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Governor Pataki's 2003 Budget Address

by Governor Pataki, Jan 29, 2003
 

Lieutenant Governor Donohue, Majority Leader Bruno, Speaker Silver, Leader Nesbitt, Leader Patterson, Comptroller Hevesi, respected members of the Legislature, fellow New Yorkers.

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The budget I propose today will spell out the very difficult decisions that current fiscal conditions demand of us.

All of us agree that New York faces serious economic challenges in this fiscal year and beyond.

Over the past few weeks, I've spoken of the need for tough choices.

Now, the time for making those tough choices has come.

And as I see it, our choices are limited to two.

It's a clear choice between taxes and jobs.

If New York's record prior to 1995 proves anything, it's that high taxes are the surest way to weaken the economy and drive jobs across New York's borders.

Conversely, New York's record since 1995 shows that cutting taxes encourages initiative, sparks new investment and creates jobs.

Our eight-year fiscal record demonstrates this -- irrefutably.

Likewise, the record we inherited eight years ago demonstrates that raising taxes discourages initiative and investment, and leads to massive job losses.

...Which means that raising taxes this year -- or any year -- is the wrong choice.

We must choose jobs.

So today, I urge you to stand with me and send the right message to the New Yorkers who are worried about their jobs, to those who need jobs, and to the entrepreneurs who create jobs: Let's take the option of raising job-killing taxes off the table on Day One of this year's budget process.

Instead, let's follow the course that we know leads to economic renewal -- the course that lifted New York out of the economic crisis we inherited eight years ago.

Then, we faced a $5 billion deficit, runaway government spending and excessive taxes that fed a bloated government bureaucracy.

Of course, there is a difference between that crisis and today's.

That crisis was the result of more than a decade of misguided policies and poor fiscal management.

Today's enormous deficit was caused by events beyond our control -- the September 11th attacks and the decline of the stock market, compounded by the national recession and the unique problems of the financial industry which is so crucial to New York's economy.

There is only one way to lift New York out of this fiscal crisis -- by creating private sector jobs that are the foundation for public sector resources.

The reason we've been able to make record investments in areas like health, education and the environment is because our tax cuts sparked new investment and new jobs which strengthened our economy and expanded our tax base.

In the weeks and months to come, the debate over this budget will take many twists and turns.

But, again, ultimately the debate comes down to a simple choice: jobs or taxes.

My budget rejects job-killing taxes.

My budget chooses jobs.

Our budget must do the same.

As clearly as I can, let me state the hard facts behind New York's fiscal crisis and the steps we must take to end it.

We face a two-year, $11.5 billion dollar shortfall, a budget gap larger than the total annual budgets of 36 other states.

As a result of the terrorist attacks, New York suffered the direct loss of nearly 100,000 jobs.

Coupled with the national recession, the stock market decline and the problems facing the financial services industry, New York has a deficit of $2.2 billion in the current year, over and above the $8.8 billion deficit we've already closed.

In the coming fiscal year, we face another $9.3 billion deficit.

It is a staggering amount, particularly when you understand what we have already done to properly manage our fiscal affairs.

Immediately after September 11th, we took quick action.

We reduced the government workforce, cut back on agency spending, restructured our debt to take advantage of low interest rates, and took other smart steps to manage the people's money.

That is how we were able to close an $8.8 billion shortfall to date.

These actions will help close another $700 million over the balance of this fiscal year.

We must, however, act quickly to protect our schools, public employees and fiscal stability by closing the remaining $1.5 billion current year shortfall.

Since early December, we have been working together to close this gap with funds from securitizing the tobacco settlement.

I urge you to take prompt action on this measure.

For all we've done, let us not forget that the total of this year's deficit and next year's deficit combined, amounts to a budget shortfall of almost $20 billion.

Never before has our state faced this type of fiscal challenge. But we are New Yorkers. We met the challenges after the barbaric attacks of September 11th. We met the challenges of putting New York back on the path of strength and opportunity.

And we will meet the challenges before us today.

But we must do so while continuing to look toward the future. It's not just about getting through this budget or even the next. Quick fixes will not solve our fiscal crisis.

My spending plan was crafted with New York's future in mind. It's a job- creating budget based on long term economic growth.

Yes, there are difficult decisions to make, but I know we will make the right ones because we have made them before.

Prior to September 11th, we set aside the highest level of fiscal reserves in state history. Because we had the foresight to protect surplus funds -- because we took responsible steps to ensure we were prepared for the worst -- we are better prepared today than other states to make the tough choices.

Those decisions won us praise from fiscal watchdogs who -- a year after September 11th – said New York had weathered a storm that would have crippled a less prepared state.

When I addressed you two years ago, I said that "fiscal restraint is more than just sound economic policy, it's our obligation.

We have to prepare our State to withstand a potential slowdown in the national economy."

That was months before any official declaration of a recession, but I saw it coming and we prepared.

That was also months before the attacks.

I urged you to hold the line on spending to gird against the national recession.

My call for fiscal restraint led to some significant battles here in Albany, battles we can not afford to repeat.

Now more than ever, we cannot afford to be blind to the fiscal realities we face.

This year, more than ever, we need to work together to put in place a budget, and that budget must spend less than last year's.

I welcome an honest debate in the weeks to come, but let's work together to get the budget done promptly so that we can ensure the recovery that will allow us to again make the new investments in education, health care, and the environment that we all support.

Last year, knowing that tough decisions would have to be made in this budget, we froze salaries for all appointed employees earning over $75,000.

And we asked all agencies of government, with the exception of Public Security, to reduce their operating costs by five percent.

In the forefront of our efforts to reduce spending and find new efficiencies in State government is the Executive Chamber, where we said we'd reduce costs by 10 percent, but we're going to do even more.

In the coming year, we'll reduce Executive Chamber costs by roughly 19 percent.

In all areas of government -- starting with my office and my staff -- we must work aggressively to eliminate waste, consolidate functions, and reduce overhead costs.

We must streamline our state workforce to ensure that it is as lean and as efficient as it can be.

Since 1995, we've reduced the size of government by nearly 20,000 positions, while actually increasing efficiency. The budget I present today calls for a state workforce reduction of an additional 5,000 positions.

Those reductions are targeted intelligently to maximize the efficiency of our government and to provide the greatest opportunity to avoid layoffs.

As we have in the past, we will work closely with the public employee unions, while striving at all times to keep any layoffs to a bare minimum.

Trimming the state bureaucracy and cutting costs at our agencies will help. But state operations account for only 15 percent of the state budget. Those cuts will only get us so far.

We cannot expect to fully solve New York's fiscal problems unless we spend less than we did last year and make reductions in almost every area of the budget.

One area of the budget that will be exempt from spending cuts is public security.

To protect New Yorkers in the post-September 11th environment, my budget includes $180 million for public security activities, an increase of seven percent over this year.

This includes $8 million in new funds to support an additional 120 State Troopers to protect and bolster security along our northern border.

Overall, we have to spend significantly less. In 1995, you and I passed a budget that spent 2.2 percent ($720 million) less than the year before.

This year, I will ask you to pass a budget that spends 2.9 percent ($1.1 billion) less than last year.

These are the difficult decisions we have to make -- decisions that will result in less funding to worthwhile programs that we all support.

I don't want to reduce spending for these programs. None of us do. But then, none of us was elected to make just the easy decisions.

We can either cut these programs today and allow for the growth that will fuel them tomorrow, or subject New Yorkers to job losses and a fiscal crisis for years to come.

But as we make the necessary cuts, we're also going to make sure our health care system remains the best and strongest in the nation.

Our Health Care Reform Act has helped make New York's health care system the best in the world.

But these difficult times mean we must make it more effective and more efficient.

This budget will protect HCRA and extends it for an additional two years.

Across the country state governments are grappling with the high cost of new medical treatments, spiraling prescription drug prices and the needs of America's growing senior population.

New York is no different.

A failure to address Medicaid spending growth could jeopardize the vital health programs we have championed together.

This budget will not do that.

We will propose reforms that will reign in Medicaid spending this year, including steps to control prescription drug costs – the fastest growing segment of Medicaid.

At the same time we will reaffirm our commitment to providing care for the most vulnerable New Yorkers through our nationally renowned programs – Child Health Plus, EPIC and Family Health Plus -- which will continue to be the best in the nation.

Our Medicaid reforms will also help New York's local governments.

The new Medicaid cost-savings measures will generate $160 million in savings for New York City and $395 million for county governments during the next two years.

These savings will grow even larger in future years.

We are also going to continue our push for legislation we proposed last year that would provide counties and New York City with a total of $172 million in new fiscal relief by eliminating the requirement that these governments repay previously advanced State Medicaid funds.

Our Budget also takes additional actions to help local governments cope with their own fiscal challenges.

It includes a comprehensive mandate relief package that would provide new incentives and greater flexibility to municipalities to reduce costs and remove long-standing impediments to greater efficiency.

Also, in spite of our own fiscal difficulties, the Budget maintains nearly $800 million in unrestricted State aid for cities, towns and villages at current levels -- including more than $327 million for New York City.

At the same time, with actions contained in the Budget -- and through other measures -- we are committed to providing the City with more than $1.2 billion in net fiscal benefits in our fiscal year.

These measures include: new mandate relief measures, additional support from the Battery Park City Authority...

...support for legislation advanced by the City that would provide new fiscal relief, authority to restructure City debt...

...additional airport lease payments from the Port Authority, and continued partnership to achieve full Federal reimbursement of World Trade Center costs.

Much of the fiscal relief provided in the Executive Budget for New York City is recurring -- and will in fact grow in future years.

Clearly, the most difficult decisions facing us involve education – an area where we have worked together to make record investments.

As someone who was educated in New York's public schools -- and as a father whose children have benefitted greatly from our excellent public school system -- the last thing I want to do is reduce spending on education.

However, the crisis is that bad. We have no choice.

In these difficult fiscal times, we need to focus on the fundamental aspects of our school aid formula – those components that are absolutely critical to the basic mission of K-12 education.

Therefore, some of the most significant reductions are in categorical programs -- programs that we all support.

Certain categorical programs will be suspended -- while others such as Bilingual Education, Improving Pupil Performance, Categorical Reading and Magnet schools will be maintained.

In addition to categorical reductions and certain other reductions, operating aid will be reduced by four percent, or roughly $400 million, with reductions made on an equitable basis – with a greater share targeted to those districts that have the greatest means to sustain them.

We will also provide greater flexibility to our schools in the use of State aid – allowing local officials to have increased ability to manage local resources during these difficult times -- and we will provide meaningful mandate relief for our schools.

On education, we've made record investments, year after year.

Currently, the State is providing 50 percent more in school aid than we did in 1995.

And even with the difficult decisions we will be making this year, school aid will be $3.6 billion more than it was in 1995.

And this year – despite our spending restraint – we will remain among the nation's leaders in per pupil spending.

Let me be clear: I believe in public education. I'm a product of public education.

In 1995, my priorities were clear -- straighten out our state's finances, restore our state's economic competitiveness, and create the economic growth necessary to make record investments in education.

Those priorities haven't changed.

We've done it before. Now we must do it again...

...so that we can once again make record investments for our children, our teachers and our future.

And as we adopt a budget that creates jobs and grows us out of crisis we must continue the long tradition of compassion that sets New York apart.

In addition to preserving our successful health care initiatives we will continue to fully fund welfare benefits, day care slots and other programs critical to New York families.

We also fulfill our commitment to the New York State Cares program.

This budget expands New York State Cares, providing additional opportunities for developmentally disabled New Yorkers to have a home in the community.

Our policies have also allowed working families to keep more of what they earn.

We've dramatically increased the Earned Income Tax Credit over the past eight years -- making it one of the most generous in the nation.

Our tax cuts have reduced income taxes on those making less than $30,000 a year, by nearly 50 percent, and we have removed more than 400,000 working families from the tax rolls altogether.

They don't pay a dime in state income taxes.

In fact, according to a national study, New York's lower income working families pay less in state income taxes than virtually any other state in the nation.

We've done well. But even in these difficult times, we can do more.

That is why this budget will increase the earned income tax credit to 30 percent, maintaining New York's national leadership in providing help to working families.

As a result of this increase, 20,000 additional lower income working families will be removed from the income tax rolls.

As we work together to address the challenges of today – we must work just as hard to embrace the promise of tomorrow.

It all starts with good jobs and the high tech economy. All of us know that a good job is the key to building a strong family. That is why we must continue on the path to growth, and continue building the foundation for 21st century economic renewal.

You and I have worked hard to transform our economy into a global leader in high tech research, innovation and manufacturing.

For years, the pieces of the puzzle were all right here in New York, with the exception of two critical components – a competitive economic climate and aggressive state government support.

Together, we've worked to put all the pieces in place. Starting with our Centers of Excellence and complemented by our STAR centers, Advanced Research Centers and CAT centers, we're bringing together world class companies and the best and brightest minds at our top-flight academic institutions to work on a common goal...

...turning New York's brainpower into state-of-the-art products manufactured within the State's borders, creating tens of thousands of new jobs in the process. Every day, that vision is moving closer to reality.

In fact, in the last three years alone we have attracted more than $3.5 billion in high tech investments to our State.

Business Facilities Magazine now ranks New York State 4th in the nation in high tech growth – up from 10th just three years ago.

And Site Selection magazine's most recent ranking had us 3rd in the nation in attracting new and expanded corporate facilities -- our highest ranking ever. And it won't be long before New York is number one.

The arrival of International Sematech to Albany – whose formal signing we announced yesterday – could have the greatest impact on our state's economy since the opening of the Erie Canal.

It's going to ignite a high-tech economic boom throughout our state. It is going to do for New York what it has done for Austin, Texas – create hundreds of thousands of new jobs.

The foundation of the Empire State High Tech Corridor is rapidly being built.

When complete, it will stretch from Long Island to Buffalo, and from Plattsburgh to Lower Manhattan, and it will mean a future economy where all students with a degree in science, math or computers will be able to begin a high-tech career right within commuting distance from their hometown.

To achieve that promise we must continue our efforts. The competition for high-tech economic development is intense. We have been aggressive... we must stay aggressive.

My budget will fully fund SEMATECH and our Centers of Excellence.

I will also propose a new high tech investment tax credit to leverage up to $250 million of new capital investments.

Access to capital is critical to high-tech firms – especially in their initial phases of start up.

These venture capital dollars will be targeted to small businesses linked to our on-going high tech efforts.

Already our Centers of Excellence are targeting companies from around the country and the world to come to New York to take advantage of our burgeoning high-tech clusters.

This proposed tax credit will be a powerful additional resource that will further increase our competitive advantage against other states vying for the high tech economy of the future.

As with all budget items, I urge you to move quickly on this important measure. Make no mistake, these are very difficult times, but if we make the right decisions we can turn crisis into opportunity.

It was the smart decisions we made to confront the economic crisis we inherited in 1995 that led to smarter policies which allowed us to make record investments in education.

It was the smart decisions we made in 1995 that allowed us to dramatically expand health care for New York's children.

It was the smart decisions we made in 1995 that allowed us to make historic investments in the environment and so many other crucial areas.

At that time -- when New York State's finances were in crisis -- those decisions seemed tough.

But ultimately, the decisions we made marked a turning point for New York.

The process of confronting the fiscal and economic crisis of 1995 made us stronger, because we made a decisive choice -- and the choice we faced then is the same choice we face today.

It's a choice between taxes or jobs.

None of us want to make cuts to our most precious programs and projects, many of which I have personally championed. After all, we've spent eight years making the right decisions so we could make record investments in these programs.

Making these tough choices will require courage, leadership, and honesty.

If we truly care about the future of New York, each of us must demonstrate all three of those qualities in the days, weeks and months to come....

...Because each of us will be approached by well-intentioned groups -- people we know and respect -- who will want us to devote more funds to programs that are well-intentioned and worthwhile.

Do we have the courage to tell them that, yes, your request for funds has merit, but in this time of crisis, the money simply does not exist?

Are we honest enough to tell them that, yes, your cause is worthy, and I support it, but the state just doesn't have the resources?

Do we have the leadership to say, yes, tough decisions are being made, but those decisions are necessary to lift New York out of its current crisis to a brighter future?

Do we have the courage, the honesty and the leadership to make these decisions?

Each of us will provide the answers to these questions in the weeks to come.

We didn't create this crisis, but if we face it head on, and if we face it together, we can end it.

We've done it before, we must do it again.

The choice I've presented to you today -- the choice between jobs and taxes -- is real. The grave consequences of making the wrong choices are just as real.

A vote to raise job-killing taxes is a vote to prolong the crisis well into the future. A vote to reduce spending instead is a vote to end it quickly by creating jobs and strengthening our economy.

During previous budget years, you and I have had the courage to set aside our differences to find common ground.

In a democracy, that is as it should be. But as we seek common ground, we can not afford to take half measures on a crisis that requires our full commitment.

Nor do we have the luxury of making compromises that ultimately result in a budget that only partly addresses the crisis.

Ultimately, I'm the one who must approve a final budget. But I know that the final product is best when it reflects the collaborative efforts of us all.

If we leave this auditorium divided from the start, we've already failed. Let's not do that. Let's not break faith with one another, because if we do, the repercussions will be laid at the doorstep of the very New Yorkers who elected us.

We know what works and what doesn't.

The course we must pursue is clear, and I'm confident that we will make the right choice quickly and with a united voice ...in times of crisis, New Yorkers have always stood tall, stood firm and stood together.

In this hour of economic adversity, there is, among New Yorkers, a real sense of uncertainty -- about jobs, about the future, about the outcome of this budget.

Nothing would send a stronger and more positive message to the people of New York than our willingness to stand together and say with one voice:

We will meet these challenges. We will make the tough decisions. And together, we will lead New York to its greatest day.

If we have the courage to do that, then -- ironically -- the budget we will ultimately be proudest of will be the one we wish we never had to pass.

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