BUDGET WATCH 2003

A Guide to the Key Budget Issues
Confronting New York State in the Year Ahead

In 2002 New York State adopted a budget that increased spending at more than twice the rate of inflation, even in the face of a national recession and of the extraordinary damage done to New York's economy by the atrocity of 9-11.

As the year drew to a close, New Yorkers began to hear repeated and insistent warnings that their state government's budget was approaching a crisis stage. On November 7, the Public Policy Institute began publishing a regular series of one-page fact sheets on different aspects of the state's fiscal situation, from debt to local aid.

Those fact sheets, 11 in all, have now been updated with the latest numbers from the Census Bureau and other sources. They are collected here (as Adobe Acrobat PDF files) to serve as a resource guide for citizens who are following the budget debate in Albany. The contents:

• Introduction:
  
• Issue #1: New York State's fiscal problem in a word: SPENDING
  Much of the public discussion of the budget focuses on the state's "revenue problem." But the root of the shortfall is that Albany is spending more than its taxpayers can afford. In fact, if state-funds spending had simply risen no faster than inflation since 1998, the state would have saved $7.9 billion in the current fiscal year alone.
  
• Issue #2: To close the gap, go where the spending is: MEDICAID
  New York spends about 2.5 times the national average per-capita on this program - and the cost of Medicaid is up by 21 percent, or a staggering $6 billion, in just the last two years.
  
• Issue #3: Education spending is up. But what about performance—and equity?
  One of the perennial myths in Albany is that we're starving education. The fact is, state aid to schools has grown by $3.7 billion in just the last five years. We need to make sure that money is spent more effectively and efficiently - and we need to put the state's effort where the money is needed the most.
  
• Issue #4: Albany has cut our taxes—but they're still too high
  Pro-spending groups would like to fix Albany's budget problems by simply raising taxes. But despite commendable progress in cutting taxes over the last eight years, New York's tax burden remains well out of line with the competition. New tax cuts being phased in this year would benefit, among others, college students and the working poor.
  
• Issue #5: To meet its fiscal challenge, New York must restrain government employment
  The number of state and local government jobs is about 14 percent above what it would be if we matched the national average per capita - and they cost taxpayers an extra $14 billion a year.
  
• Issue #6: Fiscal update: the state budget shows why spending restraint is a good thing
  The current budget crisis would be far worse, had not Governor Pataki insisted on building up reserves in the past few years.
  
• Issue #7: Our local taxes are far too high—and more state aid won’t fix the problem
  Local taxes, especially property taxes, are by far New York's biggest competitive disadvantage. But increasing state taxes and spending won't cut local taxes - in fact, in the past local taxes have risen fastest just when state taxes were also increasing.
  
• Issue #8: Like taxes and spending, government debt in New York State is far too high
  State and local debt in New York now totals $9,357 per capita - second highest in the nation behind Alaska, and fully 81 percent above the national average.
  
• Issue #9: Our higher education system is a bargain for New York taxpayers
  Higher education is a bargain for taxpayers in New York. Partly because of our large and healthy independent sector, taxpayer spending on higher education is actually next-to-last among the states. But that doesn't mean we can take higher ed for granted. And yes, it looks like it's time to increase SUNY tuition.
  
• Issue #10: Health care looms every larger in the state budget—and the budget gap
  Not only is spending on Medicaid growing rapidly - the state is using other devices to pump more money into the health-care sector. And a lot of this money is even off-budget.
  
• Issue #11: New York grows more competitive as our ‘tax gap’ with other states shrinks
  Here is some good news: New York's tax gap - in comparison with the rest of the country, while still large, has started to shrink in recent years.
  
• Appendix
  A guide to sources of information used in this series - and places that interested citizens can look to learn still more about the budget situation.
  
• New! Issue #12: Why the New Jersey tax plan would be bad news for New York
  The public-employee unions claim that New York State could reap new revenues by closing corporate loopholes. But their plan is a virtual copy of the disaster that New Jersey inflicted on itself last summer. It could double - yes, double - New York's corporate income tax.