What's New

Zack Hutchins
Director of Communications

April 15, 2003

Analysis: Unlike most high-deficit states, New York plans no major spending cuts

New York has the second largest budget deficit in the country but is not considering significant spending cuts to meet its challenge, a new analysis shows.

In contrast, of the states with the 10 largest deficits, seven are considering or have enacted major spending cuts, according to the study, which is a joint effort of the American Legislative Exchange Council (ALEC) and the Manhattan Institute. It was released April 10.

Only New York, New Jersey and Massachusetts have not endorsed comparably significant cuts. New Jersey's deficit of $5.2 billion and Massachusetts's deficit of $3.2 million are much smaller than New York's estimated $11.8 billion dollar shortfall.

"States continue to address deficits with a mix of spending cuts, tax increases and the use of one-time funds," said Michael Flynn, ALEC's director of policy and legislation. "But they're using duct tape instead of fixing the plumbing." A release on the report and the report itself are available from www.alec.org.

States that have or are expected to make significant spending cuts include: Colorado, Iowa, Massachusetts, Michigan, Minnesota, New Hampshire, Tennessee, Texas, Virginia, Washington, and Wisconsin.

New York, with a budget shortfall of nearly $12 billion, is not among the states expected to massively cut spending, the report revealed. The study also reported that New York has looked at gaming and fee increases to solve the current fiscal crisis.

In December of 2002, ALEC released another study arguing that spending cuts would be the most effective way of reducing deficits.

The study, "Show Me the Money: Budget-cutting strategies for cash-strapped states," said reducing costs should be considered by officials before raising taxes.

"Before contemplating any massive changes in state tax structures, policy makers need to squarely address the expenditure side of the equation by reducing the cost of state government," the study said.

Medicaid spending drained state coffers more than anything else, the study said.

"Next to the recession the runaway cost of Medicaid—the biggest budget cost driver in most states—is the biggest cause of the current state fiscal crises."

The Business Council has repeatedly urged New York lawmakers to cut spending. If lawmakers had simply held overall state-funds spending to the rate of inflation over the last five years they could have saved the state over $7.9 billion.

New York's Medicaid this year is about two and a half times the national average per capita, according to Budget Watch '03, a series of analyses of state spending issues prepared by The Council's research affiliate, The Public Policy Institute. Medicaid spending this year in New York will total $36 billion in New York this fiscal year—which is more than the entire budget for each of 40 other states.

More information on state spending can be found at www.ppinys.org/bwatch03.htm. For information on obtaining the complete ALEC report visit www.alec.org.