Despite endless rhetoric coming out of Gov. Cuomo’s office that New York is fiscally and economically sound, recent studies challenge those claims.
The first report, Rich States, Poor States, sponsored by American Legislative Exchange Council, is a forecast based on variables to determine economic competitiveness.
Generally speaking, states that spend less and tax less, tend to do better.
How is New York ranked? Dead last. Based on equal weighing of each state’s rank in 15 policy variables, New York came in 50th place — a position it was awarded four out of the first five years Cuomo has been in office. (In 2013, it dropped to 49th place.)
Here are the report’s key findings:
Top Marginal Personal Income Tax Rate: 12.70 percent; Rank: 49.
Top Marginal Corporate Income Tax Rate: 17.01 percent; Rank: 50
Property Tax Burden (per $1,000 of personal income): $46.48; Rank: 45.
Sales Tax Burden (per $1,000 of personal income): $24.41; Rank: 31.
Remaining Tax Burden (per $1,000 of personal income): $20.59; Rank: 33.
Debt Service as a Share of Tax Revenue: 9.4 percent; Rank: 38.
Average Workers Compensation Cost per $1,000 of Payroll: $275.00; Rank 47.
Net Domestic Migration 2005-2014: 1.5 million: Rank: 50.
Not a pretty picture.
This explains why New York leads the nation in losing residents to low tax, job creating states like North Carolina, Florida and Texas, which in the ALEC report, placed 2nd, 8th and 12th, respectively.
New York’s fiscal condition is not all that grand either.
State Comptroller Tom DiNapoli’s analysis, Unfinished Business: Fiscal Reform in New York State, raises serious concerns regarding transparency and accountability for state spending, budget reserves, debt and capital planning.
The Cuomo Administration has been relying heavily on “backdoor spending” to avoid voter approval of debt at the ballot box.
Using public authorities to issue debt to fund favored projects reduces transparency and oversight and, in DiNapoli’s judgment, “is making less responsible debt choices.”
To avoid public scrutiny, the state budget also includes billions of dollars in discretionary spending without justifying or explaining why projects were selected.
An example of this fiscal abuse is the State and Municipal Facilities Program, which was appropriated $1.5 billion in the state’s 2016-2017 budget. The proceeds which go to fund local projects, do not “have any clearly defined statutory process through which projects are objectively assessed … [and] remains outside the state accounting system.” In other words, it is a slush fund to reward political cronies.
Despite the fact that the state has received billions of dollars from Wall Street financial settlements, the statutory “rainy day” reserves, which were depleted during the Great Recession, are not close to being fully replenished.
The two largest reserve funds, the Tax Stabilization Reserve Fund and the Rainy Day Reserve Fund at the end of the last fiscal year (March 31, 2016) totaled $1.8 billion, a pathetic 2.5 percent of General Fund expenditures.
To make matters worse, the present budget does not anticipate any new deposits into those funds.
Because New York is heavily dependent on tax revenues from Wall Street, it will not have a cushion to absorb the shock of the next stock market crash.
Based on past history, Albany will probably raise taxes to cover shortfalls, which in turn will drive more people to move to greener economic pastures.
To prepare for the inevitable downturn, Comptroller DiNapoli has proposed sensible reforms.
He calls for the end of backdoor spending, meaningful debt caps, greater disclosure of public authority activities, expanding limitations on lump sum appropriations, greater budget transparency, and deposits into the rainy day fund when the state experiences a cash surplus until it reaches 8 percent of General Fund spending.
Don’t hold your breath waiting for DiNapoli’s proposals to be enacted into law.
Despite the criminal convictions of over two dozen elected state officials and continued federal investigations that have reached the office of the governor, the Albany gang continues to rely on dubious fiscal gimmickry.
And sadly, as a result, expect next year’s ALEC report to once again rate New York’s economic competitive outlook dead last.
