New York State Budget Research Paper

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spring of 2010 by Rasmussen Reports showed that 55% of New Yorkers blamed the state's budget crisis solely on the state's politicians. The telephone survey showed that the then $9 billion budget deficit was perceived as being a result of the "bickering" amongst Democrats and Republicans in Albany. The voters showed their concern by electing a new governor last fall, Andrew Cuomo, the son of a former governor, Mario Cuomo. Yet the situation is still serious. See, 55% of New Yorkers blame budget crisis on legislators, Rassmussen Reports, May 6, 2010.

But the Empire State is not alone in feeling the fiscal pain of the ongoing economic downturn facing the U.S.

As states across the U.S. this spring ponder their budget proposals for the coming fiscal year, they continue to face a monumental challenge. The worst economic depression since the 1930s has fostered the steepest decline in state tax receipts ever. Tax collections are now 11% below the level they were when the stock market crashed in the fall of 2008 in the waning days of the Bush presidency. See, States Continue to Feel Recession's Impact, Center for Budget and Policy Priorities, March 11, 2011.

But, the demands for state services have not declined. Thus, even after making significant spending cuts during the last several years, states continue to face large budget deficits. Ibid.

About 44 states, as well as the District of Columbia, are forecasting steep budget shortfalls for fiscal year 2012, which begins July 1, 2011 in most states. These come on top of the massive deficits that states reported in fiscal years 2009 through 2011. States will continue to wrangle to find the revenue to support public services for years, potentially threatening hundreds of thousands of once-stable civil service jobs. Supra.

A scan of state fiscal conditions indicates that:

The upcoming fiscal year (FY2012) is emerging as one of states' most arduous budget years ever. A primary reason these deficits are so daunting is that states' options for addressing them are fewer than before. Federal bailouts for states, which had been helpful in allowing states to avoid some of the largest potential budget cuts, will have evaporated by the end of fiscal year 2011, this current fiscal year. Many of the nation's governors have now released their budget proposals for fiscal year 2012, and their proposals demonstrate this grim reality. Many of these proposals include deep cuts to state services on top of the huge cutbacks states have already made since the start of the depression

There are signals that state finances will start to stabilize after next year, but recovery will still be slow. The number of states that have to close mid-year budget gaps for the current year is less than in the last two years. So far, only 13 states and the District of Columbia have reported new shortfalls for their 2011 budgets. During fiscal year 2010, approximately 45 states saw new deficits come about after they passed their budgets. This seems to indicate state revenues are stabilizing and state finances will begin to recover along with the U.S. economy.

Despite minor signs of improvement, states still must endure a long road to recovery. Approximately 26 states are projecting shortfalls totaling $75 billion for fiscal year 2013.

The deficits the states project for fiscal years 2012 and 2013 are on top of the more than $430 billion in shortfalls that states have already closed for fiscal years 2009, 2010, and 2011 combined. Supra.

Unemployment an aggravating factor

Unemployment has stabilized at around 9% in the U.S., but many economic forecasters expect it to remain at high levels throughout 2011. Sluggish job growth will keep state income tax receipts low and increase the demand for Medicaid and other services that states provide taxpayers. Unemployment and economic uncertainty, largely caused by business fears of an Obama tax increase or significant re-regulation of the economy, merged with households' diminished wealth due to fallen property values, will continue to dampen consumption; ergo, sales tax receipts will remain low. These macroeconomic factors seem to indicate state budget gaps will persistently be significantly larger than in the last recession, right after the jihadi terrorist events of 9-11, and last much longer. Supra.

Fiscal year 2012 outlook for New York

The fiscal year outlook for 2012 is, along with other states, even worse than in fiscal year 2011. While the state was $9 billion in arrears back then, it is projected to be $10 billion in the red this fiscal year. Supra.

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This is only going to get worse. According to the Center on Budget and Policy Priorities, New York is projected to have a $14.9 billion deficit in fiscal year 2013, or 27.9% less money than it needs to balance its budget.

The new governor of New York is getting plaudits from the liberal establishment press -- but is getting slammed by conservative working class newspapers for his $96 billion budget proposal.

"Mr. Cuomo gets high marks for demanding that the state's well-paid employees come up with hundreds of millions in payroll cuts. His call to streamline government and reduce costly requirements for local school districts are welcome. His new approach to the state's budgetary math makes sense, so long as everybody looks closely," The Times opined. See, Gov. Cuomo's Budget, The New York Times, Editorial, Feb. 2, 2011.

But, there is still fiscal gimmickry in Cuomo's budget that causes consternation to the editorialists on Times Square, and perhaps to voters, when Rasmussen gets around to polling them again.

"Mr. Cuomo pointedly chose to compare his proposed $88.1 billion operating budget to the $87.2 billion the state will spend this year -- rather than compare it to projected spending of $96 billion." Supra.

Others were even more critical of the governor in their coverage, accusing him not just of fiscal chicanery, but of creating nearly Dickensian situation for the meek and the poor.

"Gov. Cuomo wants to slash state funding to schools for the blind, deaf and severely disabled - and is asking local school districts to pick up the tab, reported the one tabloid newspaper. "Cuomo's proposed budget eliminates all direct funding to 11 schools serving such children - including three in the Bronx, one in Queens and one in Brooklyn.'To do this to our kids is just not right,' said Jeannette Christie of Throgs Neck, the Bronx, whose son suffers from a rare vision disorder and attends the New York Institute for Special Education in her home borough. 'These schools are needed.'" See, Gov. Cuomo's budget ax may chop schools for blind, deaf and severely disabled, New York Daily News, Feb. 23, 2011.

The state has financed the education of the blind and deaf directly for more than 100 years, since the Victorian Era. Ibid.

So the proposal has caused shockwaves through the educational system.

"The students who come to our school are some of the most vulnerable people in the state,'" said Frank Simpson, superintendent of the Lavelle School for the Blind in the Bronx. "Under the governor's budget, the state would rely on local districts to front the money to fund the schools. The state would then partly reimburse the districts." Supra.

The state's annual budget for these disabled kids will shrink by approximately $14 million. Some social workers claim the change could close many schools, displacing 1,500 children in need of special care. Supra.

A state budget division spokesman told The Daily News the state will still spend $112 million a year on these disabled children. Supra.

The protests over these, and other budget cuts, have gone far beyond the newsrooms in Manhattan. Protesters nearly rioted earlier this month at the state capitol, and many arrests were made for disorderly conduct of demonstrators. See, People protesting NY Gov. Cuomo's budget cuts block stairs, halls in Capitol, Associated Press, March 2, 2011

"Protest organizer Wanda Hernandez, a board member from the activist group VOCAL New York, said the group opposes cutting social programs and closing hospitals and schools while letting an income tax surcharge on the wealthiest New Yorkers expire after this year.

Gloria Wilson, a demonstrator from Community Voices Heard, said protesters want Cuomo to stand strong and resist special interests." Ibid.

The AP report added, "dozens of other protesters streamed around the Capitol lobby carrying signs calling for jobs, housing and higher taxes on the rich. One carried an American flag. They chanted, changing phrases every few minutes." Supra.

The Governor's side of the story

But Gov. Cuomo isn't letting the opposition shape the public'understanding of his new budget. He's taken the offensive, and has gone on the road to tell his side of the story. Governor Cuomo Delivers Budget Message in Staten Island: 2011-12 Executive Budget Provides Transformation Plan for a New York, Press Release, Office of the Governor, March 3, 2011

The governor told an audience at.....

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