Something for Everyone

Posted by & filed under CGR Staff.

Gov. Eliot Spitzer’s proposed state budget contains something for everyone.

Something to dislike, that is.

So, if you don’t like the way things have been done recently in Albany, maybe you’ll like this budget. It reminds me of my days as a newspaper reporter, when we would say that if you angered all your sources equally, you’d probably done a pretty good job on the article.

The health-care industry disagrees with the $1.3 billion Spitzer proposed in spending cuts. Businesses don’t like the $450 million in closing tax loopholes that will mean paying more to the state. Fiscal conservatives are sure to dislike the 6 percent overall spending increase the budget calls for – especially since they know the Legislature will fight hard to spend even more.

Even public education, which was treated generously in the budget proposal with a $1.4 billion increase, can find things to dislike, such as an increase in the number of charter schools from 100 to 250 and a $25 million tax deduction for parents paying private or public school tuition.

The taxpayer, however, might find some things to like. First, except for the closing of tax loopholes mainly affecting business, the budget does not raise broad-based taxes. There’s no hike in the income tax or the sales tax.

Second, Spitzer followed through on a campaign promise by proposing a major expansion in the School Tax Relief (STAR) program that’s proven popular with property taxpayers. The program reduces the amount homeowners pay in school taxes by exempting part of the value of a home, and the state makes up the difference to school districts. The governor wants to add $1.5 billion this year to this $3 billion program, and under his plan the state would for the first time take income into account, steering far more of the benefit to middle-income taxpayers.

The largest remaining flaw with STAR, however, is it does nothing to directly lower school taxes. In fact, some analysts have said STAR actually drives taxes higher by temporarily easing the pain: taxpayers don’t see the big tax increases at first because of the new exemptions, but eventually the increases outgrow the value of the exemptions.

Taxpayers might also appreciate Spitzer’s aggressive effort to rein in health-care spending. His budget would slow the rate of growth in the Medicaid program from an average of about 8 percent in recent years to 1.7 percent. He’s made it clear he wants to force major changes in the health-care system, and in the first of several policy speeches leading up to his budget proposal, he criticized the system and the state for allowing health care to become more about taking care of institutions (hospitals, nursing homes, labor unions) than patients.

The governor said he’s going to ferret out waste in the system, and he gave us an example by pointing to graduate medical education. The state has spent more than $8 billion over the last five years on graduate medical education – $77,000 per graduate resident in 2005 – much more than other states. The money has been distributed under a formula that Spitzer said doesn’t work the way it should and in fact sent money to educate residents and doctors who don’t even exist.

On education, however, Spitzer was more accepting of the status quo. While the governor said his new “foundation” school-aid formula will drive more money to the districts that need it most, every school district will see a state aid increase of at least 3 percent. That means even the wealthiest districts that spend many thousands of dollars a year on each student will get more of our state taxpayer dollars.

Even for the taxpayer, the Spitzer budget is mixed. But here’s something else to like: Spitzer began his budget presentation with straight talk about the state’s problems. Gone were the days of glossing them over and boasting of the state’s accomplishments. Spitzer acknowledged that we’re the highest-taxed residents in the nation, that too often we don’t get enough for what we pay, and that the economy is in serious trouble, particularly Upstate.

“We are paying a premium and getting less back,” Spitzer said, adding that his budget is a departure from the status quo: “We are saying ‘no’ to the folks who have gotten too used to hearing ‘yes.’”

For folks in New York struggling to pay their taxes, those are sweet words.