rba nys economic survival guide

Ten Essential Reforms We Can’t Live Without

ROCHESTER BUSINESS ALLIANCE

TABLE OF CONTENTS Steps to Survival

NEW YORK STATE ECONOMIC SURVIVAL GUIDE

End the Double StandardPAGE 6

Trim Medicaid’s ExcessPAGE 7

Cap the Taxpayer Burden PAGE 4

Stop Unfunded MandatesPAGE 5

steps to

SURVIVALsteps to

SURVIVAL

Control the DebtPAGE 8

Improve the Competitive ClimatePAGE 9

Reform Economic DevelopmentPAGE 10

Encourage Innovation in EducationPAGE 11

Reduce the Size of GovernmentPAGE 12

Lower the Cost of EnergyPAGE 14

INTRODUCTION New York Is in PerilTen Essential Reforms We Can’t Live Without

The pressure building from years of excessive government spending and irresponsible state budgets has reached a breaking point. Our ability to restore financial health is in jeopardy.

Even before the recession, jobs and families were leaving New York for more business-friendly states. From 1993 to 2008, a net total of more than 120,000 jobs moved elsewhere—including 50,000 to New Jersey, 18,000 to Connecticut and 17,000 to Florida. More than 1.7 million people have moved from New York to other states in the past decade, the largest out-migration from any state.1

With the recession came more job losses and reduced state revenues. But instead of curtailing spending, our leaders have increased the state budget more than $30 billion over the last five years. State borrowing has grown by 25 percent over that time, creating a debt burden second highest among large states.2

New York spends more per capita on Medicaid and public education than any other state, and our compensation of public employees is among the highest in the nation. The cost to taxpayers is extreme. New Yorkers pay more to their state and local governments than the residents of any other state but New Jersey. Still, New York is projecting deficits of $40 billion over the next three years.

Our hopes for survival are pinned on the state leaders we elected in 2010. Governor-elect Cuomo and Lieutenant Governor-elect Duffy, with their Plan for Action, have proposed hundreds of good ideas for reforming state government and restoring fiscal responsibility. Many newly elected or reelected legislators have promised to support similar reforms.

The Rochester Business Alliance welcomes these leaders to office. But we must warn that our state’s financial condition is critical. Without a major change in fiscal policies—starting with the 2011 budget process—taxing and borrowing will continue to go up, while jobs and population continue to flow out. As other states grow slowly out of the recession, New York may not recover.

This guide identifies 10 critical priorities to stop the financial bleeding. We propose specific policy changes to ease the tax burden and help create jobs, which are the lifeblood of every state’s economy. Most of our recommendations can be implemented relatively quickly; we will track the state’s progress and report on each priority in the months ahead.

If our leaders take these steps, 2011 can be remembered as the year the Empire State regained its financial footing. If not, it will be the year that our state ignored the final warning signs on the path to economic ruin.

NEW YORK IS IN PERIL. WE NEED QUICK ACTION FROM OUR LEADERS TO SURVIVE.

1 EnterprisingNY: Tracking firms, jobs and economic growth in the Empire State, Empire Center for New York State Policy, 2010

2 Debt Impact Study, March 2010, Office of the State Comptroller, p. 2

3 State and Local Tax Burdens: All States, One Year, 1977–2008, Tax Foundation

120,000 net jobs lost to other states from 1993–2008 #1

rank among all states for spending on education and Medicaid

$6,419 in state and local taxes for every resident, the nation’s second-highest tax burden

6.4%of personal income owed in state debt, second highest among large states

ISSUE Cap the Taxpayer Burden


We must get our State’s fiscal house in order by immediately imposing a cap on state spending … committing to no increase in personal or corporate income taxes or sales taxes, and imposing a local property tax cap. ~ Andrew Cuomo

No change would do more for our state’s survival than enacting this pledge, a key element of the action plan published by Governor-elect Cuomo during the campaign.

These words promise essential relief to New York taxpayers, who shoulder the nation’s second heaviest tax burden. At $6,419 per person, the state and local taxes paid by New Yorkers are more than 40 percent higher than taxes on Pennsylvania residents, more than 75 percent higher than taxes in North Carolina and more than 85 percent higher than Florida taxes.4

Local property taxes are especially high. They fuel school spending that has grown far faster than the rate of inflation for years, giving New York the highest per-pupil costs for K–12 education in the nation. When property taxes are measured as a percentage of home value, New York is home to nine of the nation’s 10 most heavily taxed counties, and 15 of the top 25.5

A cap on spending and all state taxes, as the governor-elect has proposed, is critical. Without this comprehensive approach, the legislature will continue a cycle of spending, taxing and burden-shifting that has ballooned state finances out of control.

Like any healthy diet after a binge of overeating, the caps will cause discomfort. But they will force honest discussions about what services people really need, and which ones we simply can’t afford. All taxpayers should do everything they can to help Governor-elect Cuomo make good on his pledge, and require state legislators to support him.

WE’VE ENDURED THE NATION’S SECOND HIGHEST TAX BURDEN LONG ENOUGH.

steps to

SURVIVALsteps to

SURVIVALCap property tax increases at no more than 2 percent or the rate of inflation annually, whichever is lower

Impose a state spending cap (also 2 percent or the rate of inflation)

No increase in other taxes

Declare a fiscal emergency and freeze pay for all state employees (see page 6)

$6,41911.7 percent of per capita income

New York

$4,2839.7 percent of per capita income

U.S. Average

Taxpayers in New York spend 50 percent more than the national average on state and local taxes. (2008 Tax Foundation data)

A HEAVY TAX LOAD

COSTLY RULES WILL SINK TAXPAYERS.

ISSUE Stop Unfunded MandatesTen Essential Reforms We Can’t Live Without

Controlling unfunded mandates on school districts, local governments and businesses must go hand in hand with the tax and spending caps. When the state creates a requirement that somebody else pays to implement, the cost of government still goes up. The burden is just being shifted, giving affected organizations less control over their own budgets.

School districts, health insurers, local governments, utilities and private businesses are subject every year to new state laws and regulations, many of which create a cost burden.

The issue is not that every single mandate should be paid for in the state budget. It’s that the cost of laws and regulations must be analyzed up front. Policy makers, legislators and voters should make informed decisions about whether the benefits of a change justify its expense, and who should pay.

There are structures in place to do this. Governor Paterson’s Executive Order 25 required state agencies under his direct jurisdiction to “evaluate, reform, or repeal ... rules and paperwork requirements in order to reduce substantially unnecessary burdens, costs and inefficiencies.”6 The Governor’s Office of Regulatory Reform is charged with enforcing the order. Our new governor needs to appoint a director with the talent, resources and authority to tackle this challenge aggressively.

Similarly, legislative actions require a fiscal impact assessment, embodied in the legislative “fiscal notes.” Yet fiscal notes are often driven by the bill sponsor (or beneficiary) and the quality is uneven. A 2007 law requires an expert panel, the Healthcare Quality and Cost Containment Commission, to analyze the impact of new health care mandates. After three years, the commission has yet to be formed.

Taking steps to make the existing structures work will reduce the budget turbulence that unfunded mandates create for other governments and private-sector employers.

4 Tax Foundation, 2008 analysis of state and local taxes

5 Tax Foundation, 2010. The nine New York counties are Monroe, Niagara, Wayne, Chemung, Chautauqua, Erie, Onondaga, Steuben and Madison.

6 www.state.ny.us/governor/ executive_orders

steps to

SURVIVALsteps to

SURVIVALAppoint a strong leader for the Governor’s Office of Regulatory Reform with high-level support from the governor

By the end of 2011, produce a report detailing mandates on public schools and their costs

Delegate a review of all fiscal notes to the Division of the Budget and publish the results

Require the comptroller to produce an annual report on the cost of mandates

Seat the Healthcare Quality and Cost Containment Commission so it can vet the benefits versus costs of any healthcare-related mandates before legislative action

86–8

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nd

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400

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100

50

NEW YORK STATE SPENDING OUTSTRIPS INFLATION

All Funds Spending (86–87=100)CPI (June 86=100)

State government spending has grown far faster than inflation over the past 10 years and is rising out of control. (State comptroller data)

ISSUE End the Double Standard


State workers have an unfair advantage. The old notion that government employees are paid less than their private sector counterparts, but receive slightly better fringe benefits, is no longer true. Statewide, excluding New York City, salaries for state and local government employees are 15 percent higher than the private-sector average.7

Taxpayers also fund fringe benefits—including health insurance, paid time off and pensions—for public employees that far exceed private-sector norms. For example, almost all public employees have defined-benefit pensions, compared to only 20 percent of the private sector, where 401(k) accounts are prevalent.

In Monroe County, taxpayers would save more than $40 million annually if school districts and local governments matched the national average for employer contributions for health insurance. Every contract exceeded the private-sector average for paid time off—39 days for a 10-year employee—with a median benefit that ranged 20 to 60 percent higher.8

Pensions cost the state nearly $1.5 billion, an amount expected to grow to $2 billion by 2014. The average pension received by police and firefighters retiring in 2010 ($61,295) is more than double that of regular civilian employees ($25,440).9

Employee pay and benefits represent roughly two-thirds of spending by state and local governments. We cannot close the state’s budget gap without addressing the issue.

There will be an opportunity to do that in 2011, when the governor renegotiates expiring contracts with many of the state’s largest employee unions. In New York, however, two unique statutes—the Taylor Law and the Triborough Amendment—combine to ensure that public employees continue to receive pay and benefit increases even when they have no contract.

Public employee unions retain unfair bargaining power, because there is no penalty for failing to agree to new contract terms. As our chief negotiator, Governor-elect Cuomo should strike a hard line in 2011. Our state is an employer facing a financial crisis, and we cannot afford a compensation system that rewards public employees at standards far above the private sector.

PUBLIC EMPLOYEE PAY IS UNFAIR AND UNSUSTAINABLY HIGH.

7 Payroll and employment 2009 data, U.S. Bureau of Labor Statistics. Median private-sector pay is about $43,000 annually, compared to nearly $50,000 for workers in state and local government

8 “Public vs. Private Sector Employee Benefits: A Summary Analysis of School and Local Government Union Contracts in Monroe County,” CGR report, June 2009

9 “Things New Yorkers Should Know About Public Retirement Benefits in New York State,” Citizens Budget Commission report, October 2010

10 Medicaid & CHIP spending data, Kaiser Family Foundation, www.statehealthfacts.org

11 “Medicaid in New York 2006,” Citizens Budget Commission

steps to

SURVIVALsteps to

SURVIVALLet the Taylor Law’s binding arbitration provision “sunset” in 2011

Use private-sector benchmarks for salary increases and benefit sharing in contract negotiations

Change the Triborough Amendment so that pay and benefits remain fixed if there is no contract

Following the SUNY/CUNY model, immediately offer defined-contribution retirement options for new employees, and pass the bill moving all non-civil-service employees to defined-contribution plans

Make defined-contribution retirement mandatory for new employees by phasing in Tier VI as proposed by Governor-elect Cuomo

Stop including overtime in final salary calculations for pension purposes

ISSUE Trim Medicaid’s ExcessTen Essential Reforms We Can’t Live Without

New Yorkers pay the highest bills in the nation for Medicaid, the government insurance program designed to provide medical care and long-term care services for low-income and disabled people. With spending of nearly $52 billion this year, projected to grow another $1.8 billion next year, our Medicaid costs are more than twice the national average per capita.

Taxpayers should support the governor-elect’s proposals to restructure the program and make it more efficient, while encouraging steps that can be taken more quickly to trim excessive costs. One step is to manage Medicaid at the state level. Benefits today are administered by the 62 county governments, with varying levels of efficiency and little incentive to trim costs.

Another is to change New York’s “spousal refusal” provision, which allows any married adult to qualify for Medicaid long-term care services if the spouse (or parent of a sick child) refuses to pay. Spousal refusal is a major contributor to New York’s extremely high costs for long-term care. State spending for Medicaid long-term care was $1,058 per resident in 2008, compared to a national average of $378.10

New York also provides coverage for many services that aren’t required by the federal government, which matches state Medicaid payments. One example is personal care services for Medicaid recipients who need assistance with daily living tasks, such as housekeeping and shopping. By reducing the average number of hours from 30 to 17 for this optional service—still 50 percent above the national average for personal care—taxpayers could save about $1.5 billion annually.11

New York can no longer afford the nation’s richest Medicaid program, but we don’t need a hatchet to fix it. By trimming excessive benefits to more closely match national norms, the state can save billions of dollars.

THE NATION’S MOST EXPENSIVE MEDICAID PLAN IS DAMAGING OUR STATE’S HEALTH.

steps to

SURVIVALsteps to

SURVIVALAdminister Medicaid at the state level; minimally, set reimbursement rates at the state rather than county level

Eliminate New York’s unique spousal refusal option for long-term care eligibility

Pass legislation that increases tax-credit incentives for people to buy private long-term care insurance

Reduce the authorized number of personal care services hours to 17 per week

Change other optional benefits to bring them more in line with other states

$47.6bNew York

$38.7bCalifornia

$14.7bFlorida

New York spends more on Medicaid benefits than any other state—$9,610 per enrollee compared to a U.S. average of $5,830. (Kaiser Family Foundation)

SWOLLEN MEDICAID PLAN

ISSUE Control the Debt


Rather than cut spending during the economic downturn, state government has expanded the debt pool to pay for services, which restricts our financial flexibility.

Over the past five years, state-funded debt rose 25 percent, from $48.5 billion to more than $60 billion. The state comptroller projected in 2010 that debt will rise to $67 billion in the 2014–15 fiscal year, an increase of 38 percent since 2005.12 In 2008, New York’s state debt per capita was $2,925. In 2009–10, the outstanding debt rose to $3,100 per person and 6.4 percent of personal income.13

The Debt Reform Act of 2000, a law designed to limit the state’s use of debt, obviously hasn’t worked. It permits “backdoor borrowing” by state authorities, without voter approval, which currently accounts for 94 percent of the state’s debt load. Though the law prohibits the use of debt for non-capital projects, nearly $8 billion has been borrowed to pay operating costs since it passed.14

The state’s increased reliance on borrowing hurts taxpayers in multiple ways. It increases the amount of money we must pay each year to service the debt—among the largest states, New York is surpassed only by California and Illinois in the ratio of debt service to total revenue. It prevents state leaders from making the hard choices required to live within our means. And it constrains future taxpayers by making them pay for today’s services.

WE ARE TRAPPED IN A CREDIT SWAMP.

12 Debt Impact Study, March 2010, Office of the State Comptroller, p. 2

13 Ibid, p. 14 14 Ibid, p. 115 EnterprisingNY: Tracking firms,

jobs and economic growth in the Empire State, Empire Center, Oct. 25, 2010, p. 5

16 Ibid, p. 5

steps to

SURVIVALsteps to

SURVIVALDo not increase debt caps

Limit the total of state-funded debt to 5 percent of the state’s personal income

Ban backdoor borrowing by state authorities, so that new debt is approved by voters

Support efforts to restrict use of long-term debt to capital projects

$3,621New Jersey

$2,925New York

$1,877Illinois

$1,805California

$1,115Florida

2008 DEBT PER CAPITA

New York’s rising use of credit has saddled taxpayers with a state debt burden of more than $2,900 per person, second only to New Jersey among the 10 largest states. (State Comptroller)

BUY NOW, PAY LATER

ISSUE Improve the Competitive ClimateTen Essential Reforms We Can’t Live Without

High taxes, overzealous regulations and unreasonable mandates create a hostile environment for the employers who fuel economic growth. This hampers the ability of all businesses to compete, and it causes some to fail. New York lost more jobs than any other state from 1993 to 2007.15

Other employers move to friendlier climates. While New York gained almost 272,000 jobs over 15 years from businesses moving in, we lost 392,000 jobs to other states—the third-greatest net out-migration of jobs in the nation.16 To reverse the trend, lawmakers and state agencies must help to lower the cost of doing business in New York.

A new workers’ compensation law, passed in 2007, promised to help. At that time, New York had a workers’ compensation system with one of the highest costs but lowest benefits in the nation. Payments to claimants have increased, but efficiency gains crucial to long-term cost savings have yet to be realized. The lack of progress on reform, coupled with an increase in new administrative requirements, has increased participant frustration and system costs.

The Great Recession has brought New York’s unemployment insurance trust fund to bankruptcy. In response, many legislators propose increasing benefits and requiring businesses to pay more for each employee. Some proposals would increase taxes on employers by 14.7 percent in a single year! That reduces the incentive to hire and runs counter to the best unemployment solution—creating jobs. The administration should explore new models for unemployment insurance that address fund solvency and benefit levels separately.

Health insurance premiums in New York are another major burden, and state mandates on private insurers are a significant cost driver. The new administration needs to hold the line against any new insurance mandates, at least until an independent scoring process is in place and the insurance changes mandated by federal health reform legislation take effect.

There are many other legislative proposals to increase business costs—extending prevailing-wage standards to private-sector workers, increasing time-off mandates, and enabling employees to sue for enduring a “hostile workplace” even if they have never reported a concern. The new administration must say no to these proposals and create a friendlier environment that supports the growth of jobs.

JOBS ARE A STATE’S MOST BASIC FORM OF SUSTENANCE.

steps to

SURVIVALsteps to

SURVIVALComplete workers’ compensation medical, treatment and impairment guidelines, and control permanent disability costs

Support unemployment insurance models that minimize the impact on employers, separate fund solvency from benefit levels, and offer employees additional wage-insurance options

Reject new health insurance mandates, prevailing-wage mandates and other mandates that increase the cost of doing business

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-$11.7bFlorida

-$7.4bNew Jersey

-$11.5b41 other states

-$1.9bPennsylvania

-$2.5bNorth Carolina

-$3.5bConnecticut

From 2000–2008, $38.4 billion in taxable income migrated to 46 other states as jobs and people moved away. New York had a net income gain from only four states totaling $310 million. (Tax Foundation)

WAVING BYE-BYE TO $38 BILLION OF INCOME

ISSUE Reform Economic Development


If success in economic development were measured by volume of effort, New York would be a winner. Our state has 28 government agencies, 115 industrial development agencies, 618 local development corporations, 72 Empire Zones, 50 business districts, 49 urban renewal agencies and 10 regional councils with staffs and programs designed to promote economic development.17

Attracting and retaining jobs is the real measure—and unfortunately, New York’s job growth has been far slower than other states. Over the past 20 years, the number of private-sector jobs in New York has increased by only 4 percent, while jobs nationwide have increased 18 percent.18

Economic development incentives are not the only reason that employers choose to expand, or to locate in one state over another. It is more important for government to get the basics right—strong infrastructure, efficient services, good schools, reasonable taxes and a friendly business climate.

But in a nation and a world where governments compete with each other to attract jobs, New York needs to do better. The hundreds of state and local organizations involved in economic development are not pursuing a coherent strategy. To the contrary, they often pit neighboring communities against each other, creating a shell game that moves jobs around without creating new ones.

The Rochester Business Alliance supports the proposal by Governor-elect Cuomo to create regional councils that review economic development plans and reduce unproductive local competition. We especially support his announced plans to place economic development authority in the hands of someone who understands the challenges of the upstate economy—our new lieutenant governor and Rochester’s outgoing mayor, Robert Duffy.

TOO MANY PROGRAMS AND AGENCIES ARE ATTRACTING TOO FEW JOBS.

17 From multiple sources cited in The New New York Agenda: A Plan for Action, Andrew Cuomo, p. 95

18 U.S. Department of Labor, Bureau of Labor Statistics

19 National Center for Education Statistics, 2009

20 U.S. Census Bureau

steps to

SURVIVALsteps to

SURVIVALCentralize responsibility for economic development initiatives under the lieutenant governor, ensuring a statewide focus with an understanding of upstate needs

Ensure that the new regional councils have real authority, with the ability to approve or deny economic development grants and loans

Support sectors and institutions with track records of creating globally competitive jobs that add value to the economy

ISSUE Encourage Innovation in EducationTen Essential Reforms We Can’t Live Without

Good schools are catalysts for economic development. They train future workers, attract well-educated families and at the college level can serve as resources or partners to help create new businesses. New York has many fine school districts and institutions of higher learning, but we need to do better—and excessive control from Albany hampers progress.

At the K–12 level, New York spent $15,981 per student in 2006–2007. That’s more than any other state, and 71 percent more than the national average.19 That investment does not translate to better educational outcomes: New York ranks 40th in the rate of high school graduation, with only about two-thirds of students statewide receiving a diploma.

Two solutions to reducing educational costs are outlined elsewhere in this report: reducing unfunded mandates that don’t improve educational performance, and bringing employee compensation in line with taxpayers’ ability to pay.

Charter schools can help to boost educational performance. Many of these schools are performing well, and the state has withdrawn charters from failing schools. The successful ones can serve as incubators that assist districts in developing new educational approaches. In Rochester, a unique charter compact—signed by all public education stakeholders—encourages collaboration, with a specific objective of “scaling up” successful charter methods in district schools.

Higher education in New York is a success story. Our colleges and universities enrolled 101,000 freshmen in 2007, second only to California. Based

on the number of eligible in-state students, New York enrolled 118 percent of its population share, compared to 66 percent in California.20

The SUNY system, with 64 diverse campuses and many nationally recognized programs, is a strong contributor to this success. But Albany treats SUNY like a state agency, setting tuition rates as part of the budget, controlling purchase decisions and overseeing school operations. The Public Higher Education Empowerment and Innovation Act would allow SUNY schools to compete more effectively in the academic marketplace and to partner more easily with businesses. Similarly, we need to encourage collaborations with private colleges and universities that help to create jobs.

By encouraging innovation and relaxing mandates, New York can make public education the economic engine we need it to be.

STRONGER CAMPUSES AND CLASSROOMS WILL PROTECT OUR FUTURE.

steps to

SURVIVALsteps to

SURVIVALPass the SUNY Public Higher Education Empowerment and Innovation Act

Eliminate the cap on charter schools

Support job-creating initiatives of private and public-sector institutions

New York spends more money per pupil on K–12 education than any other state, but the four-year graduation rate is among the 10 lowest in the nation. (Census Bureau and National Center for Education Statistics.)

HIGHEST K–12 SPENDING

$9,666

Four-year high school graduation rate, 2005–2006

National average

New York State average

National average

New York State average

$15,981

73.2% 67.4%

LOW K–12 SUCCESS

Spending per pupil, 2006–2007

ISSUE Reduce the Size of Government


The sheer size of government contributes to our state’s high tax burden. We need a fresh look at delivering services in the most efficient way possible, taming the growth of government before the cost eats taxpayers alive.

According to an attorney general’s survey, New York has more than 1,000 state government entities.21 A patchwork quilt of overlapping agencies, authorities, boards and commissions has evolved over our long history. The last significant reorganization of the state’s executive branch occurred under Governor Al Smith in 1927, when the state employed 29,000 people. In 2010, the state employed more than 228,000 full-time-equivalent employees. These numbers alone don’t suggest inefficiency, but any large organization should work to deliver services at lower cost, especially in tight budget times.

To his credit, Governor-elect Cuomo has made government efficiency a priority. His goal, which the Rochester Business Alliance strongly supports, is to reduce the number of state agencies, authorities and commissions by 20 percent. Although streamlining New York governments will take time, the steps he has outlined to begin the process should be immediate priorities.

A first step is analyzing the current state bureaucracy to identify efficiency improvements, with help from private-sector reorganization experts. Seventeen other states have conducted similar reviews in the past decade, but no state needs it more than New York.

To make efficiencies happen, the governor should have authority to reorganize the executive branch, as is true in 31 other states.22 This would allow the governor to make changes in the executive branch, which could be rejected by legislative vote. Before this change, another step the governor can take is simply not to appoint commissioners to state boards that no longer serve a useful purpose.

Reforming and restructuring public authorities must be on the table in any review of government efficiency. The first state authorities were established 90 years ago, as a way for the state to fund capital projects without requiring a voter referendum. Today, hundreds of authorities operate as a “fourth branch of government,” delivering thousands of services that overlap with government agencies.

The Transportation Department, for example, shares responsibility for meeting the state’s infrastructure and transit needs with more than 50 state and local authorities. Low-income housing policy is not driven primarily by the state’s Division of Housing and Community Renewal, but by four state housing authorities and nearly 200 local ones. Authorities control 85 percent of the state’s infrastructure and account for 93 percent of state debt, without direct oversight from elected leaders.

With more than 10,500 government entities at the local level, communities are served by many layers of overlapping services and functions. From tax assessments to highway maintenance to delivering

21 “A New N.Y.: A Blueprint to Reform Government,” Office of the Attorney General, New York State, 2008, available at www.ag.ny.gov

22 “The Book of the States: 2009 Edition,” Council of State Governments, pages 190–91

23 “Local Government Efficiency Program Annual Report 2008–09,” New York State Department of State

OVERSIZED GOVERNMENTS DEVOUR TAXPAYER DOLLARS.

ISSUE Reduce the Size of GovernmentTen Essential Reforms We Can’t Live Without

water, taxpayers would benefit from regional planning and cooperative administration of services. But that is difficult to do under our current structure.

The New York State Commission on Local Government Efficiency and Competitiveness, chaired by former Lieutenant Governor Stan Lundine, offers good ideas for streamlining. Its 2008 recommendations include requiring that collective bargaining agreements be renegotiated when local governments consolidate, converting many locally elected offices (such as highway superintendent and tax assessor) to appointed positions, and requiring villages with fewer than 500 residents to hold referenda in order to continue separate village governments.

On the subject of consolidation, many taxpayers want to have it both ways. While decrying the high cost of government, they reject proposals to save money by consolidating services. The state should encourage communities to make their local governments more efficient with steps that could include sharing information on best practices statewide, creating joint purchasing agreements, and providing grants to fund consolidation studies.

Experience suggests that incentives like these offer a good return on investment. A study by the Department of State found that $40 million spent assisting communities with shared-service and consolidation projects is yielding $350 million in reduced costs to local government.23

steps to

SURVIVALsteps to

SURVIVALReduce the number of state agencies, authorities and commissions by 20 percent

Pass legislation giving the governor authority to reorganize the executive branch, with changes taking effect unless the legislature objects

Do not appoint new commissioners to unnecessary state agencies

Support implementation of Lundine Commission recommendations

Use grants, incentives and information-sharing to promote government consolidation and regional planning

GOT GOVERNMENT?

57

Counties

62

Cities

932

Towns

556

Villages

991

Authorities

6,900+

Special districts

Taxpayers fund more than 1,000 state agencies and 10,500 local governments across New York State (Attorney General)

996

School districts & BOCES

ISSUE Lower the Cost of Energy


The strain of utility taxes is a key reason that New York loses businesses to competing states. Taxes fuel higher energy costs compared to other states. In fact, New York has the highest average retail price for electricity of the largest 15 states. Nationwide, only Hawaii and Connecticut utilities charge more. At an average of 16.57 cents per kilowatt-hour, electricity costs in New York are 78 percent higher than in Pennsylvania, 97 percent higher than in Ohio and more than double North Carolina’s.24

It’s critical to make New York’s energy costs more competitive, but the state increasingly takes money from utilities as a backdoor tax. Excess “18-a” utility assessments, which are designed to pay for the Public Service Commission, are diverted to the general fund, instead of being returned to utility customers. Funds raised by the Regional Greenhouse Gas Initiative (RGGI)—a cap-and-trade system for reducing emissions from electricity-producing power plants in 10 states—are also being diverted to the general fund, which amounts to a new carbon tax.

A good place to start lowering taxes is to eliminate the systems benefit charge, which benefits programs administered by the New York State Energy Research and Development Authority. These are worthy causes, but they don’t justify reduced competitiveness.

The end of 2002 saw the expiration of New York State Article X, which streamlined the process for siting new power plants. Proposed legislation in 2007 that would have revived Article X failed to gain bipartisan support, but the effort should be renewed in 2011. Article X would help our state develop new energy sources, creating jobs and reducing electricity prices for all New York residents and businesses.

One potential source is the Marcellus Shale, which lies below a vast region covering the Southern Tier, and contains huge amounts of natural gas. Extracting the gas requires hydraulic fracturing, which is being used at scores of drilling operations in Pennsylvania just across the New York border. But the state legislature has halted new permits for Marcellus Shale extraction until May 15, 2011. We need to accelerate a negotiated settlement permitting gas extraction from Marcellus Shale. It will bring jobs and income to New York, along with lower gas prices.

24 Average Retail Price of Electricity by State, 2008, U.S. Energy Information Administration, www.eia.doe.gov

OUR STATE SUFFERS FROM THE HIGH COST OF POWER.

steps to

SURVIVALsteps to

SURVIVALCut taxes on utilities, starting with the systems benefit charge

Reduce excessive 18-a utility assessments

Renew Article X so that we can bring new power plants online safely but with minimum red tape

Reach a legislative settlement that will permit the extraction of gas from the Marcellus Shale

SUMMARY New DirectionTen Essential Reforms We Can’t Live Without

For 20 years, the Empire State has suffered an economic decline that started gradually but has reached a crisis point.

State government spends more than taxpayers can afford, and our leaders have committed to unsustainable annual increases. They borrow money to help close the gap, while pushing costly new requirements onto school districts, local governments and businesses. The cycle goes on, year after year, even as the migration of jobs and residents to other states has grown from a trickle to a flood.

That’s business as usual in Albany. It’s a disaster for the individual taxpayers and private-sector employers who are struggling to remain afloat.

The new governor and legislature that take office in 2011 offer our last and best chance to survive. State leaders must change business as usual from the day they take office, focusing on the priorities laid out in this report.

All the steps can be implemented with determination and effort. Many of them involve just saying no:

NO TO NEW TAXES.

NO TO SPENDING PROGRAMS WE CAN’T AFFORD.

NO TO INCREASED COSTS ON EMPLOYERS.

New York’s economy can rise again, reversing the trend of people and businesses moving away. We can create jobs and climb out of the recession as well as or better than other states, if our leaders are willing to make changes now. If they don’t, we may never recover.

State leaders are not the only ones who must act. All taxpayers should fight for New York’s survival, by demanding change from their state legislators and other leaders. To get involved, visit the Rochester Business Alliance website at www.RBAlliance.com and support the Unshackle Upstate effort at www.UnshackleUpstate.com.

Look for more reports in the months ahead, and more ideas to create jobs. Together, we can make 2011 the year that the Empire State reverses its economic decline and returns to a path of greatness.

WE NEED QUICK STEPS IN A NEW DIRECTION TO BRING NEW YORK BACK.

Help New York Survive

As our new governor takes office in 2011, New York is in financial danger. We must take steps immediately to control government spending and create jobs.

© Rochester Business Alliance, Nov. 2010

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