RBA NYS Economic Survival Guide

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RBA NYS Economic Survival Guide

  1. 1. Ten Essential Reforms We Can’t Live Without ROCHESTER BUSINESS ALLIANCE
  2. 2. NEW YORK STATE ECONOMIC SURVIVAL GUIDETABLE OF CONTENTS Steps to Survival steps to SURVIVAL PAGE 4 Cap the Taxpayer Burden PAGE Stop Unfunded Mandates 5 PAGE 6 End the Double Standard PAGE 7 Trim Medicaid’s Excess PAGE 8 Control the Debt PAGE 9 Improve the Competitive Climate PAGE 10 Reform Economic Development PAGE 11 Encourage Innovation in Education PAGE 12 Reduce the Size of Government PAGE 14 Lower the Cost of Energy
  3. 3. Ten Essential Reforms We Can’t Live Without INTRODUCTION New York Is in PerilNEW YORK IS IN PERIL. WENEED QUICK ACTION FROMOUR LEADERS TO SURVIVE.The pressure building from years of excessive The Rochester Business Alliance welcomes thesegovernment spending and irresponsible state budgets leaders to office. But we must warn that our state’shas reached a breaking point. Our ability to restore financial condition is critical. Without a major changefinancial health is in jeopardy. in fiscal policies—starting with the 2011 budget process—taxing and borrowing will continue to goEven before the recession, jobs and families were up, while jobs and population continue to flow out.leaving New York for more business-friendly states. As other states grow slowly out of the recession,From 1993 to 2008, a net total of more than 120,000 New York may not recover.jobs moved elsewhere—including 50,000 to NewJersey, 18,000 to Connecticut and 17,000 to Florida. 120,000 1More than 1.7 million people have moved from New rank among #York to other states in the past decade, the largest all states for spending onout-migration from any state.1 education and Medicaid net jobs lost to other states from 1993–2008With the recession came more job losses and reducedstate revenues. But instead of curtailing spending, $6,419 6.4% of personalour leaders have increased the state budget more than income owed$30 billion over the last five years. State borrowing in state debt,has grown by 25 percent over that time, creating a second highest among largedebt burden second highest among large states.2 in state and local taxes for every resident, states the nation’s second-highest tax burdenNew York spends more per capita on Medicaidand public education than any other state, and This guide identifies 10 critical priorities to stop theour compensation of public employees is among financial bleeding. We propose specific policy changesthe highest in the nation. The cost to taxpayers is to ease the tax burden and help create jobs, whichextreme. New Yorkers pay more to their state and are the lifeblood of every state’s economy. Most oflocal governments than the residents of any other our recommendations can be implemented relativelystate but New Jersey. Still, New York is projecting quickly; we will track the state’s progress and reportdeficits of $40 billion over the next three years. on each priority in the months ahead.Our hopes for survival are pinned on the state If our leaders take these steps, 2011 can be rememberedleaders we elected in 2010. Governor-elect Cuomo as the year the Empire State regained its financialand Lieutenant Governor-elect Duffy, with their footing. If not, it will be the year that our state ignoredPlan for Action, have proposed hundreds of good the final warning signs on the path to economic ruin.ideas for reforming state government and restoring 1 EnterprisingNY: Tracking firms, jobs and economic growth in thefiscal responsibility. Many newly elected or reelected Empire State, Empire Center forlegislators have promised to support similar reforms. New York State Policy, 2010 2 Debt Impact Study, March 2010, Office of the State Comptroller, p. 2 3 State and Local Tax Burdens: All States, One Year, 1977–2008, Tax Foundation
  4. 4. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE Cap the Taxpayer Burden WE’VE ENDURED THE NATION’S SECOND HIGHEST TAX BURDEN LONG ENOUGH. We must get our State’s fiscal house in order by immediately imposing a cap on state spending … committing to no increase in personal or corporate income taxes or sales taxes, and imposing a local property tax cap. ~ Andrew Cuomo No change would do more for our state’s survival Like any healthy diet after a binge of overeating, the than enacting this pledge, a key element of the action caps will cause discomfort. But they will force honest plan published by Governor-elect Cuomo during discussions about what services people really need, the campaign. and which ones we simply can’t afford. All taxpayers should do everything they can to help Governor-elect A HEAVY TAX LOAD These words promise essential relief to New York Cuomo make good on his pledge, and require state taxpayers, who shoulder the nation’s second heaviest legislators to support him. tax burden. At $6,419 per person, the state and local taxes paid by New Yorkers are more than 40 percent New York higher than taxes on Pennsylvania residents, more $6,419 than 75 percent higher than taxes in North Carolina steps to SURVIVAL and more than 85 percent higher than Florida taxes.411.7 percent of per capita income Local property taxes are especially high. They fuel school spending that has grown far faster than the Cap property tax increases at no rate of inflation for years, giving New York the highest more than 2 percent or the rate of per-pupil costs for K–12 education in the nation. inflation annually, whichever is lower When property taxes are measured as a percentage of U.S. Average home value, New York is home to nine of the nation’s Impose a state spending cap (also 2 percent or the rate of inflation) 10 most heavily taxed counties, and 15 of the top 25.5 $4,283 A cap on spending and all state taxes, as the No increase in other taxes Declare a fiscal emergency and 9.7 percent of per capita income governor-elect has proposed, is critical. Without this freeze pay for all state employees comprehensive approach, the legislature will continue (see page 6) a cycle of spending, taxing and burden-shifting that has ballooned state finances out of control.Taxpayers in New York spend 50 percentmore than the national average on state andlocal taxes. (2008 Tax Foundation data)
  5. 5. Ten Essential Reforms We Can’t Live Without ISSUE Stop Unfunded MandatesCOSTLY RULES WILL SINKTAXPAYERS.Controlling unfunded mandates on school districts, NEW YORK STATE SPENDING OUTSTRIPS INFLATIONlocal governments and businesses must go hand inhand with the tax and spending caps. When the 400 All Funds Spending (86–87=100)state creates a requirement that somebody else pays CPI (June 86=100) Spending Index (86–87 = 100) 350to implement, the cost of government still goes up.The burden is just being shifted, giving affected 300organizations less control over their own budgets. 250 200School districts, health insurers, local governments,utilities and private businesses are subject every year 150to new state laws and regulations, many of which 100create a cost burden. 50The issue is not that every single mandate should be 86–87 87–88 88–89 89–90 90–91 91–92 92–93 93–94 94–95 95–96 96–97 97–98 98–99 99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10 10–11paid for in the state budget. It’s that the cost of lawsand regulations must be analyzed up front. Policy State government spending has grown far faster than inflation over the past 10 years and is risingmakers, legislators and voters should make informed out of control. (State comptroller data)decisions about whether the benefits of a change justifyits expense, and who should pay.There are structures in place to do this. Governor steps toPaterson’s Executive Order 25 required state agenciesunder his direct jurisdiction to “evaluate, reform,or repeal ... rules and paperwork requirements in SURVIVALorder to reduce substantially unnecessary burdens, Appoint a strong leader for thecosts and inefficiencies.”6 The Governor’s Office of Governor’s Office of RegulatoryRegulatory Reform is charged with enforcing the Reform with high-level support from the governororder. Our new governor needs to appoint a directorwith the talent, resources and authority to tackle By the end of 2011, produce a reportthis challenge aggressively. detailing mandates on public schools and their costsSimilarly, legislative actions require a fiscal impact Delegate a review of all fiscal notesassessment, embodied in the legislative “fiscal notes.” to the Division of the Budget andYet fiscal notes are often driven by the bill sponsor publish the results(or beneficiary) and the quality is uneven. A 2007law requires an expert panel, the Healthcare Quality Require the comptroller to produce an annual report on the cost ofand Cost Containment Commission, to analyze mandatesthe impact of new health care mandates. After three 4 Tax Foundation, 2008 analysisyears, the commission has yet to be formed. Seat the Healthcare Quality and of state and local taxes Cost Containment Commission so 5 Tax Foundation, 2010. The nine it can vet the benefits versus costs New York counties are Monroe,Taking steps to make the existing structures work Niagara, Wayne, Chemung,will reduce the budget turbulence that unfunded of any healthcare-related mandates before legislative action Chautauqua, Erie, Onondaga,mandates create for other governments and private- Steuben and Madison.sector employers. 6 www.state.ny.us/governor/ executive_orders
  6. 6. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE End the Double Standard PUBLIC EMPLOYEE PAY IS UNFAIR AND UNSUSTAINABLY HIGH. State workers have an unfair advantage. The old Public employee unions retain unfair bargaining notion that government employees are paid less than power, because there is no penalty for failing to their private sector counterparts, but receive slightly agree to new contract terms. As our chief negotiator, better fringe benefits, is no longer true. Statewide, Governor-elect Cuomo should strike a hard line in excluding New York City, salaries for state and local 2011. Our state is an employer facing a financial government employees are 15 percent higher than crisis, and we cannot afford a compensation system the private-sector average.7 that rewards public employees at standards far above the private sector. Taxpayers also fund fringe benefits—including health insurance, paid time off and pensions—for public employees that far exceed private-sector norms. For example, almost all public employees have defined- benefit pensions, compared to only 20 percent of the steps to SURVIVAL private sector, where 401(k) accounts are prevalent. In Monroe County, taxpayers would save more than $40 million annually if school districts and Let the Taylor Law’s binding local governments matched the national average for arbitration provision “sunset” in 2011 employer contributions for health insurance. Every contract exceeded the private-sector average for paid Use private-sector benchmarks time off—39 days for a 10-year employee—with a for salary increases and benefit sharing in contract negotiations median benefit that ranged 20 to 60 percent higher.8 Change the Triborough Amendment Pensions cost the state nearly $1.5 billion, an amount so that pay and benefits remain expected to grow to $2 billion by 2014. The average fixed if there is no contract pension received by police and firefighters retiring Following the SUNY/CUNY model, in 2010 ($61,295) is more than double that of regular immediately offer defined-7 Payroll and employment 2009 data, civilian employees ($25,440).9 contribution retirement options U.S. Bureau of Labor Statistics. for new employees, and pass the Median private-sector pay is about Employee pay and benefits represent roughly two- bill moving all non-civil-service $43,000 annually, compared to thirds of spending by state and local governments. employees to defined-contribution nearly $50,000 for workers in state We cannot close the state’s budget gap without plans and local government addressing the issue. Make defined-contribution retirement8 “Public vs. Private Sector Employee Benefits: A Summary Analysis of mandatory for new employees by School and Local Government There will be an opportunity to do that in 2011, when phasing in Tier VI as proposed by Union Contracts in Monroe the governor renegotiates expiring contracts with many Governor-elect Cuomo County,” CGR report, June 2009 of the state’s largest employee unions. In New York, Stop including overtime in final9 “Things New Yorkers Should Know however, two unique statutes—the Taylor Law and salary calculations for pension About Public Retirement Benefits the Triborough Amendment—combine to ensure purposes in New York State,” Citizens Budget Commission report, October 2010 that public employees continue to receive pay and10 Medicaid & CHIP spending data, benefit increases even when they have no contract. Kaiser Family Foundation, www.statehealthfacts.org11 “Medicaid in New York 2006,” Citizens Budget Commission
  7. 7. Ten Essential Reforms We Can’t Live Without ISSUE Trim Medicaid’s ExcessTHE NATION’S MOST EXPENSIVEMEDICAID PLAN IS DAMAGINGOUR STATE’S HEALTH.New Yorkers pay the highest bills in the nation for New York can no longer afford the nation’s richestMedicaid, the government insurance program designed Medicaid program, but we don’t need a hatchet toto provide medical care and long-term care services fix it. By trimming excessive benefits to more closelyfor low-income and disabled people. With spending match national norms, the state can save billionsof nearly $52 billion this year, projected to grow of dollars.another $1.8 billion next year, our Medicaid costsare more than twice the national average per capita. SWOLLEN MEDICAID PLANTaxpayers should support the governor-elect’s proposals steps to New York SURVIVALto restructure the program and make it more efficient,while encouraging steps that can be taken more quicklyto trim excessive costs. One step is to manage Medicaidat the state level. Benefits today are administered by Administer Medicaid at the state level; minimally, set reimbursement $47.6bthe 62 county governments, with varying levels of rates at the state rather thanefficiency and little incentive to trim costs. county level CaliforniaAnother is to change New York’s “spousal refusal” Eliminate New York’s uniqueprovision, which allows any married adult to qualifyfor Medicaid long-term care services if the spouse spousal refusal option for long-term care eligibility $38.7b(or parent of a sick child) refuses to pay. Spousal refusal Pass legislation that increases tax- credit incentives for people to buyis a major contributor to New York’s extremely highcosts for long-term care. State spending for Medicaid private long-term care insurance Florida Reduce the authorized number $14.7blong-term care was $1,058 per resident in 2008, of personal care services hourscompared to a national average of $378.10 to 17 per weekNew York also provides coverage for many services Change other optional benefits to bring them more in line withthat aren’t required by the federal government, which New York spends more on Medicaid other statesmatches state Medicaid payments. One example benefits than any other state—$9,610is personal care services for Medicaid recipients per enrollee compared to a U.S. average of $5,830. (Kaiser Family Foundation)who need assistance with daily living tasks, such ashousekeeping and shopping. By reducing the averagenumber of hours from 30 to 17 for this optionalservice—still 50 percent above the national averagefor personal care—taxpayers could save about$1.5 billion annually.11
  8. 8. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE Control the Debt WE ARE TRAPPED IN A CREDIT SWAMP. BUY NOW, PAY LATER Rather than cut spending during the economic The state’s increased reliance on borrowing hurts downturn, state government has expanded the taxpayers in multiple ways. It increases the amount debt pool to pay for services, which restricts our of money we must pay each year to service the debt— 2008 DEBT PER CAPITA financial flexibility. among the largest states, New York is surpassed only by California and Illinois in the ratio of debt service New Jersey Over the past five years, state-funded debt rose 25 to total revenue. It prevents state leaders from making percent, from $48.5 billion to more than $60 billion. the hard choices required to live within our means. $3,621 The state comptroller projected in 2010 that debt will rise to $67 billion in the 2014–15 fiscal year, an And it constrains future taxpayers by making them pay for today’s services. increase of 38 percent since 2005.12 In 2008, New York’s state debt per capita was $2,925. In 2009–10, New York the outstanding debt rose to $3,100 per person and 6.4 percent of personal income.13 $2,925 The Debt Reform Act of 2000, a law designed to steps to SURVIVAL limit the state’s use of debt, obviously hasn’t worked. It permits “backdoor borrowing” by state authorities, Do not increase debt caps Illinois without voter approval, which currently accounts for 94 percent of the state’s debt load. Though the Limit the total of state-funded debt $1,877 law prohibits the use of debt for non-capital projects, nearly $8 billion has been borrowed to pay operating to 5 percent of the state’s personal income Ban backdoor borrowing by state costs since it passed.14 authorities, so that new debt is approved by voters California Support efforts to restrict use of $1,805 long-term debt to capital projects Florida $1,115 12 Debt Impact Study, March 2010, Office of the State Comptroller, p. 2New York’s rising use of credit has saddled 13 Ibid, p. 14taxpayers with a state debt burden of more 14 Ibid, p. 1than $2,900 per person, second only to 15 EnterprisingNY: Tracking firms,New Jersey among the 10 largest states. jobs and economic growth in the(State Comptroller) Empire State, Empire Center, Oct. 25, 2010, p. 5 16 Ibid, p. 5
  9. 9. Ten Essential Reforms We Can’t Live Without ISSUE Improve the Competitive ClimateJOBS ARE A STATE’S MOSTBASIC FORM OF SUSTENANCE.High taxes, overzealous regulations and unreasonable Health insurance premiums in New York are another WAVING BYE-BYE TOmandates create a hostile environment for the major burden, and state mandates on private insurers $38 BILLION OF INCOMEemployers who fuel economic growth. This hampers are a significant cost driver. The new administrationthe ability of all businesses to compete, and it causes needs to hold the line against any new insurancesome to fail. New York lost more jobs than any other mandates, at least until an independent scoring processstate from 1993 to 2007.15 is in place and the insurance changes mandated by federal health reform legislation take effect. FloridaOther employers move to friendlier climates. WhileNew York gained almost 272,000 jobs over 15 yearsfrom businesses moving in, we lost 392,000 jobs to There are many other legislative proposals to increase business costs—extending prevailing-wage standards -$11.7bother states—the third-greatest net out-migration of to private-sector workers, increasing time-off mandates,jobs in the nation.16 To reverse the trend, lawmakers and enabling employees to sue for enduring a “hostileand state agencies must help to lower the cost of doing workplace” even if they have never reported a concern.business in New York. The new administration must say no to these proposals and create a friendlier environment that supports the New JerseyA new workers’ compensation law, passed in 2007, growth of jobs.promised to help. At that time, New York had aworkers’ compensation system with one of the highestcosts but lowest benefits in the nation. Payments to -$7.4bclaimants have increased, but efficiency gains crucial steps toto long-term cost savings have yet to be realized.The lack of progress on reform, coupled with anincrease in new administrative requirements, has SURVIVAL Connecticut -$3.5bincreased participant frustration and system costs. Complete workers’ compensation medical, treatment and impairment North Carolina -$2.5b guidelines, and control permanentThe Great Recession has brought New York’s disability costs Pennsylvania -$1.9bunemployment insurance trust fund to bankruptcy.In response, many legislators propose increasing Support unemployment insurance models that minimize the impactbenefits and requiring businesses to pay more for on employers, separate fund 41 other stateseach employee. Some proposals would increase taxes solvency from benefit levels,on employers by 14.7 percent in a single year! Thatreduces the incentive to hire and runs counter tothe best unemployment solution—creating jobs. and offer employees additional wage-insurance options Reject new health insurance -$11.5bThe administration should explore new models mandates, prevailing-wagefor unemployment insurance that address fund mandates and other mandates that increase the cost of doingsolvency and benefit levels separately. business From 2000–2008, $38.4 billion in taxable income migrated to 46 other states as jobs and people moved away. New York had a net income gain from only four states totaling $310 million. (Tax Foundation)
  10. 10. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE Reform Economic Development TOO MANY PROGRAMS AND AGENCIES ARE ATTRACTING TOO FEW JOBS. If success in economic development were measured The Rochester Business Alliance supports the proposal by volume of effort, New York would be a winner. by Governor-elect Cuomo to create regional councils Our state has 28 government agencies, 115 industrial that review economic development plans and reduce development agencies, 618 local development unproductive local competition. We especially support corporations, 72 Empire Zones, 50 business districts, his announced plans to place economic development 49 urban renewal agencies and 10 regional councils authority in the hands of someone who understands with staffs and programs designed to promote the challenges of the upstate economy—our new economic development.17 lieutenant governor and Rochester’s outgoing mayor, Robert Duffy. Attracting and retaining jobs is the real measure— and unfortunately, New York’s job growth has been far slower than other states. Over the past 20 years, the number of private-sector jobs in New York has increased by only 4 percent, while jobs nationwide steps to have increased 18 percent.18 SURVIVAL Economic development incentives are not the only Centralize responsibility for reason that employers choose to expand, or to locate economic development initiatives in one state over another. It is more important under the lieutenant governor, for government to get the basics right—strong ensuring a statewide focus with an understanding of upstate needs infrastructure, efficient services, good schools, reasonable taxes and a friendly business climate. Ensure that the new regional councils have real authority, with But in a nation and a world where governments the ability to approve or deny economic development grants compete with each other to attract jobs, New York and loans needs to do better. The hundreds of state and local organizations involved in economic development Support sectors and institutions with track records of creating are not pursuing a coherent strategy. To the contrary, globally competitive jobs that they often pit neighboring communities against each add value to the economy other, creating a shell game that moves jobs around without creating new ones.17 From multiple sources cited in The New New York Agenda: A Plan for Action, Andrew Cuomo, p. 9518 U.S. Department of Labor, Bureau of Labor Statistics19 National Center for Education Statistics, 200920 U.S. Census Bureau
  11. 11. Ten Essential Reforms We Can’t Live Without ISSUE Encourage Innovation in EducationSTRONGER CAMPUSES ANDCLASSROOMS WILL PROTECTOUR FUTURE.Good schools are catalysts for economic development. on the number of eligible in-state students, NewThey train future workers, attract well-educated York enrolled 118 percent of its population share,families and at the college level can serve as resources compared to 66 percent in California.20 HIGHEST K–12 SPENDINGor partners to help create new businesses. New Yorkhas many fine school districts and institutions of higher The SUNY system, with 64 diverse campuses and $15,981learning, but we need to do better—and excessive many nationally recognized programs, is a strongcontrol from Albany hampers progress. contributor to this success. But Albany treats SUNY $9,666 like a state agency, setting tuition rates as part of theAt the K–12 level, New York spent $15,981 per budget, controlling purchase decisions and overseeing National New Yorkstudent in 2006–2007. That’s more than any school operations. The Public Higher Education average State averageother state, and 71 percent more than the national Empowerment and Innovation Act would allowaverage.19 That investment does not translate to better SUNY schools to compete more effectively in the Spending per pupil, 2006–2007educational outcomes: New York ranks 40th in academic marketplace and to partner more easilythe rate of high school graduation, with only about with businesses. Similarly, we need to encouragetwo-thirds of students statewide receiving a diploma. collaborations with private colleges and universities that help to create jobs. LOW K–12 SUCCESSTwo solutions to reducing educational costs areoutlined elsewhere in this report: reducing unfunded By encouraging innovation and relaxing mandates,mandates that don’t improve educational performance, New York can make public education the economic 73.2% 67.4%and bringing employee compensation in line with engine we need it to be.taxpayers’ ability to pay.Charter schools can help to boost educational National New Yorkperformance. Many of these schools are performing average State averagewell, and the state has withdrawn charters from steps to Four-year high schoolfailing schools. The successful ones can serve asincubators that assist districts in developing neweducational approaches. In Rochester, a unique SURVIVAL graduation rate, 2005–2006charter compact—signed by all public education Pass the SUNY Public Higher New York spends more money per pupilstakeholders—encourages collaboration, with a Education Empowerment and on K–12 education than any other Innovation Act state, but the four-year graduation ratespecific objective of “scaling up” successful charter is among the 10 lowest in the nation.methods in district schools. Eliminate the cap on charter schools (Census Bureau and National Center Support job-creating initiatives of for Education Statistics.)Higher education in New York is a success story. private and public-sector institutionsOur colleges and universities enrolled 101,000freshmen in 2007, second only to California. Based
  12. 12. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE Reduce the Size of Government OVERSIZED GOVERNMENTS DEVOUR TAXPAYER DOLLARS. The sheer size of government contributes to our state’s To make efficiencies happen, the governor should high tax burden. We need a fresh look at delivering have authority to reorganize the executive branch, services in the most efficient way possible, taming as is true in 31 other states.22 This would allow the the growth of government before the cost eats governor to make changes in the executive branch, taxpayers alive. which could be rejected by legislative vote. Before this change, another step the governor can take is simply According to an attorney general’s survey, New York not to appoint commissioners to state boards that no has more than 1,000 state government entities.21 longer serve a useful purpose. A patchwork quilt of overlapping agencies, authorities, boards and commissions has evolved over our long Reforming and restructuring public authorities history. The last significant reorganization of the state’s must be on the table in any review of government executive branch occurred under Governor Al Smith efficiency. The first state authorities were established in 1927, when the state employed 29,000 people. 90 years ago, as a way for the state to fund capital In 2010, the state employed more than 228,000 projects without requiring a voter referendum. full-time-equivalent employees. These numbers alone Today, hundreds of authorities operate as a “fourth don’t suggest inefficiency, but any large organization branch of government,” delivering thousands of should work to deliver services at lower cost, especially services that overlap with government agencies. in tight budget times. The Transportation Department, for example, shares To his credit, Governor-elect Cuomo has made responsibility for meeting the state’s infrastructure government efficiency a priority. His goal, which the and transit needs with more than 50 state and local Rochester Business Alliance strongly supports, is to authorities. Low-income housing policy is not reduce the number of state agencies, authorities and driven primarily by the state’s Division of Housing commissions by 20 percent. Although streamlining and Community Renewal, but by four state housing New York governments will take time, the steps authorities and nearly 200 local ones. Authorities he has outlined to begin the process should be control 85 percent of the state’s infrastructure and immediate priorities. account for 93 percent of state debt, without direct oversight from elected leaders. A first step is analyzing the current state bureaucracy to identify efficiency improvements, with help from With more than 10,500 government entities at the private-sector reorganization experts. Seventeen other local level, communities are served by many layers21 “A New N.Y.: A Blueprint to states have conducted similar reviews in the past decade, of overlapping services and functions. From tax Reform Government,” Office but no state needs it more than New York. assessments to highway maintenance to delivering of the Attorney General, New York State, 2008, available at www.ag.ny.gov22 “The Book of the States: 2009 Edition,” Council of State Governments, pages 190–9123 “Local Government Efficiency Program Annual Report 2008–09,” New York State Department of State
  13. 13. Ten Essential Reforms We Can’t Live Without ISSUE Reduce the Size of Governmentwater, taxpayers would benefit from regional planning GOT GOVERNMENT?and cooperative administration of services. But thatis difficult to do under our current structure. 57 62 932 556The New York State Commission on LocalGovernment Efficiency and Competitiveness,chaired by former Lieutenant Governor StanLundine, offers good ideas for streamlining. Its 2008 Counties Cities Towns Villagesrecommendations include requiring that collectivebargaining agreements be renegotiated when local 996 991 6,900+ Taxpayers fund more thangovernments consolidate, converting many locally 1,000 state agencies and 10,500 local governmentselected offices (such as highway superintendent and across New York Statetax assessor) to appointed positions, and requiring (Attorney General)villages with fewer than 500 residents to hold referenda School districts Authorities Specialin order to continue separate village governments. districts & BOCESOn the subject of consolidation, many taxpayers wantto have it both ways. While decrying the high costof government, they reject proposals to save moneyby consolidating services. The state should encourage steps to SURVIVALcommunities to make their local governmentsmore efficient with steps that could include sharinginformation on best practices statewide, creating jointpurchasing agreements, and providing grants to fund Reduce the number of stateconsolidation studies. agencies, authorities and commissions by 20 percentExperience suggests that incentives like these offer Pass legislation giving the governora good return on investment. A study by the authority to reorganize the executiveDepartment of State found that $40 million spent branch, with changes taking effect unless the legislature objectsassisting communities with shared-service andconsolidation projects is yielding $350 million Do not appoint new commissionersin reduced costs to local government.23 to unnecessary state agencies Support implementation of Lundine Commission recommendations Use grants, incentives and information-sharing to promote government consolidation and regional planning
  14. 14. NEW YORK STATE ECONOMIC SURVIVAL GUIDE ISSUE Lower the Cost of Energy OUR STATE SUFFERS FROM THE HIGH COST OF POWER. The strain of utility taxes is a key reason that New One potential source is the Marcellus Shale, which York loses businesses to competing states. Taxes fuel lies below a vast region covering the Southern Tier, higher energy costs compared to other states. In fact, and contains huge amounts of natural gas. Extracting New York has the highest average retail price for the gas requires hydraulic fracturing, which is being electricity of the largest 15 states. Nationwide, only used at scores of drilling operations in Pennsylvania Hawaii and Connecticut utilities charge more. At an just across the New York border. But the state average of 16.57 cents per kilowatt-hour, electricity legislature has halted new permits for Marcellus Shale costs in New York are 78 percent higher than in extraction until May 15, 2011. We need to accelerate Pennsylvania, 97 percent higher than in Ohio and a negotiated settlement permitting gas extraction more than double North Carolina’s.24 from Marcellus Shale. It will bring jobs and income to New York, along with lower gas prices. It’s critical to make New York’s energy costs more competitive, but the state increasingly takes money from utilities as a backdoor tax. Excess “18-a” utility assessments, which are designed to pay for the Public Service Commission, are diverted to the general fund, steps to instead of being returned to utility customers. Funds raised by the Regional Greenhouse Gas Initiative (RGGI)—a cap-and-trade system for reducing SURVIVAL emissions from electricity-producing power plants Cut taxes on utilities, starting in 10 states—are also being diverted to the general with the systems benefit charge fund, which amounts to a new carbon tax. Reduce excessive 18-a utility assessments A good place to start lowering taxes is to eliminate Renew Article X so that we can the systems benefit charge, which benefits programs bring new power plants online administered by the New York State Energy Research safely but with minimum red tape and Development Authority. These are worthy causes, Reach a legislative settlement but they don’t justify reduced competitiveness. that will permit the extraction of gas from the Marcellus Shale The end of 2002 saw the expiration of New York State Article X, which streamlined the process for siting new power plants. Proposed legislation in 2007 that would have revived Article X failed to gain bipartisan support, but the effort should be renewed in 2011. Article X would help our state develop new energy sources, creating jobs and reducing electricity prices for all New York residents and businesses.24 Average Retail Price of Electricity by State, 2008, U.S. Energy Information Administration, www.eia.doe.gov
  15. 15. Ten Essential Reforms We Can’t Live Without SUMMARY New DirectionWE NEED QUICK STEPS IN ANEW DIRECTION TO BRINGNEW YORK BACK.For 20 years, the Empire State has suffered an New York’s economy can rise again, reversing the trendeconomic decline that started gradually but has of people and businesses moving away. We can createreached a crisis point. jobs and climb out of the recession as well as or better than other states, if our leaders are willing to makeState government spends more than taxpayers changes now. If they don’t, we may never recover.can afford, and our leaders have committed tounsustainable annual increases. They borrow money State leaders are not the only ones who must act.to help close the gap, while pushing costly new All taxpayers should fight for New York’s survival,requirements onto school districts, local governments by demanding change from their state legislatorsand businesses. The cycle goes on, year after year, even and other leaders. To get involved, visit the Rochesteras the migration of jobs and residents to other states Business Alliance website at www.RBAlliance.comhas grown from a trickle to a flood. and support the Unshackle Upstate effort at www.UnshackleUpstate.com.That’s business as usual in Albany. It’s a disaster forthe individual taxpayers and private-sector employers Look for more reports in the months ahead, and morewho are struggling to remain afloat. ideas to create jobs. Together, we can make 2011 the year that the Empire State reverses its economic declineThe new governor and legislature that take office in and returns to a path of greatness.2011 offer our last and best chance to survive. Stateleaders must change business as usual from the daythey take office, focusing on the priorities laid outin this report.All the steps can be implemented with determinationand effort. Many of them involve just saying no:NO TO NEW TAXES.NO TO SPENDING PROGRAMSWE CAN’T AFFORD.NO TO INCREASED COSTS ONEMPLOYERS.
  16. 16. Help New York Survive As our new governor takes office in 2011, New York is in financial danger.We must take steps immediately to control government spending and create jobs. You can be part of the SOLUTION Contact your state legislators Share this document with friends and colleagues Track progress and take action at www.RBAlliance.com © Rochester Business Alliance, Nov. 2010

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