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A Battle Plan For Gen. Cuomo - If Elected Governor, He'll Have To Back Up Rhetoric With Action

October 31, 2010

By Josh Barro, Daniel DiSalvo

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The New York governor’s race has offered a good bit of black humor, producing a mix of laughter and discomfort, but no suspense about the outcome. While it’s nearly certain that Andrew Cuomo will be elected governor on Tuesday, it is less clear what exactly he will do once in office.

His political profile is that of a charmer and wheeler-dealer; his campaign platform is that of a warrior who’s set to slay the fiscal dragon that menaces the Empire State.

The fiscal future of New York turns upon which version of Cuomo carries the day. If New York is to avoid becoming the next California, constantly teetering on the brink of total fiscal calamity, the next governor needs to choose clarity over compromise. Doing so will entail a long and tiring political war with the entrenched union forces, who are among Cuomo’s principal supporters.

Fiscal policy in New York has been wildly out of step with reality. From 2000 to 2010, state government spending grew 70%, about twice as fast as personal income. The anti-growth tax policies that finance this spending have undermined job growth: from 1993 to 2008, New York’s job base grew at one-fifth the national rate. And when the Great Recession battered state revenues, lawmakers raised taxes again to the tune of nearly $4 billion per year, making New York City’s top income tax rate once again by far the country’s highest. As a result, New York sank to last place in the Tax Foundation’s annual ranking of state business tax climates. Public sector unions that consistently favor higher taxes and more spending are at the root of the problem.

On paper, Cuomo’s platform is very aggressive when it comes to targeting the problems created by the public employee unions. It contains proposals to freeze state employee wages, cap state spending and local property taxes, make local employees contribute more to their health insurance, reduce pension benefits for new employees and sunset the new millionaires’ tax in 2011. The New York Times has described his agenda as a plan to launch an “offensive” against the public sector unions.

But declaring your intentions is one thing. Executing them is another. The usual New York pattern, according to Cuomo himself, is this: “[T]he governor announces the budget, unions come together, put $10 million in a bank account, run television ads against the governor. The governor’s popularity drops; the governor’s knees weaken; the governor falls to one knee, collapses, makes a deal.”

It’s not hard to see why. The Empire State tops the charts nationally with nearly 70% of state and local employees belonging to unions. They are particularly powerful interest groups that can exert great influence over their employers - that is, government - through campaign donations, get-out-the-vote drives and independent expenditures. They are also a principal constituency of the Democratic Party. And in New York, where the Republican Party is anemic at the state level, the only restraint on the unions is the bond market. So, an offensive against the unions is a daunting prospect.

A solution to New York’s $8.2 billion budget gap will require structural reductions in state and local spending. Two areas stand out as ripe for reform: Medicaid and employee compensation. But these cost drivers are the unions’ bread and butter.

So, the only road to fiscal sustainability runs through the unions.

Take Medicaid. New York accounts for 14% of the country’s Medicaid spending, despite being home to just 6.4% of people and 8.7% of Medicaid recipients. We spend 25% more on Medicaid than California, even though California’s program has twice as many participants.

Just closing half the gap between New York’s per-enrollee Medicaid costs and the national average would save $5 billion a year - enough to close half the budget gap.

Excessive Medicaid spending is driven by the Service Employee International Union’s (SEIU) local affiliate 1199, the health care employees union, which has cut deals in Albany with Republicans and Democrats alike. High Medicaid spending benefits the union’s members, so the union can be counted on to fight any cuts tooth and nail.

Employee compensation reform may make Medicaid look like a walk in the park. Public employee wage levels in New York are high, including the country’s highest teacher salaries, according to the National Education Association. Cuomo’s call for a freeze on state workers’ wages and for them to pay a larger share of their health insurance premiums will be met with stiff resistance - as will a property tax cap, which would put downward pressure on municipal and school payrolls. (Notably, New York’s largest teachers union declined to endorse Cuomo.)

But the single most alarming area of spending increases is in retirement benefits. The state’s required contribution to the main employee retirement system is likely to more than double from $1.3 billion in 2010 to $2.7 billion in 2014. Even larger pension bombs will fall on local governments. Current employees’ benefits are constitutionally protected and thus off-limits.

Cuomo’s only option is to propose a new pension scheme for new hires - and here, his proposals are both too timid to produce the necessary savings and too radical to please the unions.

Despite his bold rhetoric now, Cuomo may be tempted instead to copy his predecessors and, bit by bit, appease the unions with a patchwork of tax hikes, nuisance fees, accounting tricks (like pension amortization) and hope. This is essentially what George Pataki did in his third term, and he got lucky: A soaring stock market and consequent high income tax receipts bailed out the state’s budget. Cuomo is unlikely to have similar luck, especially since he faces the added challenge of replacing federal stimulus dollars that held the last two budgets together but which will evaporate by 2012.

Minimizing disagreement with unions would have the upside of preserving Cuomo’s carefully crafted image as a reasonable, modest and fair-minded politician. But the downside is huge: Cuomo would have few accomplishments to speak of, no fundamental changes would occur in the way Albany works and New York would slide into the pantheon of fiscally doomed states.

Nevertheless, there are some signs that Cuomo could wind up siding with the unions anyway. For instance, when he had the chance to cut off the Working Families Party’s ballot line he did not do so. SEIU 1199’s former chief political operative, Jennifer Cunningham, is counted among Cuomo’s advisers. And he has avoided drawing lines in the sand on issues such as a repeal of the so-called Triborough Amendment, which gives public sector unions great leverage in contract negotiations.

The unions are undoubtedly pleased by Cuomo’s unwillingness to pick a fight with them on these issues during the campaign. Of course, that may be part of a wise strategy of holding one’s cards close to the vest and avoiding clashes with allies.

The biggest advantage of a more confrontational strategy - one Cuomo, a politically savvy operator, cannot be blind to - is that it promises to earn him a national reputation as a reformer. It would place him in the small coterie of Democrats who’ve shown they can navigate the new age of austerity.

Ultimately, as long-time New York political observer Fred Siegel has argued: “if Cuomo is to govern effectively, he will have to take on the public sector spending monster.”

If he doesn’t, we might as well have re-elected David Paterson. What New Yorkers desperately want and need is leadership: palpable anger about the fiscal problems created by public worker unions coupled with a clear-eyed and bipartisan search for policy solutions.

There’s no reason that can only come from a Republican like New Jersey’s Chris Christie; indeed, it’s Cuomo’s only option besides failure.

Original Source: http://www.nydailynews.com/opinions/2010/10/31/2010-10-31_a_battle_plan_for_gen_cuomo__if_elected_governor_hell_have_to_back_up_rhetoric_w.html

 

 
 
 

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