New York to self: Drop dead

President-elect Obama and Congress are talking about a federal stimulus package that includes a substantial though as-yet-undetermined amount of aid to states and, possibly, localities.  Earlier this month Ohio Gov. Ted Strickland made an eloquent case for still more federal aid, to make up for more of the huge shortfall in revenues that normally go to education:

“It doesn’t make a lot of sense … to put huge resources into creating jobs with these infrastructure projects, while at the same time the states are having to lay off teachers, and to underfund education and to allow college tuition to explode.”

According to the Associated Press, Strickland and four other Democratic governors, including David Paterson of New York, presented Obama’s transition team and Congressional leaders with a request for $1 trillion in state aid, including $250 billion for education, $250 billion for social services such as Medicaid, and $150 billion in middle-class tax cuts.   The article mentions that Paterson said New York has a $15.4 billion deficit, but that’s it from him.  New York, as possibly the hardest-hit state in the union in this financial and economic crisis, has a compelling case for why the states have recession-related revenue shortfalls and could use federal aid.  Maybe Paterson made that case, but if so it didn’t make the article.

It did not make Paterson’s State of the State address this week, either.  In two sentences he called for Congress to pass a stimulus bill to help the national economy, but he did not mention federal aid to the states, nor any pending request for aid.  Instead he called for a range of tax increases and spending cuts; his budget includes a 10% cut in aid to community colleges, at a time when community college may be the only affordable college option for many high-school graduates.  He also repeated his call for caps on property taxes, which would be fine if he had suggested an alternative for school funding.   Nowhere was there an acknowledgement that raising taxes and cutting spending in a recession is like pouring gasoline on a fire.  I understand that New York’s constitution requires the governor to submit a balanced budget, even in recessions, but a forceful request for federal aid could go a long way.  Imagine if the governor had urged New Yorkers to contact their U.S. congressmen and senators and the new presidential administration to request federal aid.  Instead, Paterson preached a message of “no pain, no gain.”

In a televised interview yesterday, Paterson edged somewhat closer to calling for more federal aid.  His remarks were slightly encouraging, as he mentioned possible federally-funded capital projects in New York and a more equitable allocation of Medicaid spending, but he did not give the impression of an aggressive advocate for federal aid to the states.  He said only that the current proposed stimulus of $775 billion, most of which is not direct aid to states, is “probably” not enough.  Again, why not make a case for federal help with balancing New York’s budget, in view of the devastating impact of Wall Street’s implosion on New York’s tax revenues?

dropdead2Ask not, and ye shan’t receive.   Unlike the 1975 New York City fiscal crisis, in which the city asked for federal aid and President Ford said no, this time Washington is clearly receptive to federal aid for state budget crises, but the New York governor is either uninterested or exceptionally coy.

UPDATE, 11 Jan. 2009: The more I think about it, it seems Paterson is an austerity fetishist.  He has even ruled out tapping into the state’s billion-dollar “Rainy Day” Reserve fund as a source of revenues.  (As the state senate minority leader put it, “Governor, it is raining.”) He said in the State of the State address, “At this moment, there is only one way out of this economic crisis,” namely to balance the budget.  Herbert Hoover in 1932 couldn’t have said it better.

UPDATE, 13 Jan. 2009: Yesterday brought a glimmer of light for New York State, in the form of a joint appeal by Senator Charles Schumer and Governor Paterson for federal aid to local school districts.  Schumer got the macroeconomics of it exactly right:  “The [federal] government is giving with one hand and [the state government is] taking with the other.  It doesn’t benefit the economy.” Schumer framed it well for the localities, too, saying that in these tough times the school districts should not have to choose between raising property taxes or cutting vital services.   Although Paterson was standing by Schumer’s side, he seemed less than enthused.  “Even with the addition of resources from the federal government,” he said, “it will all go to waste if we outspend it.”   Not helpful.

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One Response to “New York to self: Drop dead”

  1. The Little IT Program That Could Bankrupt New York City - Hit & Run : Reason Magazine Says:

    […] Gillespie | March 29, 2010  From the comments in my earlier post about how states and cities go bust (they spend too much, […]

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