Monday, February 7, 2011

Our Bankrupt State

Governor Cuomo's budget reflects the horrible reality that New York State is in terrible financial condition, but it is painful for New York City and cuts education and healthcare significantly.

Painful Spending Cuts

With a $10 billion deficit staring him in the face, Governor Cuomo has proposed a budget with enormous spending cuts and almost no tax increases. Governor Cuomo is more responsible than Mayor Bloomberg, who has sought to fill his budget gaps with regressive taxes. But, Cuomo's reliance on budget cuts also has the potential to be highly regressive and to undermine the economic future of our state.

In addition to significant cuts to healthcare and education, Cuomo's budget brings us 10% cuts to each state agency without regard to which agencies currently use our tax payer dollars most effectively and without regard to which agencies' activities serve the most vulnerable populations in our state. Across the board cuts are rarely the best approach to improving a budget's quality, but Governor Cuomo's focus is on reducing our state's deficit. Across the board cuts are an excellent solution to reducing a deficit.

A large portion of New York State spending goes to help pay the bills of municipalities in our state. The cuts will put pressure on many cities and towns in New York State, and New York City will be one of the municipalities facing exacerbated budget problems as a result of our state's need to cut its deficit.

Automatic Government

In the 1988 book Automatic Government, its author Kent Weaver demonstrates the growth at the federal level in indexing government spending to the inflation rate. Because nearly half of the US federal budget is indexed to inflation, it is essentially on auto-pilot. Elected officials who do nothing are essentially voting for indexed programs to represent a larger portion of the budget each year as non-indexed programs face squeezes and cuts as deficit reduction is attempted.

In New York, the "automatic government" is far more unmanageable in a deficit reduction era. Governor Cuomo revealed as part of his budget address that both healthcare spending and education spending are scheduled to increase by 13% in the next fiscal year if nothing is done by the New York State Legislature to change the auto-pilot trajectory. In an environment where overall spending must be reduced, automatic 13% increases are an unwelcome challenge, and even if those automatic increases are not implemented in the upcoming year, they will return in the following year to ruin a future budget in the absence of major cuts in the rest of the budget. Neither education nor healthcare are services that New York State residents can easily do without, and the size of the cuts may require real sacrifices that are likely to be borne by those with the least resources in our society.

What's Next?

Now, the fight begins. There are no clear heroes and few clear villains in this fight. Budgets cuts will hurt vulnerable people, and some opposition to budget cuts comes from self-interested groups seeking to profit from the state and not to protect vulnerable constituencies. Let us pledge to pay close attention to this budget fight and support efforts to reduce the deficit in ways that do not target poor people and other vulnerable groups. Let us also recognize that the process of getting our house in order will require most of us to sacrifice. We do not have to like it, but we do have to endure it in order to give our state the type of future our children and their children deserve.

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