of millions of dollars a year on costly contract consultants. 

 

It’s time for real change and to start cutting where true savings can be realized.  The governor, to his credit, has made an effort to not only recognize the problem but to attempt a solution as well.  The problem is it is not nearly aggressive enough.  These are desperate times, it is time to take on the consultants that are draining agency budgets.  PEF has put forth a plan that will save the state $375 million annually by 2012-13.  Phased in over three years this plan will save the state $656 million over that time period.  This should be part of the fundamental reform we are all looking for.

Ken Brynien is President, NYS Public Employees Federation.