February 12, 2014
By Marc Bussanich
New York, NY—Economists with the Fiscal Policy Institute told reporters that Gov. Cuomo’s proposed $142 billion budget for fiscal year 2014-2015 represents another year of austerity that won’t solve ordinary New Yorkers’ economic hardships and will widen the state’s growing income inequality. Video
According to Frederick Floss, executive director at FPI, the governor is making four assumptions in the budget that require scrutiny such as New York’s government is too big.
“Since 1990 the size of the state’s government is about the same size as the rest of governments in the U.S. The share of employment for state and local governments has been roughly 9 percent for a long time,” said Floss.
The second assumption the Governor makes, noted Floss, is that capping the state’s government spending at 2 percent is the right growth rate.
“Is two percent a reasonable benchmark? Well, the estimates for inflation going forward for the next couple of years are about 2.4 percent. If we are going to grow the government at 2 percent then we’re actually going to grow below the rate of inflation.”
Another assumption in the budget is that the government can save a lot of money by consolidating local governments upstate, which is about 10,500. But Floss contests that number.
“There are really about 1,600 of what we would normally think of as governments—cities, towns and villages. The rest of them are really special purpose governments—thinks like libraries, fire departments—and 5,000 are lighting districts, just a way of taxing one part of the county that has street lights when the other one doesn’t,” Floss said.
The final assumption in the governor’s budget is that corporate tax breaks, particularly for manufacturing firms, spurs economic growth. But Floss said studies show different.
“Most of the studies we’ve looked at such as the [New York State Tax Reform and Fairness] Commission and from the state comptroller say that corporate tax breaks don’t seem to create many jobs or have a significant economic impact.”
As a result, the governor’s budget for FY 2014-2015 proposes about $2 billion in cuts to agencies and aid to localities while proposing $486 million in tax cuts that favor wealthier New Yorkers.
“This is a contractionary budget. This budget is going to slow down the state’s economy the way it is being proposed,” Floss said.
He noted the state government should be figuring out ways to expand the economy on the heels of a recession, not contracting it.
James Parrott, FPI’s chief economist, said in an interview that the proposed tax cuts in the 2014-2015 budget doesn’t bode well for millions of New Yorkers still struggling.
“It’s just going to compromise the capacity of state and local government to provide efficient and effective infrastructure, high quality education and high quality services that are really important in terms of retaining business here and attracting other businesses to New York,” said Parrott.
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