May 16, 2001
A 'spending binge' this year will derail New York's recovery
Warns that high spending this year may later mean tax increases
or deferred tax cuts
New York State is at a crossroads in its economic history, and its decisions about state spending this year will determine its future prosperity, Governor George Pataki told more than 700 business and government leaders at The Business Council's annual dinner May 14.
The Governor thanked The Business Council for contributing ideas, information, and advocacy that he said have helped make New York's recent economic resurgence possible. He also urged The Council to remain a strong voice for fiscal restraint and policies that will nurture prosperity.
"New York is a very different state than it was six and a half years ago, and I don't intend to let us go backwards," he said.
"We have to make sure that we don't do the wrong thing . . . say 'yes' to every interest group, spend billions more than we can afford, and then, at the height of a national economic slowdown, have to do things like raise taxes or defer tax cuts," he said.
The Governor recalled conversations early in his tenure with leaders of major New York-based corporations in which he was told that New York's then-stultifying business climate was prompting corporate leaders to steer their growth to other states.
Since then, he said, these companies have refocused their growth in New York State because its business climate has improved.
He credited tax cuts that will total more than $100 billion when fully implemented, as well as the repeal or modification of 1,800 different state regulations and key reforms to the state's unemployment insurance and workers' compensation systems.
But he also warned that the looming national economic slowdown has put New York at a crossroads that last month saw a reduction of 220,000 in private-sector jobs across the country.
If New York goes on a spending binge or tries "to be all things to all people," he added. "the financial progress that we have made over the last six years could be lost with one bad budget."
Noting that his proposed budget for 2001-2002 already includes record levels of school aid, highway and mass transit spending, aid to local governments, and funding for environmental programs, he said his budget is the best proposal for avoiding massive deficits next year or the year after if the national economy does not continue to grow.
He noted that California's bipartisan budget office is considering cutting $4.5 billion from its governor's proposed budget, and that the state is seeing declining revenues for the first time since the Great Depression.
The Governor said he would continue to emphasize policies that will facilitate growth for small businesses, manufacturers, and the high-tech sector, especially biotechnology enterprises. For example, he said, he would continue to advocate repeal of the state's alternative minimum tax, adoption of the single-sales factor for determining the corporate taxes of manufacturers, and a $250 million state investment in a planned $1 billion public/private partnership in a new biotechnology research initiative.
He also emphasized the importance of doubling the size of the state's 22 Empire Zones and creating new ones. Empire Zones are regions in which employers can get tax credits and other incentives for creating jobs.
"We have to continue to go forward to make sure that [New York's recent] comeback is a permanent part of New York's future and not a small part of its long-term history."