Looking for a tax-cutting, budget-slashing, fiscally conservative governor? How about Andrew Cuomo? Yes, that Andrew Cuomo.
With the possible exceptions of California and Illinois, no state is facing as big an economic mess as New York. Years of profligate spending and crushing taxes have left the state with a $10 billion budget shortfall. The conventional wisdom said that despite having the nation’s highest tax burden, and what Cuomo has called the “worst business climate in the country,” New York would have no choice but to hike taxes yet again. That is, after all, the path that Illinois just chose, raising its state income tax by 75 percent.
Cuomo rejected that approach, early, often, and loudly. He vowed to balance the state’s budget without borrowing and without raising taxes.
“The old way of solving the problem was continuing to raise taxes on people, and we just can’t do that anymore. The working families of New York cannot afford tax increases. The answer is going to have to be that we’re going to have to reduce government spending,” Cuomo declared.
In fact, Cuomo didn’t just rule out tax increases, he actually called for tax cuts. Already he has pushed through the state senate a bill establishing one of the nation’s strongest caps on property taxes. For New York businesses and homeowners, this is a long overdue move. Nationally, the median annual property tax is $1,917. In some New York counties, the average property-tax bill exceeds $9,000.
Cuomo’s proposal, modeled after nearby Massachusetts’s successful Proposition 2½, would limit property-tax increases to no more than 2 percent or 120 percent of the inflation rate, whichever is lower. Significantly, it does not include traditional loopholes for things like government employees’ health-insurance premiums or pensions. It would also eliminate the practice of localities’ voting separately to approve school budgets without regard to their impact on taxes. And most important, the bill would require a 60 percent supermajority for voters to override the cap, ensuring that taxes would only be raised for genuine emergencies or the most worthwhile projects.
Cuomo also has announced that he will allow the state’s “temporary” income-tax surcharge on the wealthy to expire as scheduled at the end of this year. That has outraged liberal groups, unions, and the New York Times, but Cuomo responds by warning that high taxes are a job-killer and would “just prolong the recessionary conditions in the state.”
Of course, tax-cutting is always easier than budget-cutting — as Congress has shown in recent years — but Cuomo also seems serious about controlling state spending. In fact, Cuomo sounds almost Reaganesque, declaring flatly, “The state spends too much money.”
Almost immediately, he imposed a freeze on salaries for state workers. While that move was more symbolism than substance, it was important symbolism. Public-employee unions have been some of the state’s most powerful special interests. Since 2007, while most Americans have been struggling, New York public employees have seen their wages and benefits go up by 13 percent. Beyond the symbolism, Cuomo’s freeze will save taxpayers $200 million this year. Cuomo is also set to cut the size of the state bureaucracy. His 2011 budget, released yesterday, calls for a reduction in the state work force of some 15,000 people, slightly more than 7 percent of the state’s 200,000 employees. And he cut his own office’s budget by 25 percent.
Overall, Cuomo’s budget represents the first proposed year-to-year drop in state spending since the mid 1990s. Everything is on the table, from prison construction to state aid to New York City.
Cuomo also appears ready to go after the sacred cows of state spending: education and health care. He has pledged to eliminate state budget rules that lock in annual increases to educational programs and Medicaid — a 13 percent hike this year. But beyond doing away with the automatic $8 billion hike built into the budget formulas, Cuomo plans real cuts as well. His budget would cut Medicaid spending by $3 billion.
He would also shave nearly $1 billion from state education spending. And Cuomo has made it clear that he was talking about actual cuts, not just the traditional game of decreases in the rate of increase.
The proposed cuts have engendered the usual howls of outrage that it will lead to fired teachers, overcrowded classrooms, and sick people dying in the street. In response, Cuomo notes that New York spends more per pupil on education and more per enrollee on Medicaid than nearly any other state, yet has little to show for the money.
Andrew Cuomo apparently understands that the secret to economic growth is a smaller, less expensive government. It’s an approach that some of his fellow Democrats in Washington — including the White House — could learn a lot from.
— Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.