Dismay Greets New York’s $124 Billion Budget Plan

Published April 1, 2008

Taxpayer advocates, business groups, and local government officials are speaking out against New York Gov. Eliot Spitzer’s (D) proposed budget, which would add about $2 billion in new revenue, for a total of $124.3 billion for the fiscal year that begins April 1.

The governor’s 2008-09 Executive Budget includes tax hikes on gasoline and health insurance and changes in the way small cigars and flavored malt beverages would be taxed, sharply raising the taxes on those items.

Though the budget proposal includes some spending cuts, total state spending would grow 5 percent. In announcing the budget, Spitzer said he believes spending could grow as much as 5.3 percent, which indicates he may be leaving room for lawmakers to add more spending items.

‘Haven’t Cut Enough’

“We’re glad the governor has identified some cuts in state spending,” said Kenneth Adams, president of the Business Council of New York State, the state’s largest business organization. “But his proposal to raise nearly $2 billion in new revenues from taxes and fees suggests that they haven’t cut enough. With the national economy in turmoil and Wall Street tanking, our leaders in state government need to take bold actions to reduce spending, ease the tax burden, and give the private sector a boost.”

Spitzer told reporters at the budget announcement, “We have to build for our economic future” and cited proposed increases in funding for K-12 public school education, higher education, and health care spending.

Major Spending Increases

Major spending increases include:

  • Another $1.46 billion for K-12 public schools, a record single-year funding increase for New York State, which already has the nation’s highest per-pupil spending. U.S. Census data released last year show per-pupil spending of $14,199 in New York State for the 2004-2005 school year, 62 percent above the national average of $8,701.
  • Expansion of the Child Health Plus program to provide health care for children in the state.
  • Creation of a $1 billion Upstate Revitalization Fund.
  • Creation of a $4 billion endowment for New York’s colleges and universities, which would be built up over time.

Spending cuts would include 5 percent reductions in non-personnel services and state government energy costs, changes in health care reimbursements totaling $980 million, and delaying increases in a property tax relief program to save the state $354 million.

County Officials Object

In testimony before the Joint Fiscal Committees of the legislature on February 5, officials with the New York State Association of Counties (NYSAC) said county governments would be forced to raise taxes to make up for cuts proposed by Spitzer. Spitzer’s budget showed counties would see a net increase in funds from the state of $348.9 million in 2008 and $519 million in 2009.

“The 2008-09 Executive Budget presents counties with two fundamentally flawed and unfair changes in the fiscal structures of human services programs,” said NYSAC Executive Director Stephen J. Acquario in his testimony.

“The first is in the area of public assistance,” Acquario said. “The Executive Budget shifts an additional 2 percent of the cost of public assistance to counties and the City of New York, while the State would pay 2 percent less.”

Acquario continued, “The second proposal in the Executive Budget that counties find absolutely unacceptable is the shift in cost of juvenile detention centers. Effective April 1, 2008, counties will assume 100 percent of the cost for youth placed by the Family Court in secure and non-secure detention facilities.

“Currently, the State reimburses counties 50 percent for secure and non-secure juvenile detention costs,” Acquario continued. “The State’s estimated savings for this initiative is $35.4 million.”

Local Taxes Would Rise

Acquario said the additional financial burden on counties would be higher than the governor’s estimate, and both the public assistance and juvenile detention changes would force counties across the state to raise local property taxes.

At NYSAC’s annual meeting in January, Suffolk County Executive Steve Levy, a Democrat, said the budget “is a net loss for us” but added there are positives in it, including an initiative to consolidate small taxing bodies for more efficiency.

Grassroots Opposition Grows

Mark LaVigne, communications director for the association, said, “There is a growing grassroots movement. This issue is salient to property taxpayers across the state. Based on newspaper articles and editorials we’ve seen, the county message is being received in communities across the state.”

LaVigne added, “No one will deny we have a property tax crisis in New York State. Our member counties are concerned and are reacting accordingly.”

LaVigne said Spitzer spoke at the county association’s annual conference and acknowledged property taxes had averaged a 51 percent increase since 2000 while personal incomes in the state had grown 27 percent.

In his State of the State address early this year, Spitzer announced the creation of a property tax commission to develop a cap and other reforms to address the “root causes” of New York’s high property taxes.

A property tax cap would be subject to approval by the legislature and probably could not take effect until at least 2009, LaVigne said.

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.

For more information …

Testimony of representatives of the New York State Association of Counties regarding the proposed 2008-2009 state budget: http://www.nysac.org/documents/2008-09NYSACNYPWAHumanServicesTestimony2-5-08.pdf