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October 3, 2005

New report finds New York's spending has outpaced the rate of inflation since 2001

New York's spending has grown nearly three times the rate of inflation since 2001, according to a new report from state Comptroller Alan Hevesi.

The report, an annual analysis of state finances, found that state spending totaled $101.1 billion in fiscal 2005, “an increase of $3.4 billion or 3.5 percent from the prior year.”

The state's spending has grown 26.2 percent since 2001, compared to a growth in the Consumer Price Index (inflation) of 9.2 percent, the report said.

The report also noted that in 2002, per capita spending in New York was $4,457, nearly 20 percent higher than the national average of $3,738.

New York's Medicaid spending increased nearly $1.07 billion, or 46 percent, from 2000 to 2004, the report added. "Medicaid spending rose due primarily to the rising number of Medicaid recipients, increases in utilization, and growth in the cost of services and prescription drugs," it said.

The comptroller's report also listed several findings about New York's combined state and local tax revenues. Taxes in the Empire State are 26 percent above the national average when measured as a share of personal income, “primarily because local taxes are nearly 58 percent above the national average.”

Property tax levies grew more than 25 percent for counties, cities, towns and villages combined between 1999 and 2004, the report said. "School district property tax levy increases outpaced all other classes of local government, with a median increase of 38.4 percent between 1999 and 2004."

New York continues to lag the nation in job and population growth, the report found. The state’s population has grown much more slowly than the rest of the country, increasing by only 1.3 percent between 2000 and 2004, compared to the national average of 4.3 percent.

“For the first five months of 2005 compared to the same period of 2003, employment in the state rose by 1.1 percent, while the number of jobs in the nation increased by 2.3 percent,” the report said.

The report also found that the state is increasingly paying for capital projects, such as road work, bridges and other construction projects, with borrowed money instead of current revenues from taxes and and fees.

"In 1994, the pay-as-you-go share of non-Federal capital financing was 51 percent," the report said. "Since then, pay-as-you-go financing has averaged 39 percent."

The current Capital Program and Financing plan would increase capital spending to an average of $7.1 billion per year through 2009-10, the report said. "At the same time, the projected share of non-Federal capital spending financed on a pay-as-you-go basis will average 28 percent over the next five-year period."

The report expressed concern about the state of New York's finances and implications for the future.

"The budget enacted for 2005-06 relies on $4.2 billion in non-recurring resources to maintain balance throughout the year, reproresenting almost 10 percent of general fund spending," the report said. "This structural imbalance—not raising as much in revenues as is spent—causes massive out-year gaps."

The report also warned against the state's increasing reliance on debt.

“The more we pay for interest on the debt, the less we have to pay for schools, hospitals, public safety and other vital programs,” Hevesi said. “At the rate we’re going, paying the price for all of our borrowing is going to crowd out critical services taxpayers will need in the future.”

The report found that New York has the second highest level of debt, behind California. The report added that the state’s level of debt was almost twice as much as the third most indebted state.

Of the state’s $48.2 billion in debt, about 96 percent has been issued without voter approval through public authorities, the report noted. “The eighteen largest public authorities had a total of $120.4 billion in debt outstanding, of which $41.7 billion was issued on behalf of the state and the balance of $78.7 billion was issued for authority purposes, underscoring the need for legislation to ensure accountability for authorities’ fiscal practices,:” the release on the report said.

“Acquiring debt, particularly debt for operating expenses, weakens the State’s finances for the future when our infrastructure will be older and in need of greater repair and when new technologies may require completely new investments to keep the New York economy competitive,” Hevesi said.

A release on the comptroller's report is available at www.osc.state.ny.us/press/releases/sept05/093005.htm.

The full report is available, in PDF format, at www.osc.state.ny.us/finance/finreports/fcr05.pdf.