New York Governor Proposes $3 Billion in Spending Cuts

Published February 21, 2011

New York’s new Democrat governor, Andrew Cuomo, has proposed balancing the state’s budget with $9 billion of spending cuts from what had been projected, including nearly $3 billion from education, $3 billion from Medicaid, and $1.4 billion from state agency operations.

The new budget, which the state is supposed to adopt by April 1, would have $3 billion less total spending than the current budget, if Cuomo’s spending targets are hit.

Tax Cuts, Tax Cap
Cuomo has also pledged not to impose any new taxes and in fact says he favors letting a surcharge on individuals who earn more than $200,000 a year expire as scheduled this coming December. He also wants a 2 percent property tax cap (with exceptions for New York City and some other cities). The State Senate passed the measure on Feb. 2 by a 45-17 margin.

Many powerful interests are pressuring the governor to continue the state’s high tax and spending policies, but so far State Assembly Minority Leader Brian Kolb (R-Canandaigua) likes what he sees and hears from Cuomo, as do many taxpayer and business groups.

“My first reaction is I support what he is trying to do, which is reduce real spending,” said Kolb. “This [proposed] budget is about $3 billion less than the current budget. He’s saying the so-called millionaire’s tax, which really isn’t a millionaire’s tax but a tax on $200,000 or higher income, should go away. That’s good too.

“The devil is in the details. Reducing education and Medicaid spending has to be done, because education and Medicaid are the two largest pieces of the budget.”

Few Medicaid Details
The governor’s proposal lays out how it would affect specific local school districts. There’s less specificity regarding how Medicaid spending would come down, which has Kolb and others wondering.

“He’s set a spending number [for Medicaid] but no detail on what that will look like. Can he get there with details on what those cuts will look like by April 1, when the budget hopefully will be adopted? I don’t know, but the intent is good.”

The Business Council of New York State (BCNYS) also likes what Cuomo has presented.

‘The Right Direction’
“This budget puts forward a long-term, sustainable approach to move New York in the right direction,” said Heather Bricetti, acting president and CEO of the BCNYS. “It puts an end to the gimmicks and short-term fixes that simply mask the underlying problem of government’s overspending.

“The Business Council has said repeatedly that New York cannot tax its way out of this deficit,” Bricetti added. “Governors and legislatures have tried that for years, and the crisis has grown worse. We realize difficult decisions will be made in this budget. But if we can put the state’s fiscal house in order we can create an environment that will lead to economic development and create jobs for all New Yorkers.”

Not all are happy with the governor’s proposal.

Bloomberg’s Complaint
New York City Mayor Michael Bloomberg told members of a joint legislative committee the city would lose about $2.1 billion if the lawmakers don’t change Cuomo’s budget.

Bloomberg was projecting a $2.4 billion deficit in New York City’s next budget of $67 billion, which takes effect July 1. Cutbacks on state revenue sharing with the city, and other changes such as reduced state aid to the city’s schools, would add to that deficit, Bloomberg said.

Cuomo’s budget proposal includes layoffs of thousands of government workers, which does not please government worker unions. One aspect of the plan would consolidate some state prisons, which prompted New York State Correctional Officers and Police Benevolent Association President Donn Rowe to tell a joint legislative budget committee that closing some prisons could cause a “catastrophe.”

“If enacted, these closures will represent a clear and present danger to our prison system and the men and women who serve in it,” Rowe said in his prepared remarks.

‘Haircuts, Not Amputations’
E. J. McMahon, a senior fellow for Tax and Budgetary Studies at the Manhattan Institute, posted on the institute’s The Torch blog: “The budget calls for haircuts, not amputations. Not that it will be easy. (Ever try to cut the hair of a squirming, screaming two year old?)

“Giving Cuomo the benefit of a doubt, keeping the reform details vague for as long as possible is a way to keep potential adversaries guessing while keeping options open,” he continued. “On the Medicaid side, in particular, Cuomo has armed himself with appropriations language that would give the governor discretion to cut the budget down to size if the ‘team’ fails to agree on another way to get there.”

Minority Leader Kolb said New York’s budget situation has grown so bad Cuomo has no choice but to cut spending and hold down taxes.

“The only thing that kept spending alive the last two years was federal stimulus money that was spent,” he said. “That money only postponed dealing with fiscal realities. Democrats who were in power increased taxes and fees by $10 billion over two years. There was no choice for the governor but to reverse course to have any credibility. The numbers are so bad he couldn’t do anything else.”

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