The State of New York

Probably the most disturbing statistic I read about this weekend is the extent to which New York State depends on Wall Street. Apparently, 20% of state revenue is garnered from the taxes on bonuses paid to investment bankers and capital gains (source: Newsday). Now I knew it was a significant amount but 1/5 of the budget is alot. New York State has a budget of $120,000,000,000 a year. Of course with the decimation of most of the major financial firms continuing to escalate, Citigroup announced layoffs of 50,000 workers today, it is not hard to predict that this stream of revenue will be significantly reduced. 50% is the amount currently anticipated or approximately $12,000,000,000 less. The State is on track to have a $1,500,000,000 deficit this year and a $12,500,000,000 deficit next year.

This past July, Governor Patterson sounded the early alarm and hauled the Legislature in to address an additional $600,000,000 in budget cuts to cover the then-anticipated budget shortfall for this year and at the time projected a deficit of nearly $6,000,000,000 for next year. As we can see, these numbers have more than doubled since July so tomorrow the Legislature is being hauled back in again to address the spiraling budget deficit. From the top - corporations and governments - to the bottom - individuals, we are all saddled with decreasing income/revenue and higher debt. 

Unfortunately, instead of trying to come up with solutions, the advance notice is of Legislators bickering about programs that they do not want to touch, funds for education, healthcare, adminstration, pensions and themselves. Yes, it will be difficult to cut funds for all of these programs, New York spends nearly half of its budget, $59,000,000,000 for public health care costs, Medicare, Medicaid and Child Health Plus, alone. 

These funds represent the neediest cases but for all of those people who are losing their jobs, the projection is over 160,000 jobs across the state this year, the prospect of a majority of those persons paying into COBRA; extending their employer-based healthcare beyond a layoff is slim. Cobra costs are daunting. I have done it. It cost us $1200 a month to COBRA our healthcare costs a few years ago when we decided to go into business for ourselves. Most people will not be able to afford COBRA so that will be more people on the public health rolls. How do you cut the budget here? The other major area is education. None of the Legislators want to cut those funds either; New York State funding helps to keep my school taxes at an unrespectable $7,000 a year. Long Island school taxes are legendary, most of us are hanging by a thread, we couldn't survive a hike in taxes if the state cuts aid. 

So if not, health and education, then where? You have try to cut people but NY State is a union state. The teachers union is 600,000 strong then there is the Civil Service union with 300,000 members and police and transit and service employees and healthcare employees adding tens of thousands more; all the heavy-hitters with generous pensions, healthcare benefits and salary to boot. All of the Legislators owe some allegiance to one or the other of these unions so who will have the balls to cut them? Look, the Congress is arguing over saving GM for precisely the same reason; huge legacy costs will probably crimp its ability to become self-sustaining even if it does come up with the car of the future.

There is no good solution to the state's budget crisis but someone has to pay because there is no more money; most economists have now agreed that we will suffer a deep and protracted recession. So far Governor Patterson has been effective in keeping everything on the table. Instead of bellyaching and intractability, our Legislators should attempt to come up with some budget-reducing ideas that they could swallow; like it or not, we all have to do it.