Budget Battle Blog

Budget Battle Blog Retired

2008-10-10T13:30:00.001-04:00

Checkout www.WorkingFamilies.org for the latest on the New York budget fight.

Siena Poll: New Yorkers prefer circuit breaker almost 2-1, Newsday Doesn't Get It

2008-08-18T11:44:00.004-04:00

Today’s Siena NY poll confirms what should be obvious, New Yorkers prefer a tax cut in the form of a circuit breaker over a cap in the amount property taxes can increase:

"Voters continue to support the circuit breaker over the cap if only one action is taken 58-33 percent (up from 52-36 percent last month)."

Although they prefer spending cuts to raising their own taxes to balance the budget, New Yorkers weren’t asked if they support the millionaire’s tax, which previous polls showed was backed 4 – 1.

E.J. McMahon from the Empire Center is shocked (!) that defenders of public education appear to be working together to fight a school funding cap.

Newsday’s editorial board doesn’t love the WFP’s ad campaign against the school-funding cap:

“A television ad from the Working Families Party and the Alliance for Quality Education calls the cap a "gimmick" and a "scheme" that "won't cut property taxes." At the same time, NYSUT's Web site says that $460 million in local revenue for education would have been lost over the past four years had the cap been in place. So, which is it?”

We're sorry to ruin Newsday's Gotcha moment, but here's the explanation: a school-spending cap doesn't lower property taxes, only the rate they can increase. That much is clear. Faced with rising costs like fuel and healthcare, many communities around the state have voted to tax themselves at rates above the would-be cap to ensure their children's education when state aid for schools has faltered. With a cap in place, cities and towns could be trapped - unable to raise their own taxes, stuck with rising costs, but left out to dry by Albany. That's how the cap threatens our schools.

A little more explanation from Andrew Reschovsky, from the Robert M. La Follette School of Public Affairs at the University of Wisconsin at Madison, who writes in Saturday’s Times Union:

"A tax cap will tie the hands of local school officials the next time state aid is reduced. They will have no choice but to reduce education spending. And now, with New York state facing a budget deficit of more than $6 billion, Paterson has indicated that he may be forced to recommend cuts in state education spending.

"While tight budgets might at first produce some efficiencies, evidence from other states that have lived under property tax caps suggests that the long-term consequence of restraining school spending in a world of rising costs is a marked decline in student performance. The research suggests passage of revenue limits can lead to larger class sizes, a lessened ability to hire the best qualified teachers and lower test scores."

Elsewhere, legislative leaders move toward a deal on spending cuts (see also here and here).

High on the list of good ideas for prudent spending cuts, the Times reminds us, is reform of the state’s Industrial Development Agencies (IDAs), which give away millions in tax breaks to companies that fail to produce the new jobs they’ve promised.

Last word to Reschovsky:

"The final irony is that the property tax caps will provide very little tax relief to those New York homeowners facing the heaviest burdens.… If the goal of the New York Legislature is to provide property tax relief to those homeowners whose property taxes exceed their ability to pay, a much better policy would be a so-called circuit breaker or homestead exemption that that targets property tax relief to those individuals most in need."

Editorial Pages Unite for Common Sense; Post Ignores History, Facts

2008-08-15T12:06:00.000-04:00

The Schenectady Star-Gazette added itself to the ranks of editorial pages calling for a balanced approached to solving the budget gap:

Tax hikes aren’t pleasant, but what does the governor think is going to happen in municipalities like Schenectady if aid is cut (creating a $700,000 deficit in the city’s case)? Eventually, local jobs will be lost or property taxes will have to be raised — and on people who have far more modest incomes than millionaires.

The state needs to act fast to head off a financial crisis, but it needs to act fairly. The best way is to cut a little in a lot places, while raising taxes on the very rich.

That call for reason adds the paper to the ranks of the New York Times, the Albany Times Union, and the Syracuse Post-Standard, all of whose editorial pages have proposed a combination of prudent spending cuts and modest tax hikes on the rich to balance the budget.

The New York Post (surprise, surprise) broke that consensus today, boldly ignore facts and (very) recent history:

Mayor Bloomberg couldn't have said it better this week when he called an Assembly plan to slap "millionaires" with stiff new taxes "crazy."

Unless, of course, the goal is to chase every last one 'em out of state - leaving them paying Albany exactly . . . nothing.

As profoundly unfair as the argument is (“Lets only tax people who can’t afford to move!”) it’s also not based in reality.

The last time New York asked its wealthiest citizens to contribute a little more to the costs of keeping civilization going, they didn’t go anywhere. In 2003 (who can fault the Post for not being able to remember so far back?), New York avoided deep cuts to critical public services with a temporary surcharge on high-income New Yorkers. The result? The number of tax filers with incomes of over $200,000 a year increased through 2005, the year the surcharge was lifted.

It’s not hard to understand why Henry Kravis and his ilk didn’t flee. A dozen states have high-end income tax rates higher than New York’s. New Jersey’s (an obvious destination) is 30% higher.

The Post continues:

After all, these men and women are the ones who are able to spend and invest the most - and thus keep the economy humming. (And the ones who foot most of the tax bill already.)

Again, numbers are illuminating. According to the Institute for Taxation and Economic Policy, the wealthiest 1% of New Yorkers pay 17.3% of the state’s total tax burden, but they earn a whopping 25.2% of its income.

Wondering how that’s possible? In New York the top income tax rate begins at $42,000 a year, meaning a millionaire and a mechanic are paying income taxes at the same rate. Combine that with regressive property and sales taxes (which New York relies on more than any other state except Texas), and you wind up with a system that asks the least from the people who can afford to give the most.

Elsewhere, Newsday, the Times Union, and WXXI all report on Paterson’s frayed relations with his allies over his right turn on the budget and how best to solve the property tax crisis.

Whatever Tom Suozzi says, this is a principled disagreement over how to deal with the challenges New York faces. The WFP thinks we can meet them without forgetting the values of shared sacrifice and fairness, and we hope the Governor comes around to our view.

We’ll let Assemblyman Gottfried have the last word, from today’s Gannett:

"We should only consider cutting essential services like health care as a last resort. We have been cutting taxes on the wealthiest New Yorkers for years; if we undo just a little of that, we would not have to cut important programs to close the budget gap."

Warnings from Massachusetts; Teachers Fight Back

2008-08-14T12:30:00.000-04:00

The WFP’s joint campaign with the Alliance for Quality Education against the tax cap gimmick continues. From Gannett:

In an effort to convince the state Assembly to oppose a cap, which was adopted by the Senate last week, education-advocacy groups reissued a 2008 report first released in June on the negative results of the cap in Massachusetts. The plan calls for limiting school tax increases to 4 percent a year or 120 percent of the inflation rate, whichever is less.

Iris Lav, from the Center on Budget and Policy Priorities, and author of that report (“Hidden Consequences: Lessons from Massachusetts for States Considering a Property Tax Cap”) added:

"A cap is likely to cause a lot more damage in New York than it did in Massachusetts," Lav said, "New York lacks some of the advantages Massachusetts had when Proposition 2 1/2 was implemented."

Here’s the rub: the cap in Massachusetts led to greater disparities between wealthy and working class schools and in many cases led to laid off teachers and reduced services. Further damage was only prevented because, as Lav points out, Massachusetts increased state aid to its schools by billions. A booming economy helped pay for it.

But with New York teetering toward a recession, the question for supporters of a cap in New York is simple: where will the lost revenue our schools need to provide quality education come from?

In California, revenue lost to the tax cap was never replaced, and schools went from among the best in the nation to among the worst.

That’s the fate the WFP and education advocates are fighting to avoid.

Yesterday, the WFP announced the escalation of the campaign with mail to 200,000 New Yorkers in targeted Assembly districts, asking them to tell their Assemblymember to vote no the tax cap gimmick.

Meanwhile, the New York State United Teachers un-endorsed dozens of State Senators who voted for Gov. Paterson’s irresponsible tax cap. From the Albany Times Union:

The state's largest teachers union is withholding endorsements from 38 senators who voted earlier this month for Gov. David Paterson's proposal to place a 4 percent annual cap on the growth of school taxes.

"They've made a choice to choose political expediency," New York State United Teachers President Richard Iannuzzi said of the mostly Republican senators.

Let’s hope the Assembly considers the consequences for New York’s children before making the wrong choice too.

Parker Speaks Up, Fight Moves to Assembly

2008-08-11T12:35:00.001-04:00

The quote of last week came from Sen. Kevin Parker, who joined a majority of his fellow Democrats in voting against the tax cap bill, telling the New York Times:

“We’re not going to be voting for political schemes today, we’re going to be standing up, speaking truth to power.”

What would the tax cap bill passed by the Senate do exactly? Richard C. Iannuzzi, president of the New York State United Teachers, summed it up perfectly:

“The Senate today chose political expediency and the illusion of property tax relief over a real, meaningful solution — a restructuring of our property tax system based on equity, income and ability to pay.”

Since the “cap” won’t lower anyone’s tax bill (but could, as experience in other states shows, do real damage to our schools) it’s hard not to see Friday’s vote as more than a political stunt. Said Blair Horner of the NYPIRG in Newsday:

"Today was set up to be a way to put pressure on the Assembly ... most of the time that kind of tactic doesn't work."

Political theatre or not, the vote may have some real consequences, as both the AFL-CIO and NYSUT may reconsider their fall Senate endorsements. Dennis Hughes, AFL-CIO President:

"What was once a certainty for endorsements of Republican incumbents is not a certainty anymore.”

The fight now moves to the Assembly, where as Times and other note, the prospects for passage are at least a bit dimmer. The Sun’s Jacob Gershman points out:

“It's hardly unusual for Mr. Silver to be the odd man out. In his 14 years as speaker, he has flourished in the role by conserving bargaining leverage and holding out for concessions.”

The politics are complicated, to say the least. But unlike the Senate Republicans, Democrats in the Assembly have rarely grasped at bad policy solutions, even when it’s the politically convenient thing to do.

Here’s hoping those voices of reason prevail again.

Beware the Mass. Model; Skelos Confused

2008-08-07T15:02:00.000-04:00

If New York is considering a cap on the amount property taxes can increase, it might make sense to look at the experience other states who’ve tried the idea:

Massachusetts proves that a property tax cap - while popular - is an ineffective way either to provide tax help or to protect equitable education funding. Massachusetts' three-decades-long experiment has exacerbated inequities in public school funding, reduced valuable local services ... And while the cap reined in property taxes when it was first implemented, taxes have since gone up at a rate similar to New York's.

Those words of caution come from Greg Jobin-Leeds, chairman of the Schott Foundation for Public Education in an op-ed in today’s Newsday. Why was the cap so ineffective (and even destructive)? Because, as common sense would lead one to believe, a cap doesn’t do anything to control costs or increase state aid, instead:

“a cap merely forces spending cuts. It doesn't lower energy, transportation or health care costs. It doesn't improve management skills, hire better personnel or innovate. Districts have been forced to make cuts to basic teaching staff in addition to art, music, athletic programs and other services provided by schools.

What’s worse, there’s good reason to believe a cap would be even more disastrous for New York:

Massachusetts' cap was first implemented during an economic boom - so greater state aid could compensate for the loss of property taxes - and when the student population was waning. Instituting this cap in New York now - as the state faces an economic downturn, budgetary concerns and expanding student enrollment - would have a punishing impact on public school children.

And what about equity?

Since the cap began, Massachusetts has seen dramatic growth in school inequity. This should be a red flag to New York, which already has one of the widest gaps between rich and poor in the nation. Wealthy communities in Massachusetts pass annual tax-cap overrides and continue to fully fund their schools. But the rest of the state cannot afford to do so and rely only on state aid.

Yikes! After a 15 year fight for CFE funding, fans of the ‘tax cap’ could undermine that historic victory in 15 days this August.

Contrast Jobin-Leed’s wise words with those of Senate Majority Leader Skelos in today’s New York Sun. Discussing a millionaire’s tax, he pipes:

"You are going to chase the people out of the state if you do that…Those taxes are going come down to you and me. It's not going to be millionaires, they are going to come right down. They are going to hit everybody."

Chase people out? That’s not what happened the last time New York asked the wealthy to chip in a little more in order to keep the state running, between 2003-2005. There were more high income tax filers when New York phased out the tax than when it began.

We’re not sure where Dean thinks New York’s millionaire’s would move to, anyway. Certainly not New Jersey, where taxes on the rich are 30% higher than New York’s. (A fact which hasn’t pushed New Jersey’s rich out of the garden state either).

Dean’s fears about a millionaire’s tax “trickling down” to “everybody,” seem more than a little misplaced, since no one anywhere is proposing that. Dean must be getting worried that once New Yorkers realize the consequences of his slash and burn plan for cutting our way out of the budget gap, they’ll be even more keen on asking the most wealthy to pay their fair share (an idea they already support 4 -1 ).

The last word today goes to Senator Libous:

“Hard working tax payers here in the Southern Tier and around the state are paying too much for school taxes. That's a fact, it comes through loud and clear in every poll. At the same time, we have to be fair and equitable to the school districts, you can't just cap something and not allow them to be able to pay the bills, because fuel energy costs go up, transportation costs go up.”

Lancman Calls for Sanity, New Yorkers Call for Millionaires Tax

2008-08-06T14:57:00.001-04:00

“Why is it so important that we acknowledge that there is no crisis, but merely a serious challenge?

Because crises produce bad policies, while serious challenges produce serious, thoughtful responses.”

Those wise words come today from Assemblyman Rory Lancman (D-Queens) in an op-ed in the Albany Times Union. He continues:

“Witness the rush to judgment of our state's editorialists and political commentators, crying out for cuts, cuts and more cuts to education, health care and our work force; and no new taxes, even for those earning over a million dollars a year. Have the fiscal and social consequences been thought out of our consigning another generation of New York City schools kids to an inadequate education after we finally got them their fair share of state education money; of denying access to health care for the working poor or elderly; of ignoring the gross inequities in our tax policies that leave middle class families paying a far higher share of their resources in state taxes than our wealthiest citizens?”

The “cuts, cuts and more cuts” crowd simply refuses to consider asking the wealthiest New Yorkers to pay their fair share. Not that it’s such a popular crowd - according to a new Quinnipiac University Poll released today, New Yorkers want to rollback irresponsible tax giveaways to rich by a 4 – 1 margin.

Meanwhile, Senate Republicans blasted Assembly Democrats for putting much needed help for New Yorkers who’ll be struggling with record increases in the price of home heating oil this winter ahead of a tax cap:

"If people can't afford to pay their property taxes, then they are not going to have a home to worry about heating," said Senate Majority spokesman Mark Hansen.

Speaker Silver must find that line of criticism a little ironic. His proposal to give people a break on their heating bills actually lowers the cost of living. The Senate Republicans’ proposed “tax cap” actually does not. The tax cap doesn’t lower your taxes. Only the circuit breaker does that. Period.

The Assembly Democrats are in a bind, caught between Republicans who are willing to be irresponsible and a Governor who has conflated the budget deficit and the tax cap in perplexing ways. Who better to explain the options the Assembly faces than Assemblyman Richard Brodsky (D-Westchester). From today’s Daily News:

"If you have a $600 million gap, there are three ways to fill it: You can fill it entirely with spending cuts or entirely with revenue-raisers or a combination, the Legislature is going to try to add values and a social perspective to what is otherwise a pure exercise in numbers."

We’ll let Lancman have the last word:

“Let's all take a deep breath, take stock of what is undoubtedly the serious financial situation we have known of for some time, and act resolutely but deliberately to keep our financial house in order in a manner consistent with our values and our long-term goals as the family of New York.”

DiNapoli throws cold water on Budget hysteria while Hammond fans the flames. Stiglitz and Jones weigh in.

2008-08-05T11:31:00.005-04:00

State Comptroller Tom DiNapoli threw some refreshing cold water on state budget hysteria. From today’s Daily News:

"The state's top moneyman Monday gave the Legislature a pass on Gov. Paterson's push to cut $600 million from the state budget later this month. State Controller Thomas DiNapoli said $630 million in planned administrative cuts by Paterson should be enough to balance the current year's budget. Paterson wants the Legislature to cut the budget an additional $600 million during a special session he called for Aug.19."

Speaking of elected officials who get it, Assemblyman Rory Lancman (D-Queens) has taken an even keeled view on the budget gap, telling Danny Hakim of the New York Times:

“I don’t think there’s a real crisis. There’s a modest shortfall which requires some modifications,”

“Lots of us had high hopes when [Paterson] became governor that the same progressive senator and lieutenant governor would become a progressive governor, But the entire construct of this conversation he has created has been from the right. Well, which programs are we going to cut and how many employees are we going to lay off?”

Bill Hammond at the Daily News, however, isn't buying any calls for ration and calm:

“It would be easy for Gov. Paterson to play down the gravity of New York State's fiscal quagmire. It would be easy to ignore the steep slide in tax receipts, to pretend that Wall Street will bounce back in a couple of months…”

He goes on to bash calls for raising taxes on the wealthy as part of the solution to the budget gap:

“[Paterson] could just go along with the easiest of easy fixes - hiking taxes on the wealthy, further pummeling the state's battered economy.”

That’s an interesting argument, considering that the last time New York asked its most fortunate citizens to contribute a little more to keeping society running (2003 – 2005), the economy kept right on growing. In fact, although Governor Pataki had predicted a negative impact on the economy and on the number of high income earners in New York during the last budget battle, tax filers with incomes above $200,000 continued to grow steadily.

But Hammond raises the right question - what would be better for the state's economy, raising taxes on the wealthy or cutting spending?

Lucky for us, Joseph Stiglitz, Nobel Prize winning economist, has weighed in on exactly that topic, telling Albany leaders in a March 17^th letter:

“New York, like most states, is now facing an unenviable choice: either taxes have to be raised, or expenditures cut…When faced with such an unpleasant choice, economic theory and evidence gives a clear and unambiguous answer: it is economically preferable to raise taxes on those with high incomes than to cut state expenditures.”

“The reasoning is straightforward: in a recession you want to raise (or not decrease) the total level of spending – by households, business, and government – in the economy.”

Bill, you may want to slash New York’s healthcare and education spending for ideological reasons, but most New Yorkers don’t want to use the economic downturn as an excuse for more Bush-enomics.

If advice from one of the world’s leading economists wasn't enough to make the case for shared sacrifice as the guiding principle in the budget battle, David Jones from the Community Service Society reminds us what’s at stake for New York's most vulnerable:

“Low-income New Yorkers are already reeling from the current economic slowdown, squeezed by rising health care and housing costs. Worse, many are suffering from food insecurity; the New York Coalition Against Hunger reports that 1.3 million New York City residents live in households that can't afford an adequate and consistent supply of food.

…[D]ata from the Community Service Society's own "Unheard Third" annual survey of low-income New Yorkers reflect growing economic hardships and concerns, including the findings that 1 in 5 residents near the poverty line either did not get, or postponed, medical care or surgery because of a lack of money or insurance; 1 in 4 couldn't fill a needed prescription because of lack of money or insurance; and 1 in 4 fell behind on rent or mortgage payments."

He closes:

“When the budget-cutters get together in Albany on August 19, they must be aware of the implications of their choices.”

Amen!

Lebrun: We're Pretty Nice to our Millionaires, Brodsky: Shared Sacrifice, Goodwin Needs a Fact Checker

2008-08-04T15:27:00.000-04:00

Some common sense from the pages of today's New York Times and the Times Union, and the Daily News' Michael Goodwin reveals his need for a fact checker.

In the TU columnist Fred Lebrun weighs in on the budget gap. Lebrun writes:

"I've called some of the more active fiscal minds around town who deal with state finance. The consensus is the governor has to come up with a profound revenue source that isn't Wall Street, not just advocate for cuts in expenditures.

The only logical way for the governor to get his makeup revenues in a hurry, as well as deal with the looming out-years deficit … is to bring back a temporary tax surcharge on our wealthiest.

From 2003 to 2005, a .85 percent increase for those making $500,000 or more raised the highest tax bracket to 7.7 percent. New York's current highest tax rate is back down to 6.85 percent. We're pretty nice to our millionaires.

Assembly Speaker Sheldon Silver wants to bring back a fractional surcharge for those earning $1 million or more. New Jersey has done something similar, raising its highest tax bracket to 8.9 percent.

Will this work? Conservatively, a tax surcharge on our wealthiest will bring in $2.1 billion to $2.4 billion a year. That washes away a lot of red ink. Critics insist such a surcharge will only chase away our millionaires, who will flee New York in droves for friendlier turf. Well, it didn't happen from 2003 to 2005. We gained rather than lost millionaires, in substantial numbers.

Certainly there is always a risk, but I am reasonably certain of one thing: Those millionaires won't be setting up shop in New Jersey any time soon."

Thankfully members of the legislature agree. The quote of the day goes to Assembly member Richard Brodsky in today's New York Times putting the deficit in a historical context. Brodsky on the Assembly's response to the Governor's plan: "What I think you'll see the Legislature do is force a debate about fairness and shared sacrifice."

And about that shared sacrifice, over at the Daily News budget cuts must have forced them to lay off their fact checkers. Goodwin writes in his hosanna to budget cutting:

"But a sluggish economy isn't the biggest reason New York is where it is. The state actually outspent the boom years, with the budget nearly doubling since 1995, sustained only by exorbitant tax hikes and unsustainable levels of debt."

Goodwin's right that spending is up - but he fails to point out why. It's high because we - all of us -- decided that we wanted to have smaller schools and lower class size. We instituted universal Pre-K, so New Yorkers everywhere would be able to give their children the head start they need. And we expanded healthcare coverage for thousands of New York's children. That's why spending is up. And that's what we're going to have to put on the chopping block if the Governor plans to balance this budget through cuts alone. Food for thought for Daily News readers.

But Michael, exorbitant tax hikes? Did we miss something? Large multiyear tax cuts enacted in Governor Cuomo's last year in office and Governor Pataki's first six years - tax cuts largely targeted at the wealthiest New Yorkers - will cost the state more than $16 billion this year alone. New York State has cut the tax rate on the wealthiest 1% of New Yorkers by more than 50%. Our top marginal tax rate is now lower than in California, New Jersey and ten other states. If we had merely kept in place the high income tax surcharge from 2003 we'd be well on our way to solving the state's budget problems. You can't give away the store without ending up in a hole in hard times.

I know Goodwin is fond of a challenge (see his duel over bagels with Albany D.A. David Soares). So here's one of our own - debate me on taxes. Venue of your choice. I'll bring the bagels.