ALBANYDavid F. Shaffer, president of the Public Policy Institute of New York State, will discuss Medicaid and other factors that drive up local government costs and local taxes in New York State at a panel discussion at 8:30 a.m. Thursday, October 7, at the GreenField Manor in Lancaster, Erie County. The event is sponsored by the Lancaster Area Chamber of Commerce.
Shaffer has done extensive research on the factors that drive up local taxes Upstate. For example, he wrote the Institute's recent report entitled "How High is the Upstate Tax Burden—and Why?" That report, which was released August 16, showed that Upstate New York taxpayers paid as much as $6 billion more in state and local taxes than they would in an average state, mostly because of the state's far-above-average levels of spending on Medicaid and local government payrolls.
Shaffer's remarks prepared for his presentation Thursday include the following points:
- Erie County Executive Joel Giambra has been outstanding among Upstate local government leaders in thinking creatively about this problem and about all the other challenges facing local governments and their taxpayers.
- Medicaid is a grave problem for New York taxpayers and for our economy and business climate. It’s costing state and local governments in New York almost $8 billion a year more than we’d be paying if we could get our average cost per recipient down to the cost in, say, Michigan.
- New York State's total Medicaid spending on a per-capita basis is far above average, but the problem is far worse Downstate than Upstate. For example, Erie County’s per capita Medicaid spending is actually below the national average at $863.
- This means that if New York State picked up the local share of Medicaid everywhere, including New York City, and if it raised the income tax to pay for it, western New York taxpayers would actually pay more net taxes. The result of such a state takeover would be a net transfer of about $1.3 billion from taxpayers outside New York City to the city.
- That's why what matters most about Medicaid in New York State is not how that burden is distributed, but how much Medicaid costs and how the state can get that spending under control. Regardless of how the burden is distributed, the bill always goes, ultimately, to the same payer—the taxpayer.
- Strong cost-cutting proposals have come from the Center for Governmental Research in Rochester. These recommendations include moving more patients into managed care: reassessing eligibility for some services, especially long-term care; using data on Medicaid spending and outcomes to find out what therapies and treatments are producing the best results at the lower cost and steering the system towards them.
- Medicaid is definitely a problem driving up local government costs, but it's not Upstate's biggest cost problem. The Public Policy Institute's recent study showed that Upstaters pay about $5 to $6 billion a year more in state and local taxes than they would be if Upstate's tax burden merely matched the nation's average tax burden. Medicaid expenses account for about $1 billion of that extra $5-$6 billion. A far bigger share of Upstate's added expense than Medicaid is local government.
- Upstate New York overall has somewhere between 75,000 and 95,000 more local government employees than it would have if its local government employment matched the national average. As a result, Upstate’s local government payroll is 18 percent above the national average. This extra local-government expense costs Upstaters $3 to $4 billion a year.
- To put this in perspective: If Erie and Niagara counties could cut total Medicaid spending by 10 percent, there would be savings of about $50 to $60 million a year in state and local taxes. But if the region could do without some 4,300 above-the-normal local government employees in the region, the savings would be almost $200 million. [This is a correction from an earlier version. The earlier version incorrectly reported that the full savings could be obtained from just one government entity, Erie County.]
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