I remember the sense of frustration and injustice I felt back in 2000, as the dot.com bubble burst and it was clear that we were heading into a fiscal crisis. Even though certain interests had gotten far more out of New York State’s budget that was justifiable based on any fair principles during the boom, and others were permitted to put in far less in taxes, I assumed that spending in all categories and for all groups and places would suffer equal cuts, and all would be drained by equal increases in taxes. That is an easier road to take, politically, than asking those who have benefited disproportionately from government policy to sacrifice first. Taking the easy road, making the non-decision, is what our politicians do.
The reality was far worse than even I had expected. There would be no equal sacrifices, even after grandfathering existing inequities. Those who were behind would end up further behind, those who were ahead would end up further ahead. And that is exactly what I expect is about to happen again. It isn’t even worth wasting bandwidth talking about alternatives. Let’s just review what they did, and try to project what they will do, in Albany.
These were the choices that were made between mid-2000 and mid-2005.
Three months after the bubble burst, the state signed a massive pension enhancement, claiming it would cost nothing; subsequently pension costs soared and pay for new public employees in NYC was cut.
New York already had the nation’s most expensive Medicaid program, and a fiscal crisis, when the Health Care “Reform Act” increased spending further in 2002, as part of a political deal.
Health care spending for public employees and retirees has continued to soar; funding for the Health and Hospitals Corporation, which actually services the poor, was cut prior to later restorations.
State and local income, sales, and property taxes were jacked up, but most of the special tax deal remained on the books. Property and sales tax rates are still higher than they were, and the 7% NYC property tax cut people are talking about losing is really an 11% property tax increase from what it used to be. Later additional deals, including the $400 Bloomberg check and the city’s exemption of clothing from sales taxes, were added.
While taxes were jacked up on wage income for those who work, retirement income for those who don’t remained untaxed.
With the big tax increases post-2000, the state didn’t cut the city’s state school aid outright, but it did cut the city’s share of state school aid from 35.8% in FY 2001-02 to 34.2% in FY 2002-03.
In the prior fiscal crisis, with no tax increase, Governor Pataki cut the city’s school aid outright while increasing it to the rest of the state, reducing the city’s share to 29.6%. When the Daily News calls for Paterson to channel his inner Pataki, they ought to understand what that means. In each year the city had 36.5% to 37% of the state’s public school students, and poorer and more troubled students than average at that.
School districts in the rest of the state have continued to add staff continually, in good times and bad, whether enrollment was rising or declining. After raising property taxes, they have insisted that the state provide them with more aid (and NYC with less) to prevent their taxes from going higher. The state has done so
During the previous recession, the city and state deferred required pension contributions by phasing them in, putting off the cost until later. That cost is still sky-high and going up.
The city and state also borrowed money based on the future revenues from the tobacco settlement, meaning all the money from that settlement cannot be spent now or ever in the future – in fact if the settlement money is less than expected, other taxes will have to be increased or services cut to pay off the bonds.
Assistance to the MTA Capital Plan was cut off back then, and the MTA ordered to borrow the difference. Now the MTA is bankrupt and asking the city and state to come up with money they do not have. While I doubt state capital assistance to the MTA will be cut below zero, I wouldn’t put it past them.
And now, here we go again. No matter what Governor Paterson, who voted in favor of every one of those decisions as a State Senator just like all of them, says. I’ll say it again — Governor Paterson voted in favor of all the decisions the led us to this point. So what can we be sure will not happen?
No way retired public employees will be asked to make any sacrifices, no matter how bad off their still-working and private-sector counterparts are. Nor will retirees be made to pay taxes.
No way school districts in the rest of the state will be asked to spend less, or even stop spending more and more. State aid will be cut to New York City, and only New York City, if money for the STAR and related programs are included.
No way Medicaid spending in New York City on home health care and personal care will be cut, even if (as recent investigations revealed) the services the senior citizens didn’t really need the services, the services were never delivered, or the senior citizens in question didn’t really exist. After all, it’s for the seniors. NY’s Medicaid spending per recipient on seniors is sky-high by national standard, but its spending on children is not. Expect, therefore, health care spending on children to be slashed.
Don’t expect Medicaid funding for hospitals, which according to anecdotal evidence cash in on medical tourists from less generous states, to be reduced either. Perhaps payments to primary care doctors, already low in New York State, will be slashed, as was threatened at the federal level.
No way tax breaks for city homeowners will be reduced, or the exemption for clothing repealed.
No way will anyone, whether a public employee represented by machine Democrats or a government contractor represented by machine Republicans (oh heck, they are both represented by both) will be asked to provide a better deal.
Nothing is off the table? Nonsense. Everyone who has a special deal or unearned privilege that others do not get is off the table. Period. You want to convince me otherwise? Put bankrupcy, with cuts in spending on interest on debt and past pensions on the table.
We know what will happen, and there isn’t a damn thing we can do about it. After all, after imposing sacrifices on those who didn’t matter in the previous bust, more benefits and privileges were handed out to those who do matter in the subsequent boom. Those benefits and privileges are now “rights” that cannot be changed, requiring drastic increases in taxes, decreases in services, and selling out of the future “due to circumstances beyond our control.” That’s what “shared sacrifice” means. The people who matter sacrifice nothing. Again. And this state has even less of viable future than it did before.
So what can we expect will happen?
Expect drastically diminished services at NYC public schools, even if spending rises slightly, as more money is diverted to the retired by the recent massive “free” pension deal. Expect extra-curricular activities to eliminated, and courses to be cut to the point where they may be unable to take all required and thus unable to graduate in four years, a recurrent situation in fiscal crisis at C.U.N.Y. If things are bad enough, expect schools to suddenly shut down early one year, after a mid-year cut in state aid to New York City (but not elsewhere), as happened in Oregon some years back. After all, one can’t expect people in the rest of the state to pay for the age 55 retirement. They’ll make the kids pay, since according to Randi Weingarten that decision on priorities was a “win for children.”
Expect the “temporary” deferral of vital transportation projects such as the Second Avenue Subway, and accelerating deferred maintenance and normal replacement of the infrastructure. Unfortunately subway service is already starting to degrade, and it is going to get much worse. The last time pension and debt service costs soared the infrastructure was allowed to fall apart. A repeat may be expected, but not admitted.
Expect the usual cuts and closings for New York City’s parks and libraries. Shall the libraries be open two days per week or three? At this point does it matter?
Expect the usual cuts at the Administration for Children’s Services. They’ll be restored a few years later after the usual horrible child deaths. Or perhaps this time we’ll be broke enough to just give up, write the children of troubled families off, and bank the savings in education expenses.
Expect cuts in basic health care, even as spending on health care for public employee and retirees, and “health care” for seniors under Medicaid, rockets upward.
In order to “save money” (yeah right), expect additional deals under which existing public employees to get retire even earlier with full pensions and health benefits, offset by still lower pay for new hires. Expect the unions who cut those deals to subsequently tell the future members that they have every right to do a lousy job, since the general public screwed them out of fair pay. And expect a lousy job. Perhaps we’ll offset having teachers retire at 55 instead of 62 by dropping entry level pay and certification requirements, and providing automatic tenure to the unmotivated and incompetent.
And expect massive tax hikes, and not just on the rich, because with Wall Street bonuses falling the rich won’t have nearly the money to make up the difference. I would expect the typical New Yorkers to become two- to four percent worse off (less in the rest of the state, more in New York City) due to state and local tax increases alone. The federal tax increases will be on top of that. Expect, at the very least, the income and sales tax charges enacted in the prior recession to be re-enacted, and eventually exceeded, and the property tax increases to be repeated.
According to Governor Paterson “it is time for New York and other governments to cut up our credit cards. The era of buy now, pay later and later is over.” Right. Expect a huge increase in debts, with costs deferred to and revenues sucked out of a diminished future. One of the first proposals to leak out after the speech was selling state assets like roads and bridges, cashing in all future toll revenues and spending the money between now and the Governor’s re-election campaign in 2010. Just like the tobacco bond deal. Did I mention he is a former state legislator?
According to Sheldon Silver, “there are tough choices to be made; choices that must reflect our priorities as a state. If it is our intention to ask working families to shoulder the burden of these cuts, we must ensure that our most affluent citizens share that burden.” Well you just read what the priorities of the state are as a result of people like Silver. And yes working families and the affluent will shoulder the burden; the retired and insiders with special deals will not. Because those are the values of the state as enforced by Sheldon Silver.
The political class, in particular, will be unaffected. It doesn’t use public transportation; it drives to parking spaces reserved by placard. It doesn’t send its kids to the regular NYC public schools, just “special deal” schools, private schools, or suburban schools (as many of the public employees, especially the teachers, live in the suburbs). It doesn’t rely on public parks and public libraries. And with rich health benefits and pension benefits most Americans do not get, it definitely does not go to public hospitals and health clinics and does not rely on Social Security alone. And once they start drawing public pensions, members of the political class don’t pay state and local income taxes either.
Quoting Lilly Tomlin: “We don’t care. We don’t have to.” And given all this will happen after the November election, quoting Nelson Munz, “Ha Ha!”
And if people get so riled up they want someone to pay for what has been done to them? Well, that’s your role Governor Dinkins er Paterson. Here is where his experience as a legislator comes in. One gets a sense he knows that he is being set up as the person who has to sacrifice the victims and cheat the children, even as the legislators are “heroes” for protecting the privileged interests. After all, he’s been in the game of “do the deed and deflect the blame” for God knows how many years. As Governor, he doesn’t deserve this. But as a member of the state legislature, they all do.