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For Release — Wednesday, April 28, 2004

NEW REPORT ASSESSES STATE'S ECONOMIC TRENDS

ALBANY—New York State's economy has performed more poorly than the nation's both during the current recession, and over the longer term, according to a new analysis by the Public Policy Institute, the research affiliate of The Business Council of New York State, Inc.

And the report says the state's economy has been heavily dependent on taxpayer-funded employment to provide job growth -- something it warns is not sustainable over the long run. In fact, the report says, since 1990 New York has grown few, if any, net new jobs, except for those funded directly or indirectly by the taxpayers.

The report, New York State's economy in 2004: Which way out?, analyzes job growth in the state since 1990, including a number of different subsets of that timeframe. It shows that the recession has been notably hard on New York State, which has lost jobs at twice the rate of the nation since the recession began in March of 2001. But even in times of growth, it said, New York has lagged far behind the national pace. For example:

The "one bright spot," the report said, came in the first half of the Pataki administration, when New York took aggressive steps to improve the business climate and its growth rate began to catch up to the nation. New York's private-sector job count grew 10.7 percent from 1995 through 2000, compared to national growth of 13.4 percent. To renew that progress, the report says, "New York needs to get back to the business of improving the environment for private-sector, tax-paying businesses."

But it warns that instead, "creating and sustaining taxpayer-funded jobs has become Albany's de facto economic policy."

From 1990 through 2003, the Institute calculated, New York's total job count grew by 191,200. But the state's traditional economic bulwarks declined: manufacturing jobs were down 368,500, and financial industry jobs down 82,300. Growth was concentrated in two sectors: local schools (up 71,600, or 16.7 percent), and that slice of the private sector referred to as "health care and social assistance," up 312,800 jobs, or 36.8 percent.

The Institute calculated that somewhere between 40 percent and 60 percent of the growth in health care and social assistance jobs was financed by the taxpayers, through Medicare and Medicaid, and through government contracts with various social service providers. Taxpayer-financed jobs thus account for almost all, or perhaps even all, of the state's net job growth during the 1990-2003 period.

"The fact that a job is funded by the taxpayers, of course, doesn't mean it's a less worthy endeavor than some other job," the report said. "On the contrary, these jobs in health care and social assistance are providing vital services, often to the most needy in our society."

But as an economic growth policy, depending upon new tax-funded jobs alone would "prove self-defeating.... Taxpayer-supported jobs are totally dependent upon the existence of taxpayers.... Steadily growing the taxpayer-supported economy at the expense of the tax-paying economy is a one-way street leading to permanent decline."

The full text of the report is available (in Adobe Acrobat format) at: www.ppinys.org/reports/2004/economy04.pdf.