Op-Ed on challenges facing Albany

By Daniel B. Walsh,
The Business Council of New York State, Inc.

(Editor's note: This op-ed piece ran in the New York Post November 6, 2002.)

Now that Election Day is past, we'll see more and more headlines about the tough budgetary decisions facing Gov. Pataki, Mayor Bloomberg and our state and city legislators.

Those decisions are important, but the budget gaps confronting New York state and New York City actually represent something much bigger. It's a gap between what our body politic is driven to spend, and what our private-sector economy can afford to pay.

Action on both fronts is needed in Albany, and there's no time to lose.

The first priority must be to restrain and cut spending.

Over the past five years, state spending has risen from $45 billion to $59.4 billion, not counting federal funds. That's a staggering increase of 32 percent, more than twice the rate of inflation for state and local government services.

If spending had simply kept pace with inflation since 1998, this year's total would be $7.9 billion lower. Almost certainly, that would be enough to eliminate the state's projected gap for next year.

As for the Empire State economy, we need to refocus on the things that work.

Our job growth lagged far behind the rest of the nation for much of the 1990s. We started to catch up in 1995, when we started cutting taxes, and New York outpaced the competition in 1999 and 2000. Why? Because we made employers welcome again.

Our taxes are still too high, though. Gov. Pataki told The Business Council in September that tax increases are not an option - rather, that we need to cut taxes more to stimulate new jobs. He's absolutely right. A good start: Reforming the state corporate tax code so it rewards employers for adding jobs - rather than adding to their tax bills, as is true now.

Creating jobs is expensive in New York not only because of taxes but because benefits such as health care and workers' compensation cost more here.

Albany's health-care financing law expires next June 30. Renewing that law is traditionally an occasion to force more spending on hospitals and other health interests. This time, it must be an opportunity to reduce employers' costs - and give the 3 million New Yorkers without health insurance a better shot at coverage - while controlling the huge cost of Medicaid.

New York state lost 40,000 manufacturing jobs over the last year. We still fall behind other states when it comes to retaining and creating such jobs. One way to strengthen this key sector: Reduce workers' compensation insurance premiums, which are 28 percent above the national average.

We're starting to repair the economic devastation that hit New York 14 months ago. Now, the Empire State is on the rebound. We face great challenges - but that only makes it all the more urgent that we get back to business now.