New York State of Confusion

Had the pleasure yesterday of being part of the local NPR station’s (the fabulous WRVO FM) coverage of New York Governor David Paterson’s State of the State address.  I was on as the “economic expert” regarding New York’s budget mess, a topic about which I admit to knowing very little (other than that I’m on both sides of the ledger, as a taxpayer and a SUNY professor).  Preparing for this stint was enlightening, but the enlightenment has a long way to go.

One thing I learned is that it’s maddeningly hard to get basic information about the New York State budget, like basic breakdowns of expenditures and receipts by category (a NYS equivalent of those pie charts that the IRS includes with the 1040 instructions would be most helpful).  Every line of the budget is published information, of course, so I’m not accusing anyone of suppressing it, but I have to think the public discourse about NYS’s fiscal mess would be better if people could find such basic information online.  (A colleague of mine said he’d read somewhere that New York does a much worse job than most other states of putting its budget info online.)  Once I get around to digging up this information in a library, I’ll post it.

In the meantime, here are some links that I found useful yesterday and some interesting things I learned:

* The Fiscal Policy Institute, a left-leaning think tank that combines its advocacy with economic literacy and solid research.  Their 2010 budget briefing should be out soon.  Their 2009 briefing is still timely in many respects.

* The recent report by the Empire Center for New York State Policy, part of the conservative Manhattan Institute.  The report said the state could save $10 billion per year over the next three years by making certain spending cuts or caps, including wage freezes for teachers and state workers, caps on school aid and Medicaid spending.  The report also calls for selling off state-owned golf courses, ski resorts, and Off-Track Betting agencies, which sounds good to me.

* “Just the Facts Tables” by the Public Policy Institute of New York State.  I learned a lot from these tables.  The state-by-state rankings are most interesting. They’re a bit dated (2006-2007), but still very instructive:

  • Yes, New York, we are a high-tax, high-spending state.  In terms of state & local spending (or taxes) per capita, New York ranks 2nd (to Alaska (!)) in spending, with $12,483.  New York ranks first in taxes, with $6,405 (apparently tolls, SUNY tuition, various fees, and the deficit account for the difference).  A bit more than half of the taxes are at the local level ($3,432, a full $1000 more than second-place New Jersey); New York ranks 11th in state taxes per capita.
  • Incredibly, New York ranks only 46th in higher education spending (I don’t know how that is possible), despite ranking third in K-12 education spending.
  • On Medicaid, the largest component of the budget, New York spends $44.7 billion.  In per capita terms, New York spends $2,316 on Medicaid, about 50% more than second-ranking Rhode Island.  This may be because New York has the highest poverty rate of any Northern state (except Montana) and a very high living and health care costs, especially in New York City.   (And since the Census uses the same dollar threshold in calculating poverty rates, despite big statewide variations in the cost of living, New York’s real poverty rate is much higher than the official rate of 14%.  And that was for 2007-2008, while the recession was still young.  New York’s poverty rate and thus Medicaid costs are surely much higher now.)
  • State pensions are a big issue.  In terms of average annual benefit, New York ranks ninth.  The average employee contribution is less than 2%, which ranks 45th.  In December 2009 the legislature passed changes to the pension system that are supposed to save $48.5 billion over 30 years, the remaining pension obligations are still huge.  (This is a problem for many states, not just New York.)  Adding an extra layer of risk is the fact that most of these pensions are defined-benefit (i.e., guaranteed), not defined-contribution (i.e., dependent on the performance of the assets they hold, like an IRA or 401(k) would be).  If the market tanks, taxpayers will have to make up the difference.

I’ll post more about the NYS fiscal mess when I know more.  The legislature typically takes a long time to pass a budget, so this will surely be an ongoing story.  Last year the budget got passed relatively early, but state finances deteriorated so rapidly that legislators had to come back and make several rounds of cuts, including to popular programs like education.  Stay tuned.


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