In his first state of the state address, New York Gov. Andrew Cuomo on Wednesday said the state must reduce spending and close a $10 billion budget gap in the next fiscal year.
“We need to start with an emergency financial plan to stabilize our finances,” Cuomo said in front of a crowd of lawmakers and the public in Albany. “We need to institute a wage freeze in the State of New York, we need to hold the line on taxes, we need a state spending cap, and we need to close this $10 billion gap without any borrowing.”
Cuomo will propose his budget for the fiscal year beginning April 1 later this month. Though the Democratic governor did not announce specific cuts, he said that spending on Medicaid and education had been growing faster than the rate of inflation without producing comparable results.
Cuomo announced the creation by executive order of several commissions or teams that would craft proposals that could be considered in the fiscal 2012 budget. The spending-cap proposals would limit state spending growth to the rate of inflation. A property-tax cap proposal would limit increases to the lesser of the rate of inflation or 2%, though the caps could be overridden locally.
“New York has no future as the tax capital of the nation,” Cuomo said. “The people of the state simply cannot afford to pay more taxes.”
“A property tax cap is extremely necessary at this time,” said Michael Solomon, a managing director at Janney Montgomery Scott LLC who served on a state commission examining property taxes in 2008. “It’s a very blunt instrument, but what a tax cap will do is force the necessary changes that get at the root causes of spending.”
Solomon said that about 75% of school districts’ costs are employee related.
Another commission will look at unfunded and underfunded mandates imposed by the state on local governments and school districts.
The New York State Association of Counties will be part of that commission. NYSAC deputy director Mark LaVigne said that a property tax cap and mandate relief need to happen at the same time.
“We should do a cap, but we should do more than a cap, we should actually cut property taxes. But we can’t do that until they reform the mandate system that has caused a property tax crisis in the state,” LaVigne said. “We deliver the state’s programs and services locally and we’re required to fund a proportion of those.”
Cuomo also said the state needed to change the way it created jobs. He proposed creating 10 regional economic development councils that would compete against each other for $200 million of grant money for job-creation projects. Lieut. Gov. Robert Duffy would lead the councils, whose boards would include representatives from counties and local governments in each region.
“There is no top-down template to create jobs,” Cuomo said. “You have different regions in this state with different assets and different abilities and these plans are going to have to come from the bottom up.”
He said the councils would coordinate existing funds that flow to the regions primarily through the Empire State Development Corp.
It was unclear from the speech what the ESDC’s role would be in the new administration or whether the councils would obviate the need for local industrial development agencies. The issuer has traditionally sold personal income tax bonds to finance economic development grants.
Like his recent predecessors, Cuomo said the state’s colleges and universities, especially the State University of New York system, would be economic engines in partnership with the private sector.
Cuomo also created by executive order a Spending and Government Efficiency Commission that has a goal of reducing the number of agencies, authorities and commissions in the state by 20% and is headed by cabinet member Paul Francis.
