Spending Watch


Bulletin #8: May 26, 1999
More state aid won't cut local taxes. Mandate relief will.

New York's biggest single competitive problem is local taxes. All told, the population-adjusted difference between local taxes here, and those in other states, adds up to an extra burden of $25 billion. That's how much New Yorkers would save, if our per-capita local taxes were no higher than the national average.

Every year, municipalities and school districts ask Albany for more state aid. More money from state taxes, they say, will make it possible to reduce the local tax burden - particularly the most noticeable, the property tax.

Experience proves, though, that more state aid does not reduce local taxes. They pretty much always go up, whether financial support from Albany skyrockets or just goes up a little bit.

For instance, from 1995 to 1997, state aid to schools rose 2 percent, and property taxes 3.1 percent, after adjusting for enrollment changes. The numbers were bigger, but the trends the same, from 1993 to 1995. In those years, state aid jumped 9.3 percent, and property taxes rose 6.6 percent, on a per-student basis.

Repeal Wicks, to start. Then, across-the-board reforms.

More spending from Albany will never solve our local tax problem. And even if it could, the money all comes from the same place - individuals and businesses all across New York State. For us, paying out of one pocket is no better than paying out of another.

The only answer is to reduce the demand for ever-higher spending. At the local level, one key step is to reduce the burden of costly and inefficient state mandates. These laws tell local officials what to do and how to do it, as though they're too stupid or mean-spirited to do the right thing on their own.

Perhaps the best-known example is the Wicks Law, which drives up the cost of public construction projects by an estimated 20 to 30 percent while creating huge, needless delays. The Legislature should start a mandate-relief campaign by repealing Wicks, or at least enacting Governor Pataki's proposed reforms. (Either step would save millions in state tax dollars, too.)

In coming months, The Business Council will join with local government leaders to work for a full agenda of broad-based reforms aimed at improving vital services, while reducing costs for local taxpayers.