Gotham Gazette

The Place for New York Policy and politics

 

Economy

Social Service Programs Cut; Minimum Wage Raised


In the $105.5 billion budget that Governor George Pataki has proposed to the state legislature, he seeks to close the $4.15 billion gap projected for the next fiscal year by making deep cuts in health care for the state's poor, by raising tuition for state and city colleges, and, as the New York Times explained, by "giving New York City only a fraction of the education aid a court-appointed panel said it deserved by next year."

But the news already had been bad for New Yorkers with low incomes. In the current fiscal year (which ends on March 31), Pataki had cut some $100 million in state aid to New York City (plus federal matching funds) for programs that serve a cross-section of needy New Yorkers. These cuts were "among the steepest made to social services in about a decade,"according to the New York Times, and the people they are affecting include:

  • adults on welfare who need preparation for job hunting;
  • substance abusers seeking rehabilitation;
  • people with mental illness who need treatment to stay out of institutions;
  • the elderly;
  • veterans;
  • children at risk of abuse and neglect, or growing too old for foster care;
  • high school dropouts trying to earn diplomas;
  • homeless and runaway teenagers;
  • students at state and city colleges;
  • homeless adults and children;
  • prison inmates preparing to re-enter society; and
  • people with disabilities trying to go back to work or survive on Supplemental Security Insurance.

These were programs that the governor cut, the state legislature restored, and the governor vetoed.

One item added to the budget by the legislature was not vetoed by the governor: a $200 million lump sum for "member items" and "legislative initiatives". In the past, Pataki has vetoed similar unspecified appropriations, claiming that they were unconstitutional. They are distributed outside of the usual rules for government spending; no formal competition is involved. Individual legislators choose their own priorities, which may not coincide with the legislature as a whole. Still, "It's some of the only money we can count on to keep some of these programs alive," says Ron Deutsch of the Statewide Emergency Network for Social and Economic Security, otherwise known as SENSES.

Federal Spending Cuts Also Ahead

The federal spending bill covering most human services for 2005 is also a disappointment to many. Housing assistance for the elderly and people with disabilities will be reduced, as well as programs serving the poor. There will be less money for job training for youth, and too little energy assistance to meet the increased need caused by sharply higher fuel costs. While AIDS relief worldwide will increase, the nation will spend less on HIV prevention within the United States.

Some programs are benefiting under the federal spending bill. Funding will rise for the nutrition program for Women, Infants and Children, and for grants from the Compassion Capital Fund, which supports services delivered by religious and other charitable organizations.

Budget Reform

Late last year, the governor vetoed a budget reform bill, which was trying to make sure that the state budget would be passed on time for the next fiscal year (which officially begins on April 1); it has been late for each of the last 20 years. This is not an abstract problem for social service providers. The longer it takes to settle the budget, the longer service providers must juggle loans and reserve funds, trying to keep programs alive until their funding future is decided. Reducing uncertainty would make it easier for providers and their clients to plan for the future. A new bill proposed by the State Senate would put a specific contingency budget into effect if a regular budget has not been adopted by the start of the next state fiscal year on April 1. Advocates preferred the previous bill. In any case, this watered-down one is unlikely to gain support in the Assembly.

Minimum Wage Raised Over Pataki's Opposition

For the first time in three decades, the minimum wage in New York State is higher than the federal minimum. At the end of 2004, the State Senate overrode the governor's veto of a minimum wage increase, as the Assembly had done the previous August.

As of January 1, 2005, the hourly wage for most of the state's lowest-paid workers rose from $5.15 to $6. In 2006, they will get a raise to $6.75, and in 2006, to $7.15 an hour. An even lower minimum wage applies to restaurant and bar employees who earn tips. Their hourly wage, which was $3.30 an hour, is now $3.85, and will rise to $4.60 by 2007.

New York City has about 274,000 minimum-wage workers, according to the Fiscal Policy Institute(in pdf format). Most work in stores, restaurants, hotels, and similar businesses. Another 218,000 workers earn only a little more: $7.15 to $8.15 an hour. Economists believe a spillover effect raises the wages of such workers as well when the minimum wage goes up.

The governor vetoed the minimum wage bill in July, citing his preference for a nationwide increase. Currently, New York's neighboring states have a variety of minimums. New Jersey and Pennsylvania remain at the federal level of $5.15. Connecticut's minimum is $7.10 an hour, and Massachusetts and Vermont each have a $6.75 minimum.

A mother working full-time year-round, at the $5.15 minimum wage, can earn only $10,712 a year, which is below the federal poverty line if she supports a child. The $7.15 hourly wage will raise her annual wage to $14,872, almost enough to lift her out of poverty if she has two children.

The federal Bureau of Labor Statistics recently reported that the average hourly wage in each of the city's five boroughs ranged from $16.48 in Staten Island to $47.83 in Manhattan.

Linda Ostreicher, a former budget analyst for the New York City Council, is a freelance writer and consultant to nonprofits.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Governor George Pataki's Remarks: 2005 Budget Address


Lieutenant Governor Donohue, Majority Leader Bruno, Speaker Silver, Leader Nesbitt, Leader Paterson, Attorney General Spitzer, respected members of the Legislature, and fellow New Yorkers.

Thank you for being here.

Let's get right down to business.

We all want to make our state as safe and secure as it can be, keep our health care system the best in the world, preserve our environment, provide our children with a quality education, and create hope and opportunity for all New Yorkers.

These and all our other goals depend on two important factors - the fiscal strength and integrity of our State, and an economic climate that encourages job creation, growth and investment.

Before we get to the specifics of this year's budget, please allow me to put a little perspective on it.

In 2002 and 2003, New York State suffered a decline in revenues for two years in a row - the first time that had happened since the Great Depression.

Due to the combined impact of the national recession, September 11th, and the Wall Street decline, New York suddenly faced a budget deficit of more than $11 billion.

Since then, we've worked hard to restore fiscal balance.

Our economy is coming back, and yet today we still face a deficit of $4.15 billion - significantly less than we have dealt with before, but still a formidable obstacle to future prosperity.

We are once again showing strong growth in state revenues. During periods of revenue growth the temptation is always there to spend more on worthwhile programs - but our responsibility is clear.

We must control spending and reduce the tax burden that limits economic growth so we can put these fiscal difficulties behind us just as we've done in the past.

The budget I submit to you today closes the current deficit primarily through recurring actions. It lowers next year's gap to $2.7 billion, the lowest level in five years, and puts us on the road to complete structural balance in 2007.

This budget takes decisive, sensible action - action to achieve the fiscal strength and integrity that will not only erase this year's spending gap, but close future deficits as well. It accomplishes this goal with four core principles:

 

 

  • Controlling spending and building the State's reserves;
  • Reforming our health care system and our biggest budget item - Medicaid;
  • Cutting taxes, including property taxes to spur economic growth; and
  • Linking state aid to performance and accountability standards.

 

Let's begin with state spending.

For the last ten years, we've held state spending growth below the national average.

The budget I present to you today will do even more.

It limits spending growth to just 2.6 percent in the General Fund and 2.4 percent in All Funds, holding both below the rate of inflation and consistent with our 10 year record of keeping it below the national average.

Another proven way to solidify the fiscal strength of our State is by building up the State's Rainy Day Fund.

Back in 1995, the Fund contained just $157 million. This year, just as we've done nine times since, we'll make the maximum contribution allowable under current law, increasing the reserve fund to over $864 million.

For the first time since its inception, the Fund is now filled to its maximum capacity.

One of the main reasons we were able to overcome the fiscal challenges of the last three years is the billions in unrestricted reserves we had set aside in addition to the Rainy Day Fund.

So, along with this budget, I'm submitting legislation that will allow us to further strengthen our State's fiscal foundation by more than doubling the size of the Rainy Day Fund.

We have an opportunity this year -- an opportunity to use the recent trend of economic growth as a springboard to long-term solvency, fiscal stability and tax relief.

Today I submit to you a responsible, forward-looking State budget that puts New York on solid financial footing and ensures a bright future for the State of New York.

New York has the finest health care system in the nation. From access to the latest medicines and life saving medical technology to the best doctors and hospitals anywhere, we truly have a health care system to be proud of.

But if we are to maintain the high quality of our health care system we must take action to address the rapidly escalating costs of Medicaid.

We all know that the cost of Medicaid is crushing taxpayers.

New York's Medicaid program is the most expensive in the nation. If left unchecked, within the next six years Medicaid costs could actually consume more than half of our entire state budget.

We cannot allow this to happen.

The budget I propose today keeps state and local Medicaid spending flat and reduces the program's burden on New York City, on our counties and their taxpayers.

It provides real, immediate relief to New York City and county governments with a beneficial fiscal impact this year of $577 million.

Beginning in 2006, the budget caps local government Medicaid payments at a maximum growth rate of 3.5 percent, and lowers that rate permanently to 3 percent by 2008.

And starting in 2008, this budget calls for a complete State administrative takeover of Medicaid.

But merely redistributing the burden is not enough. The State can no more afford to pay for the current and future costs of Medicaid than counties can.

Shifting the cost of Medicaid from the real property taxpayers in the counties to the state taxpayers without reform is nothing more than an empty promise.

Many of us have been working to address this issue for years. The recommendations in my Executive Budget take ideas from many corners including the Berger Working Group and the Senate Task Force on Medicaid Reform, led by Senators Hannon, Meier and Rath.

My budget proposes a four point plan to address this matter. It includes proposals aimed at the critical issues of: Cost Containment, Excess Capacity, Facility Infrastructure and Long-Term Care.

Real Medicaid reform is about more than cost containment - it's about restructuring the delivery of health care to make it smarter, more affordable, more efficient and higher quality.

First, we must implement a series of cost containment measures. Let me be clear, there can be no Medicaid takeover without cost containment.

While we control costs, we must modernize and strengthen our health care facilities in a way that recognizes how important they are to delivering these vital health care services.

That's why the second point of my plan addresses the issue of excess capacity. We cannot afford to invest more in underutilized facilities. My Executive Budget creates the Commission on Health Care in the 21st Century to make the difficult recommendations to right-size the health care system.

But even as we make these tough decisions, let's make sure that those facilities most in demand are up to the challenges of the 21st Century.

That's why the third point of my plan creates the new Health Care Efficiency and Affordability Law for New Yorkers (HEAL NY) -- a $250 million program this year that will fund health care facility and technology upgrades throughout the State.

Finally, we must make the system better, more accessible and more flexible to meet New Yorkers' individual needs.

The fourth element of my proposal is a package of initiatives that will dramatically improve the long-term care options available to seniors and their families. Long-term care, particularly nursing home care is one of the most expensive aspects of Medicaid.

Because we know a nursing home should be an option, but not the only option, I am advancing the new Access to Home Program that will help families make the structural improvements that allow elderly or disabled loved ones to continue living at home. And because more and more seniors can and want to stay in their own homes, the budget also doubles the State's investment in home services for the elderly.

These long-term care initiatives are not only the right thing to do - they are what our seniors want and they also cost less than the alternatives that exist today.

Each of these four critical elements is necessary if we are going to reduce the costs of the Medicaid system while improving care.

And as we make these major reforms to our health care system we must do more. That's why my Executive Budget reauthorizes HCRA and moves it on budget to provide for greater accountability and transparency in our health care financing.

We all recognize that there are two reasons why our Medicaid costs are too high. First, we spend too much and second our federal reimbursement rate has been too low since the inception of the Medicaid program.

As we seek additional aid from Washington our case will be strengthened only if we make these reforms and finally bring our costs under control. Let's work together to enact these reforms and also with our congressional delegation to help secure additional aid from Washington.

On behalf of real property taxpayers, New York State taxpayers, on behalf of our seniors, on behalf of the next generation of New Yorkers, I urge you to join me in reforming our Medicaid system this year.

As we cap local costs and eventually take over the Medicaid program, let's make certain that the resulting savings will mean lower property taxes for New York's families.

Toward that end, this budget builds on the highly successful STAR program with Co-STAR- a new tax reduction program that gives county governments and the City of New York an incentive to control spending and provide property taxpayers with needed relief.

To be eligible for Co-STAR, counties must keep their overall spending growth at or below the Medicaid cap rate of 3.5 percent in 2006. Taxpayers in qualifying counties will receive a property tax rebate check, directly from the State of New York. The program will begin in 2006 for seniors and farmers and expand to all taxpayers in eligible counties beginning in 2008.

Co-STAR provides a double benefit to county and New York City taxpayers - their governments will be encouraged to control spending growth and lower future property taxes, and they will get property tax relief directly from the State as well.

This year alone our Medicaid reforms will provide savings of more than half a billion dollars to New York's counties and the City of New York. But we know that many other municipalities, especially our Upstate cities, have been facing their own fiscal challenges - we need to help them, too.

As we exercise the fiscal discipline to put the State's financial challenges behind us, let's provide encouragement for local governments to do the same.

The new Aid and Incentives for Municipalities (AIM) program will provide up to $164 million in new State funding to cities, towns and villages all across the State over the next two years.

Every municipality will get at least a five percent increase. Certain fiscally distressed cities will be eligible for increases of up to 25 percent, provided that they have balanced budgets and hold their spending growth below 3.5 percent in 2006 and below 3 percent by 2008.

If they meet these standards, AIM will provide record increases of $38.5 million to Buffalo, $27 million to Yonkers, nearly $18 million to Rochester and $16 million to Syracuse over the next two years.

Next, this budget provides local governments and their taxpayers with an estimated $621 million in savings this fiscal year by making necessary reforms to the State pension system.

But we don't stop there. Once again my budget proposes a comprehensive mandate relief agenda that protects localities from the costs of top-down state policies.

The mandate relief plan repeals the Wicks Law, reforms binding arbitration practices, relieves local governments of certain litigation costs and enacts other measures to assist local governments in reducing costs and the related burden on property taxpayers.

By enacting real Medicaid reforms…launching the Co-STAR program…providing more aid to local governments…linking state aid to performance and accountability standards…making prudent pension reforms…and providing relief and protection from State mandates, this budget takes direct, decisive, and intelligent action to substantially reduce property tax bills all across New York State.

Let's make home ownership in New York more affordable.

Let's strengthen families and improve the quality of life in communities throughout the State.

Let's seize this opportunity to enact smart, meaningful property tax relief this year.

And as we work to help local governments and property taxpayers across our State, we will also work to ensure that every school gives our children the best education possible.

This requires both resources and reforms.

New Yorkers already spend more per pupil on education than any state in the nation.

But in too many school districts, parents and children are not getting the results they deserve.

This year's budget increases school aid by $526 million, the largest increase ever proposed by a Governor.

We're allocating $201 million of this increase to traditional school aid, most of which will go to our Flex Aid program. This initiative will reform our education system by providing each school district greater discretion to better meet the needs of its students.

Through Flex Aid, every district will receive at least a modest increase in aid.

The remaining $325 million will be targeted to our 5-year Sound Basic Education Aid Program, or SBE.

SBE aid will also provide every district in the State with additional funding, but the bulk of it will be targeted to high-needs districts like New York City.

These additional resources, coupled with educational reforms, comprise a comprehensive plan to complete the unfinished business I spoke of when I stood before you two weeks ago.

You and I know that we didn't need a court to tell us that the school funding formula was broken and unfair.

For years now, I've called for replacing our archaic school aid formula with a statewide solution that will provide every child with a quality education.

And as I have said, any new resources must be accompanied by top-to-bottom, fundamental reforms to ensure greater accountability and performance.

SBE is meant to achieve each and every one of these goals.

We'll target nearly 86 percent of SBE aid to 207 of our State's neediest school districts, with New York City receiving 60 percent of total SBE aid.

But SBE isn't just about investing more dollars in education.

It's about getting more education for the dollars we invest.

To that end, through SBE, we'll establish an accountability system to track student progress and performance, and assess how well our schools are spending the dollars we're providing.

We'll require school districts to develop plans to improve underperforming schools, and close those that fail to improve.

We'll create a new, independent Office of Educational Accountability and Efficiency to monitor performance, review improvement plans, provide better financial oversight, and promote increased efficiency.

And we'll allow our school districts to replace tenure for principals with performance-based 3-to-5-year contracts.

And just as we're providing additional aid to municipalities that operate more efficiently - and providing Co-STAR benefits to taxpayers in counties that operate more efficiently - let's do the same thing at the local school district level through STAR-Plus.

Under this budget, a new STAR-Plus school property tax credit will be provided to taxpayers living in school districts that operate efficiently and restrain their spending.

Record investments. Fair and equitable funding. Greater accountability. Higher standards of performance.

Taking these steps will further improve New York State's education system and ensure that our children reach their full potential.

In doing so, we'll be preparing our children for a higher education that opens the door to greater opportunity.

And nowhere is there clearer evidence that sweeping accountability measures and real reforms actually work than at New York's public university systems.

Higher standards… record enrollment levels… unprecedented minority enrollment… state-of-the-art academic facilities… our SUNY and CUNY systems have been transformed over the past ten years.

This year's budget will continue our strong record of support by providing a substantial increase in State operating aid, as well as new investments in SUNY and CUNY's capital program.

Clearly, there's no better investment we can make than educating young New Yorkers to meet the challenges and opportunities of the 21st century. Let's continue our unparalleled record in this vital area, while insisting on the highest standards of accountability and performance.

In order to create a bright, prosperous future for our next generation, a good education is not enough. We need to ensure that New York is a safe place for them to live, learn, and grow.

The progress we've made in reducing crime over the last ten years is nothing short of historic -- New York is currently the safest large state in America. Let's make it the safest state in America.

This budget reflects a commitment not only to that goal, but to meeting the realities of fighting the War on Terror.

It increases funding for Operation IMPACT - allowing for an enhanced presence in the original 15 IMPACT counties, and it expands IMPACT to additional communities throughout the State.

New York State Troopers are busier than ever before, not only in their traditional role patrolling our highways and neighborhoods, but also on the front lines of the War on Terror. This budget adds even more Troopers to the Long Gray Line, bringing the total strength of the force to 4,700 - an all-time high. Another 100 of these Troopers will be joining the expanded Operation IMPACT taskforces this year.

And as we look to solidify our future, let's take action to rectify an injustice of the past.

For over three decades, the forgotten victims of the horrific 1971 riots at Attica State Prison have been seeking justice. This budget will finally honor New York's moral obligation to these dedicated public servants and their families.

With an expanded Operation Impact, a record number of State Troopers, and the best homeland security office in the nation we will make New York the safest State in the nation.

The budget I present to you today builds on our progress not only in making our Empire State safer, but also by providing a cleaner and healthier environment.

This year's budget calls for a $1.4 billion total investment in our environment.

My budget provides $150 million for our Environmental Protection Fund, the highest amount ever, and six times what it was a decade ago.

This year's budget will fully fund our Superfund/Brownfields programs, providing for the clean up and remediation of hazardous waste sites across our State, and returning lands once lost to pollution to productive use.

And my Executive Budget also provides for the expansion of our first-of-its-kind tax credit for the construction of "green buildings."

Together, you and I have made the right investments to enhance the quality of life of New Yorkers in every corner of our State. This year, let's pass a budget that continues our successes, so our children will inherit a cleaner, healthier New York -- enjoying its natural treasures and passing them on to future generations.

Another area where we've made dramatic progress is in reforming welfare, moving people from dependence on government to self reliance and productivity.

There are now one million fewer New Yorkers on welfare than there were a decade ago. Child support collections have more than doubled.

Our actions have transformed lives by giving hundreds of thousands of New Yorkers the opportunity to participate in the freedoms and rewards of our great State.

And as we have helped break the cycle of dependency for so many, let's do even more to improve people's lives.

My budget builds on our record of welfare reform by providing innovative programs that strengthen families. Lets make New York a national leader again, as we take this next step in reforming welfare.

To that end, this year's budget includes a first-in-the-nation State Earned Income Tax Credit for young single fathers who are current in their child support payments. This new credit will strengthen New York's families by encouraging fathers to play a more meaningful and productive role in their children's lives.

My budget also includes an increase in the earned income disregard, which will provide those who are still on public assistance an additional incentive to move more quickly from a welfare check to a real pay check.

I ask you to join me in empowering even more New Yorkers with the chance to pursue the American Dream.

And as I have said before, for most families, the American Dream starts with a job. The ability to achieve the goals I've outlined today depends on a growing and vibrant private-sector economy.

The cornerstone of our efforts to create jobs has been cutting taxes. In fact, between 1995 and 2000 we cut taxes more than any state in the nation.

This year alone the value of the tax cuts we enacted is nearly $15 billion. That's $15 billion less in taxes and $15 billion more in the pockets of working families and seniors, farmers and home owners, single parents and small business owners.

By cutting taxes dramatically, we unleashed our economy, creating hundreds of thousands new private sector jobs. By the year 1999, New York's annual job growth exceeded the national average for the first time in two decades.

For reasons we know all too well, between 2001 and 2003 we lost almost half of the private sector jobs we had gained since 1995.

Today, we are poised to regain the jobs we've lost and to continue our progress in the months and years ahead.

Our economy is growing, but our goal must be plain. Let's once again foster an economy that creates jobs at a rate faster than the rest of the nation - on our way to creating one million more jobs by the end of this decade.

To reach this ambitious goal, we're taking decisive action.

We're pursuing initiatives such as Worker's Compensation reform, Empire Zones and Power for Jobs.

And this budget advances three key strategies to create more opportunity for New Yorkers -- additional tax cuts, promoting job-creating investment through Operation SPUR in communities that need it the most, and continuing to attract high-tech investments through our Centers of Excellence.

Under my budget, our previously enacted tax cuts take effect this year, right on schedule, releasing a half-billion dollars back into the hands of millions of New Yorkers and their families.

But we need to do even more.

That's why my budget provides an additional $250 million in new tax cuts for New Yorkers this year. These tax cuts include accelerating the phase-out of the temporary personal income tax increase, business tax credits to spur Upstate job creation, and our STAR- plus program.

To promote private-sector investment in those Upstate communities which need it the most, my budget includes funding for Operation SPUR - the Strategic Partnership for Upstate Resurgence, our new initiative to leverage job growth and investment.

Operation SPUR is a seven-point program which will include the following:

 

  • First, a new SPUR tax credit for businesses affiliated with our Centers of Excellence;
  • Second, new wage tax credits for businesses that create new jobs;
  • Third, new agricultural opportunity zones to strengthen our rural economy;
  • Fourth, a new low cost Workers' Compensation program to help businesses - particularly small businesses;
  • Fifth, a new tax cut allowing manufacturers to calculate their corporate tax using a single sales factor if they invest in SPUR communities;
  • Sixth, a new exemption for manufacturers from the Alternative Minimum Tax or AMT; and
  • Seventh, $100 million for SPUR grants for economic development initiatives.

 

Clearly, this creates a powerful incentive for companies from around the world to build plants in our State and to keep existing plants here as well.

In particular, this program provides a double benefit for New York companies investing in SPUR communities. New York companies that have existing operations in the State that expand in SPUR communities will receive favorable tax treatment on all of their in- state facilities.

As we target those areas having the greatest need for job and business opportunities, we'll continue building on our progress across our State through our high-tech Centers of Excellence, which have already attracted billions of dollars of private investment as well as Federal support.

This year's budget will provide $250 million for high-tech and other economic development projects that will further solidify New York's role as a world leader in high-tech research and economic development.

Tax cuts. Operation SPUR. Centers of Excellence.

These three strategies are fueling our progress and setting the stage for accelerated economic and job growth in our State.

But there is one more piece to the puzzle.

Our plans for continued economic revival and job growth must include maintaining, upgrading and modernizing our intricate network of highways, bridges, tunnels and rail lines.

To that end, my budget includes a new $36.6 billion, five-year, comprehensive statewide capital transportation plan that will keep our economy moving well into the 21st century.

That includes over $17 billion for our Department of Transportation capital programs and over $19 billion for the MTA. This builds on our record investments over the past decade and allows our State to pursue public/private partnerships to provide more resources for our transportation system.

I look forward to working with you to help strengthen and modernize our system for the benefit of our fellow New Yorkers.

The budget I propose today provides a concrete plan to solidify the fiscal integrity of our State and to set the stage for future growth and prosperity in New York.

It is not a new prescription, but a proven one.

We know that controlling state spending and stimulating the economy with tax cuts will lead to growth and opportunity - it's worked before - right here in New York.

Back in 1995, we faced a more dire economic situation than we face today - a $5 billion deficit, shrinking revenues, and job losses. But we didn't rely on the failed practice of raising taxes to plug the revenue gap - we cut taxes and curtailed state spending.

We are all familiar with the results - new jobs, new investments and new hope for the people of our State.

Today, three and a half years after the human and financial devastation of September 11th, our economy is growing again, but we still face a significant gap.

Let's build on our momentum by sticking to the proven formula of fiscal discipline and tax cuts.

This budget reflects a choice - not an easy choice, but the right choice. And when you think about it, the only choice.

The choice to take the responsible, prudent path to fiscal stability, economic growth and opportunity.

The choice to control spending and build the State's reserves, bring real reforms to Medicaid, cut taxes, including property taxes, to spur economic growth and link state aid to performance and accountability standards.

The choice to face our challenges head-on, rather than pretend they don't exist.

The choice to ensure that our children and their children will be able to live safe, healthy, fulfilling lives right here in New York.

I am confident that working together we will make the right choice.

By working together for the past decade, we've made some great advances, overcome some daunting obstacles and realized some remarkable accomplishments for the people of this State.

I'm confident that by working together again this year, we can the put our State on a path to lasting financial strength and stability…and lead our people to a future of limitless hope, opportunity and prosperity.

Thank you. God bless you, and God bless the Great State of New York.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beyond the West Side Stadium: An Economic Growth Plan for Working People


Mayor Bloomberg's 2005 State of the City Address

The mayor's challengers respond to the State of the City address:

Charles Barron
Fernando Ferrer
Virginia Fields
Gifford Miller
Steven Shaw
Anthony Weiner

Remarks delivered at the New School

Introduction: A Clear Choice Ahead for the NYC Economy

Thank you for that (generous) introduction. [And let me say something I've wanted to say badly over the last few months but can only say here at the New School. Congratulations President Kerrey. You are doing a great job.]

And I'd like to thank the New School for inviting me. This school has always been a place that encourages new ideas. I hope to offer a few ideas today about our city's future and keep up a little with the school's rich tradition.

Many of us were deeply distressed by the results of this November's election. I, and many New Yorkers, believe George Bush has been bad for the national economy, our national deficit, and that he's been awful at building the international support necessary to help defeat terrorism.

But while many New Yorkers saw a clear choice in the national election, some people have argued that there aren't real issues at the local level -- that there aren't real choices this Mayor and City Council are making that concern our City and regional economy.

In his State of the City address the Mayor argued that we don't need to make any choices or changes for that matter because the economic picture is so rosy. But in fact, a lot of New Yorkers would say that things are pretty rough. Per capita income is lower, and unemployment in the outer-boroughs is higher, than at the end of 2000, while every day in New York City, one in three people on line for food relief are children. Even today's New York Times confirms that our economic situation needs attention. That we rely on promoting economic diversity more than ever and that our recovery trails the rest of the nation's.

So I believe that New York faces some very important issues that should frame this year's mayoral election. I will be laying out an education plan for the City in the near future, as well as plans on affordable housing and controlling taxes. But today I want to describe a basic economic perspective, and some specific ideas, that I think are missing from the current debate. I believe the central question is: do we continue to invest all our capital in large projects in Manhattan or do we attempt to spread growth to all five boroughs? Put another way, is our future with big developers or small business, and is our economic plan focused on a few special interests or to helping working families?

These are not abstract things to me - I grew up in Brooklyn and I live in Queens. My mother was a public school teacher and my Dad is a neighborhood lawyer who literally hung a shingle outside the house. I went to public schools. And when we needed something from the store, my mother used to send me out to "the avenue" to run errands. My vision of a thriving neighborhood is one where the neighborhood strip of stores is a healthy center of economic activity for the community.

So I have different vision of this City than a Mayor who grew up in Massachusetts and lives on the Upper East Side. When I close my eyes and conjure an image of my city, I don't think of the glorious skyline of Manhattan. I think of the rows of stores on a street like Brighton Beach Avenue or Forest Avenue on Staten Island.

Many of you know that I am thinking of running for Mayor, and the reason is because I know the working people who live in our outer boroughs. I come from there and represent them. And I believe it makes a huge difference whether local businesses succeed, whether there are good jobs, whether working families can hold on to an apartment, or even dream of owning a house and sending their kids to college. Those are the people I represent, and frankly I think they are too often forgotten or dismissed in the corridors of City Hall.

We all have heard of the "broken windows" school of thought about crime. If you let a small sign of disorder - like a broken window - persist it sends a signal to criminals that it is ok to commit crime. I have a similar theory about the way to measure our economy. When a small business goes dark in our neighborhoods it sends a troubling signal to home buyers, investors and other businesses. We need leaders who see these signs and who are more devoted to the small business and the working person and less to the big developer.

Today, I want to lay out real choices in how we make economic plans for this City, where we invest our resources, and in what we invest. A different How, Where and What for the City's future. Together, I think this can modestly be called a common-sense plan for working people of all five boroughs.

The West Side Stadium

Let me start with the economic topic that has captured people's attention. The Mayor's plan to build a multi-billion dollar stadium on the West Side of Manhattan.

The stadium is symbolic of the Mayor's approach to public investment and what he would do with the next four years. And I believe the West Side stadium project will likely become a metaphor for many of the differences New Yorkers have with the Mayor. If you like his plan, you will vote for him, if you don't, you will look elsewhere.

I believe the stadium is a mistake but it is also a useful template because it shows how the Mayor is conducting his Administration. The stadium is an example of his wrong choices and a profoundly uncreative vision for the City's future.

First, the How. We should have decisions that are transparent and accountable. But the Mayor's scheme uses a myriad of non-Democratic boards and non-public transactions to funnel at least $600 million of public money to the owners of the New York Jets. While I have substantive complaints with the stadium plan, I would be willing to lose the debate if the deal was done with public debate and accountability.

I have a chart here that details how the money is funneled to avoid public scrutiny and votes. You'll see the Rube Goldberg design. Just take a look at the ownership arrangement they have designed. The city and the state create a new, unaccountable public authority - the Local Development Corporation. It issues $600 million in bonds to pay for the platform under, and the roof over, the stadium, which the city and the state supposedly agree to repay. Then the TBTA conveys the rights to the rail yards to the MTA. The MTA leases the airspace above the Rail yards to the LDC. The LDC leases airspace to ESDC. ESDC leases the airspace to the city. The city leases the airspace back to ESDC. ESDC leases the airspace to the LDC. The LDC leases the airspace to Jets Development, and then issues another $400 million in Jets Bonds for the Jets - ultimately backed up by the taxpayer - to help build the stadium itself. Finally, the ESDC leases the platform that's built to the MTA for $1. If you understand it, you weren't supposed to.

This system is intended to avoid real debate and input. This may be the way of a privately held corporation, but it is downright offensive when it is our tax dollars and our land. We must reform these authorities so they are open and understandable to all New Yorkers.

Second, the Where. The Mayor's economic growth strategy simply does not include the outer boroughs. Again, let us use the example of the new stadium. The Mayor has argued that there is no better place than the far west side. Well I have a better place - Queens. I have proposed Willits Point on the water front near Shea Stadium.

Willits has some obvious selling points. First is that unlike Manhattan, this area of Queens has an abundance of all the infrastructure elements a stadium needs. Its sits near the LIE, the Van Wyck, the Grand Central and of course that most New York of Subway lines - the 7. It also has plenty of parking. Remember that when real New Yorkers say they want to bring the Jets home - they mean the borough they left - Queens.

It would also be an undeniably less expensive option. An internal memo by Dan Doctoroff's own organization, NYC2012, said: "construction costs [in Willets Point] would be substantially lower than on the West Side." The cost of doing the Javits Center and the West Side Stadium would be $2.8 billion dollars. The cost of doing a Willets Point Stadium and the Javits Center - assuming the facility in Queens costs roughly the average of the last five NFL stadiums - would be $1.8 billion. That represents a cost savings of almost $1 billion, or 34% percent.

But when the idea was floated to the Deputy Mayor it was dismissed out of hand - Queens, he argued, is not attractive for economic development. Tell that to airports there, tell that to the most profitable sporting event in the nation - the US Open, tell that to the tens of thousands of businesses that are thriving there. Even if this Administration had a good argument for putting the stadium in Manhattan - what does it say about the perspective of this Administration that rather than think how to make economic growth in Queens more feasible, they simply reject it out of hand and continue closed room deals to free up space in Manhattan?

Distributing Economic Development Funds Equitably

This thinking is a metaphor for the Mayor's approach to New York economics. In the past five years, the Economic Development Corporation reported that it dedicated twice as much funding to Manhattan in incentives as the other four boroughs combined. More than 75% of the population of New York lives outside of Manhattan - it's not enough to rely on one borough for job growth. Indeed, this lack of investment is having real impacts on Bronx, Brooklyn, Staten Island, and Queens. Point Two of a real economic plan for New York includes a guarantee that all four boroughs receive some fair share of EDC funds - I suggest at least 25% of EDC funds be distributed on an equitable basis to each borough.

A couple of last, quick points about the stadium. If the mayor truly believes this is the best use of the site and that the marketplace demands a $1.4 billion dollar stadium - put it out to bid. See what other proposals come in. See if - as I suspect and experts like Dick Ravitch have predicted - a developer of housing or commercial or parks might not pay us for the right to build something better. Four directional unobstructed views on the West Side of Manhattan - and we are paying someone to develop it?

Finally on the impact on Manhattan. Even the fiercest advocate of the stadium would concede that the quality of life impact on the businesses and residents during the construction and during game days would be stifling. But the questions about the economic impact on other parts of the borough have not been fully thought through. Shelly Silver has pointed out that the proposal involves New Yorkers deciding to essentially bid against ourselves. At the same time that lower Manhattan will be bringing 2 million sq. ft of commercial and office space on line, is it really wise to create huge new spaces at the same time on the far west side?

As I said earlier, this speech is not only about the stadium.

A Faster, Smart, Cheaper Transportation Network

Any one considering our plan for all five boroughs of New York has to consider what we have done right, and then dream bigger. Just as we created a subway system to help our whole city grow, we now need a comprehensive ferry system. Neighborhoods like Long Island City, Sheepshead Bay, Marine Park, Coney Island, Bayside and the areas around LaGuardia and JFK airports could all benefit.

I will be discussing my plans to improve transportation in our city in a separate speech, but I'll give you a preview because is many ways transit and business are interwoven.

We should install ferry landings along the coasts of New York. The City or State already owns the bulkheads in dozens of neighborhoods, all we need are relatively inexpensive ferry landings. I've led the fight to fund the building of one in Rockaway. We should do more. The city should purchase a fleet of small high speed ferries and begin to help commuters from and customers to these neighborhoods.

I'm ready to work with this Mayor to get started on creating a ferry service as part of the integrated transportation network that our city is famous for. As a member of the Transportation Committee I am committed to delivering the federal funds to purchase the first ferries for a new, fast fleet. I am prepared to secure $15 million for three high speed ferries that could begin service to Rockaway and maybe even the elusive half hour service to Staten Island residents. If the Mayor would just say "Yes" this is a good idea, I can guarantee the federal funds.

Better transit is the only thing holding back job creation and neighborhood growth in places like Red Hook. And easing stifling gridlock is good for commerce in all corners of our city - not to mention that is good environmental policy.

And there are other opportunities for improved travel in the City. For example, we can take the concepts of light rail and apply it to buses through a transportation system called "Bus Rapid Transit," already in use in many cities throughout the world. Bus Rapid Transit lines create bus-only lanes on the major streets just like we do on the highways during rush hour. Bus Rapid Transit systems in other cities have increased ridership by 15-150% and speed up times by 40%.

NYC's Bad Attitude Towards Small Businesses

The third economic choice New York has is the What. What is our focus? And what is the concrete modern agenda to create jobs and foster business. First let me make it clear that I am committed to making sure that FIRE continues to burn bright in New York. Finance, Insurance and Real Estate are part of the DNA of New York and I will continue to be a fighter for those industries and the jobs they bring.

We need to continue to support these industries, but we must also create a hot house of other new businesses to promote more diverse growth.

Health care. The Arts. Nightlife. And of course education. While we have been winning fewer financial services jobs, these new areas of growth have spurred activity and dollars in all five boroughs.

And then there is the giant of our economic machine - the more than 200,000 small businesses in New York City, representing 98% of all businesses. They dominate many industries and are the majority of businesses in every borough. Small businesses account for 50% of all New York City private-sector jobs and generate $4.5 billion in annual city tax revenues. Yet the way we treat small business in this town runs from benign neglect to outright contempt.

Let me give you an example. Spend an afternoon at 66 John Street. That is the address of an agency that most New Yorkers don't even know but small businesses fear - the Environmental Control Board. They hold hearings for summonses on a wide range of violations. Sit at 66 John and watch as shopkeepers are herded like cattle before a hearing officer who doesn't see an employer in front of them, but more likely sees a dollar sign or a hash mark in their quota book.

More so than any time in recent memory, the city's policy is to use the ticket book as the tax roll. In the past year alone, the city reported a 33% increase in the number of summonses for "quality-of-life offenses," to 708,349. Parking tickets were up 20% to almost 10 million in one year. The repercussions of the ticket blitz are clear: in a recent survey of business owners, the Brooklyn Chamber of Commerce cited ticket violations as one of the top obstacles to business growth. And when you have a top ticket of $180, with a couple of violations the average New Yorker is paying more in tickets than they do in income taxes. $180 for a parking ticket? $1,000 for an oversize awning? It isn't a deterrent, it's a backdoor tax.

It is this hostile attitude that's driving jobs to the suburbs.

Wal-Mart: A Fight for the Soul of the NYC Economy

Speaking of which, a word about the plan to grant an exception from the zoning laws to allow a Wal-Mart in Rego Park, Queens. As you may have read, the Mayor has shrugged that this is simply more "competition." I have led the fight to stop this plan and I want to tell you why. And what this fight says about the future of our city.

A creative vision for the City's future economy would create level playing fields in the outer boroughs so huge stores like Wal-Mart meet New York standards for worker protection and pay. I know the Mayor says it's good if Wal-Mart moves in-- but the reality is Wal-Mart has real negative consequences for New York's economies. The company offers lower wages, no health care, attacks unions, and crushes small local stores. That is not good news for the City.

Wal-Mart's business model is well known. Undercut every business in the area. Underpay and underinsure its workers - thus pushing many to require aid from the city for health care and basic needs - and then when competition is gone they increase prices to above the level they were to begin with.

Never mind the high minded macro economic theory of globalization and competition. The fight against Wal-Mart is a fight for the soul of New York's economy - the small outer borough business. If you think I'm being too dramatic, look at the numbers. On average a town that gets a Wal-Mart loses three supermarkets and every hardware store. If, as I suggested earlier, the empty store is to our economy what a broken glass is to crime Wal-Mart would be devastating.

Be an Ally, Not an Enemy, of Small Businesses

We have to make things easier for small business. First, we need to invest in them. I've discussed the need to set aside larger proportions of our resources for these outer borough businesses. Second, let's adjust the fines downward as the city issues more of them. To ensure that an increase of tickets isn't seen as a way to balance the books, take away the incentive. Here is how it would work. The city expects to gain $17 million in revenue from a new, computerized, system to increase the reliability of its ticketing. This newfound revenue should be exclusively dedicated to cut fines for small businesses, specifically for those that businesses cite as most onerous. This would reduce the incentive to try to use shopkeepers as a cash cow.

Third, it is not enough for the Mayor to tell businesses that if you have a beef you should call 311. I think that the Department of Business Services should have a team of ombudsmen on duty at 66 John to help keep the shop keepers from losing their minds and keep New Yorkers from losing their jobs.

For businesses that do manage to make it in the outer boroughs - the underdogs of the city's economy -- we need to expand the new innovative programs that work. One new approach that deserves expansion is the Business Improvement District program. If you poll shoppers of Queens about what they'd like to see on Astoria Boulevard or Nostrand Avenue they say some common things. They want less trash. Better lighting. Graffiti removed. And of course some help with parking.

Thanks to the BID program, businesses can self assess a fee and hire clean teams, design streetscapes and even help with the parking problem. A BID in Brooklyn even hired a guy with a bag of quarters to engage in a game of quick draw with ticket agents on behalf of shoppers. Yes. I know. It's illegal to feed the meters. I'm sure the Mayor will be setting up stings to add to their ticket take.

The bottom line is that right now, BID creation is too difficult and complicated - there are 17 different steps you need to take towards approval. Even the most eager business owners often can't get a BID started without practically shutting down their own stores. Finding absent landlords, organizing planning meetings and filing paperwork requires a full time staff - and that's before the BID is even approved. Unlike the mega BIDs of Manhattan, the shopping strips can't hire a grant writer or an organizer. The city should do this work for them

Jumpstarting Innovation

What is so urgently needed is more creativity and energy devoted to thinking how we can help small businesses grow.

I propose we kick start investment in innovation. One good idea is dedicate a small fund, say $10 million, to provide "seed" capital micro-loans to innovative businesses identified by private sector venture capitalists with a commitment to New York City. These loans could be as little as $10,000 or in the range of $100,000-$200,000 and would go to emerging businesses that do not yet qualify for large venture capital investments or private loans but are identified as unusually promising. If they prove successful, the private sector would pick up the funding, contingent on the businesses staying in the New York. It's not a government venture to pick winners and losers, rather it's a way for the city to leverage capital to give an incentive to the financial sector to invest here in the city, rather than across the globe.

The city should also create a "ShopNYC.com" initiative to help small businesses use the internet to better market their goods and services. If New Yorkers want to show their pride in the Big Apple or simply shop in cyberspace from a company they can reach in real space, we should help make shopping for New York goods easier. We could even enlist some of the HTML geniuses in our local high schools to do the design work.

Conclusion: Understanding What Drives the New York City Economy

I've talked a lot about the How, What, and Where of a new economic plan for the City - but I want to conclude by talking a little bit about the Why.

As I mentioned earlier, I grew up in Brooklyn, and have spent my 13 years in elected office representing Brooklyn and Queens. My view of New York has been molded by the families I have met in the diverse communities that have elected me. From Park Slope to Forest Hills. From Sheepshead Bay to Bayside.

As I travel the city I realize that my New York experience is like that of so many of the working families of New York.

My parents gave our family and me a great life here. But the work that produced the gift of our opportunity began before them, before even my grandparents, when my great grandfather moved here and worked in a little business on the Lower East Side.

Like so many New Yorkers, their generation came, worked hard, built something up and left a stronger foundation for the next generation. And so on in turn.

The families from Ireland, Italy, Russia, the Dominican Republic, from South Asia, from Haiti, they all understand that -just as my great grandfather did. We live and succeed today because of their hard work. Because they fought for a better life for themselves, and for their children.

So I want us to fight for a better life too, and I want a Mayor who will fight for more opportunity for everyone.

You have to fight Albany, you have to struggle to get a fair share from Washington. It is not enough to say the Republican President is our friend and take what we get.

It's not right or fair to close down fire houses and raise property taxes. It's not right or fair to give phony tiny tax cuts for working people and huge subsidies for the richest special interests.

New York values are fighting for the whole City, for all five boroughs, for small businesses not just large ones.

That is New York values. We need a new plan for economic growth based on those values, for this whole City.

Thank you.

 

Good News, Bad News


"Our economy - which was written off three years ago - is back, and it's back in a big way," Mayor Michael Bloomberg announced in his third State of the City address. The truth is, that at the very moment he was making his speech, midway through the city's fiscal year, the news is actually far more mixed.

The city's immediate budget prospects have brightened a bit, and the city's economy looks a little more upbeat. The latest reports from several fiscal monitors suggest that the city will end its current fiscal year (in June) with a substantial and unexpected surplus -- as much as a billion dollars.

But long-term budget deficits continue to worry the city's fiscal monitors. And one big cause of those deficits - increasing city debt service - is news again, highlighted in the city comptroller's new report on total city debt and dramatized in the mayor's West Side financing plans.

DUBIOUS DEFICIT REDUCTION PLAN

The mayor's preliminary deficit-reduction plan for next year has several risks, according to City Comptroller William Thompson's latest report (In PDF Format) on the city economy and finances:

The most troublesome may be the city's assumption that federal and state aid will increase by $950 million.

The mayor's decision to eliminate his plan to pay cash (pay-as-you-go) for capital projects will save money in the short run, the comptroller says, but may add long-term debt-service costs.

Labor costs and overtime costs may be underestimated.

The city's financial plan still contains no city funding at all in the Campaign for Fiscal Equity case - even though estimates of the city's likely share (23 percent) would add $330 million to next year's budget alone.

The comptroller's report on the economy lists several long-term worries for the nation and the city: higher oil prices, the war in Iraq, a weak job recovery, and higher interest rates. There is also a half-trillion-dollar national trade deficit and a federal budget deficit approaching the same number. All of this threatens city tax revenues as well as federal and state aid.

HIGHEST DEBT PER CAPITA

The city is far and away the nation's biggest capital spender on a per capita basis, according to another report(In PDF format) by the comptroller, on the capital debt. By June 2004, the city owed approximately $50 billion for the schools, bridges, hospitals, etc. that it has financed and built. That is over $6,200 per New Yorker. Chicago, the closest to the city in spending, owed $3,920 per person (in 2003). In a sample of selected cities, New York's spending is almost double that of the other cities, on average.

The capital debt report also shows how elected officials use all kinds of mechanisms to get around limits to conventional borrowing (that is, borrowing through the city's capital budget process, where the city council gets a vote). For instance, the $50 billion does not include the $13.4 billion that the Water Finance Authority owes (for water-main and sewer construction) or the nearly $20 billion that the Metropolitan Transportation Authority owes, even though regular New Yorkers pay both debt services - the Water Finance Authority's debt through fees and charges to city property owners, the MTA debt through transit fares.

WEST SIDE PLAN

The financing for all three parts of the mayor's West Side plan - the Javits convention center expansion, the Hudson Yards residential/commercial plan, and the Jets Stadium -- was designed to by-pass the city's capital budget process.

But the January 10 city council vote on the Hudson Yards re-zoning and financing plan by its land use committee (full vote of the council is scheduled for January 19) marked a significant change.

The council insisted on the city's paying for the up-front costs of the Hudson Yards plan over the first ten years through the city's capital budget. The mayor had proposed that short-term borrowing pay the initial debt service costs of the long-term bonds necessary for the #7 subway extension and other infrastructure costs. This would have added $1.3 billion in extra costs, according to the Independent Budget Office.

Left out of the new agreement between the mayor and the city council over the financing of the West Side plan was the question of the Jets stadium. Here, big political, legal, and fiscal questions remain, as discussed in an earlier Finance topic page update. The fiscal questions are especially important. On the construction side, the actual cost of the stadium is in dispute. The mayor's estimate -- $300 million for a platform and roof for the stadium - has been disputed by, among others, Public Advocate Betsy Gotbaum, who argues that the project's costs could exceed $2 billion, payable by city taxpayers.

On the financing side, a crucial question remains: how much revenue is the city giving up by ignoring alternative uses of the site and simply giving control to the site - and its property tax revenues -- to the privately owned Jets.

The Regional Plan Association's December 2004 alternative plan(In PDF Format) for the site, for instance, shows how a residential/commercial project, similar to the adjoining Hudson Yards plan, would generate hundreds of millions -- perhaps more than a billion dollars -- of city and state property, income, sales, and other tax dollars over a 30-year period. These revenues could be split among the city, state, and Metropolitan Transportation Authority (which owns, and will continue to own, the stadium site).

The potential tax-benefit bonanza of a new Manhattan riverside mixed-use development is illustrated by Battery Park City, where the commercial part, the World Financial Center, sits on another Hudson River site, similar in size to the stadium site. One projection, by the consulting firm CB Richard Ellis, estimates that the World Financial Center will generate property taxes for the city over the next 30 years of more than $2 billion.

The City Council's deal with the mayor to revise the Hudson Yards financing plan shows how the democratic process is supposed to work. Recognizing the mayor's strategy to blur the connections between the stadium and Hudson Yards plans, council members insisted that the Hudson Yards financing be distinct from the stadium's. Councilmember Christine Quinn said in the December 11 New York Sun, the deal "very clearly states not a penny of the financial resources, not one dollar generated by this rezoning can be used west of 11th Avenue."

Whether the Jets stadium proposal, especially its financing scheme, gets an equally open and democratic airing remains to be seen. The plan is scheduled to more or less disappear from public view, with planned votes by the Empire State Development Corporation and the obscure New York State Public Authorities Control Board. The plan could be delayed by two state court suitsfiled last month against the stadium on environmental grounds.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Online Shopping


When my iPod portable music player was swiped on the N train one evening last month, I was left with a need to replace one of my more valued possessions.

There was a choice: I could go to the Apple Store on Prince Street, spend $399 and walk out of the store with my purchase in my hands, or I could go online from my apartment in Astoria, spend $394, and wait for PC Connection, an online computer store, to ship it from New Hampshire.

At first blush, the decision seemed to be that I could wait a week or spend $5 extra. But since PC Connection doesn’t charge New York residents sales tax, the difference in price was actually closer to $40.

I decided not to go downtown.

For various reasons, an increasing number of people are buying their iPods - and their dress shirts, their laptops, and their paperback novels - online. According to Jupiter Research, Americans will spend $65 billion on online retail purchases nationwide in 2004, four percent of the total retail sales for the country. They will spend $10 billion on personal computers, $7.5 billion on clothing and accessories, and $3.6 billion on personal electronics.

By 2008, the total will be $110 billion.

New York’s businesses are finding that online shopping poses advantages and challenges; it has also begun to raise some real policy issues.

SHOPPING AS AN "EXPERIENCE"

If online retailers have the advantage of convenience and, often, lower overhead, New York's "brick-and-mortar" stores have not lost their special appeal. There's cachet even in a shopping bag from a New York store.

“Any tourist coming into New York, they like to shop, but they also like to carry a nice bag, knowing that they actually have completed a purchase in New York City,” said Ivan Cardona, president of professional shopping service Lush Life Concierge. “That says a lot about vanity, and a lot about image, the need for fulfillment: the fact that we went in there, we purchased something, and we walked out with a bag.”

Perhaps in part as a response to the rise in online shopping, new stores like the Apple Store and NBC Experience are more like theme parks than traditional shops, so that the purchase is only one part of the whole experience. (Indeed, in the new Times Warner Center mall, "the Samsung Experience" is all experience and no purchase; their cell phones, MP3 players, video cameras, flat-screen TVs and other high-tech gizmos are all on display, but not for sale). But at the same time, even the best-known New York stores are going online, offering their New York image to shoppers far away. Tiffany’s and other luxury Manhattan businesses are reportedly doing an increasing amount of business through their Web sites.

Most online vendors nationwide have at least some presence in New York. But many of New York’s brick-and-mortar retailers believe that those that do not – like Amazon.com – have one unfair advantage: the ability to get around collecting sales tax. This amounts to a price difference that many see as a de facto subsidy, and some retailers are looking to the government for help:

“It’s only right that if you buy something on the Internet or through a catalog you pay the same sales tax that you do if you buy something on the street,” said Ted Potrikus, executive vice president of the Retail Council of New York State, a trade organization.

LOSING TAX REVENUE ON ONLINE PURCHASES

While customers may find online shopping more convenient and cheaper, state and local governments have discovered at least one major drawback: the loss of tax revenue. According to a recent study (in pdf format) by two professors at the University of Tennessee, New York lost $1.1 billion in state and local tax revenues in 2003 by failing to collect sales tax for online purchases; the study estimates that the state’s annual loss will rise to $1.6 billion by 2008.

New York is legally entitled to this money, but does not have the power to force certain Internet businesses to collect sales tax from their customers. This is the result of a 1992 Supreme Court decision on whether states could force mail-order retailers to collect local sales tax when selling to out-of-state customers. These businesses argued that it was too burdensome to calculate the sales taxes for the thousands of different jurisdictions where their customers lived, and the Supreme Court agreed. It ruled that unless a business had a physical presence in a state, it did not have to collect that state’s taxes.

So the burden of collection falls on the purchasers themselves. Technically, New Yorkers are required to pay a "use tax" on items purchased online but used in New York State, just as they are supposed to write a check to the state for the taxes they owe on furniture that they drive back from the Ikea in New Jersey.

This is not the most widely respected of responsibilities

"The only people I know who [pay this tax] are people who have had jobs as tax commissioners or something like that," said Marcia Van Wagner, the chief economist at the Citizens Budget Commission. "For the most part, normal people don’t do it, and how do you enforce it?"

HOW DO YOU MAKE PEOPLE PAY THE SALES TAX?

New York loses more from uncollected Internet taxes than almost anywhere else - last year only California and Texas lost more. But as a percentage of its tax base, it loses less than any other state. This is partially because New York’s economy is less reliant on sales tax than many smaller states, and partially because so many Internet retailers are located within the state itself.

Until recently, New York State has not made a big effort to collect this lost revenue, but the amount of money involved in the rise of Internet retail has sparked new attempts to do so. As part of the 2003 budget, the state legislature added a line to the income tax return form asking New Yorkers to estimate their online purchases and pay the appropriate amount of sales tax.

The state does not yet know how much money this will bring in, but there is a wide consensus that it alone will not do nearly enough.

A recent report by the Citizens Budget Commission (in pdf format) described better enforcement of the use tax as "the least harmful and most sensible tax measure" available to the state, and estimated that it would mean between $40 million and $590 million in annual tax revenue for New York.

"However, implementation of this change depends on cooperation with other states and development of interstate enforcement capacity," read the report. "Significant new revenues are unlikely for a few years."

To deal with this problem on a national level, a group of over 20 states have formed the Streamlined Sales Tax Project, which would coordinate state and local sales taxes, making them easier to navigate and thus removing retailers’ arguments that collecting sales taxes for so many jurisdictions is too complicated. This would pave the way to overturning the 1992 Supreme Court decision.

New York has agreed in principle to join the project, but the legislature has not yet officially approved it. Potrikus hopes that the state’s worsening fiscal standing will provide the inspiration to do so.

"Budget deficits," he said, "are the mother of invention."

 

 

 

Create Conditions for Business to Thrive



Mayor Michael Bloomberg's development plan will remake neighborhoods like Long Island City, Throgs Neck, and downtown Jamaica.

Articles in this Feature:
• Developing Affordable Housing and Jobs by Brad Lander
• Create Conditions for Business to Thrive by Sandy Hornick
• Reform the Building Code by Julia Vitullo-Martin

New York has the most extensive housing program of any city in the nation. If you add up what all the other municipalities in the nation do on housing, it does not even come close to what New York City does. In addition the Bloomberg administration has set out a five-year plan to build 65,000 homes.

Building on these things, the New York City Department of City Planning is implementing redevelopment strategies across the city that will create new commercial office and housing development.

Our first priority is to restore and enhance lower Manhattan and to create the kind of amenities that will transform the third largest business district, that was devastated in the terrorist attacks of 2001, into a desirable place to live and work.

We will also implement the Hudson Yards plan. This will transform an underused area on the west side of Manhattan characterized by rail yards, parking, and one-story buildings into a new central business district with 26 million square feet of office space. In addition, we will build 14,000 new apartments, 3,000 of which will be affordable, as well as parkland and an extension of the 7-subway line. A key aspect of this is the expansion of the Jacob Javits convention center and stadium for convention events as well as New York Jets football games.

We will strengthen regional business districts like Downtown Brooklyn, Long Island City, Downtown Flushing, and Jamaica, Queens.

We are facilitating housing production. We are doing this in part through a series of rezonings throughout the city in places like Greenpoint/Williamsburg, West Chelsea, East Harlem, Harlem, Park Slope, and North Corona.

We also must work to protect New York's neighborhood character. As the city's population has grown, housing production has surged. In many ways that is a good thing, but in some places, it is not because the new housing being built dramatically changes the neighborhoods landscape. When you build further from mass transit, car ownership increases which creates traffic and parking problems. So we are doing rezoning to help ensure that neighborhoods do not have a density of housing that they cannot handle.

Finally, we are working to retrain jobs and create an environment to attract new jobs.

Sandy Hornick is the director of strategic planning at the Department of City Planning

 

A New Stadium Authority Will Add to City Budget Woes


Mayor Michael Bloomberg faces a $3 billion deficit for the next fiscal year and Governor George Pataki a $6 billion deficit. Both men are also faced with the problem of how to fund the additional $5.6 billion a yearthat a state court panel in the Campaign for Fiscal Equity case says must go to city schools. In spite of Mayor Bloombergs claim that the city should not share the new expense with the state, a common assumption is that the city will need to take on a substantial share, at least 25 percent of the new funds.

But the mayor and governor seem publicly oblivious to their budget problems, at least in their current rush to judgment on a Jets stadium in Manhattan.

New information about the financing and governance of the stadium project raises serious questions about its costs to the city and the wisdom of the city' role in creating yet another unaccountable public authority. A November report from the governor's own economic czar (in pdf format) on the project reveals how the deal-making among the Jets, the mayor and the governor will generate actual and potential costs to the city beyond the city's initial $300 million capital commitment. And a new report from the Regional Plan Association(in pdf format) shows how the city could reap much higher tax revenues from a residential and commercial development at the stadium site.

The project report comes from the mega-public authority which controls the stadium deal, the Empire State Development Corporation (ESDC) ‚ parent already to over 90 smaller authorities and run by the governor's economic czar, Charles Gargano. The report spells out in mind-numbing detail the project's financing plan and the enormously convoluted financial and governance structures that will build and control it.

The stadium deal will not just cost the $300 million promised to build the stadium platform and roof. There is also the money promised to pay the interest on the debt, which could double the cost. And then there are tax breaks given the Jets on their construction bonds and their property taxes, as well as exemptions in sales taxes. No estimate of these costs is included in the Empire State Development Corporation's report.

The city's $300 million capital promise, it turns out, is tied up with the state's own $300 million promise in a joint bonding understanding that would have the city pick up the debt service cost of the state's share should the state legislature not fund the state's share. (The state would purportedly compensate any city cost with some negotiated substitute funding.) The city share of debt service would be paid for by an unidentified revenue source.

The city will also lose two major streets to the project, and all the stores on those streets, West 30th and West 33rd Streets, between 11th and 12th Avenues, to provide the entrances to the stadium. A pedestrian bridge over the West Side highway on 33rd Street will link the project to the Hudson River Park (controlled by another public authority jointly run by city and state). And a three-block section of the High Linewould be eliminated.

The Anatomy of a Public Authority

The stadium project depends on the creation of a new public authority, called a local development corporation, which will be jointly controlled by the city and state. The local development corporation's main job will be to issue bonds to finance the stadium. This will be done outside the control of the City Council, which normally has to approve the issuing of bonds for capital improvements in the city. The local development corporation will issue $600 million of tax-exempt "Public Sector Bonds" to pay for the platform and roof. This debt, like a mortgage, will be paid off over 25 or more years by future city and state revenues. The corporation will also issue tax-exempt Jet Bonds to help the Jets pay for the stadium itself. The Jets will build the stadium, but will be exempt from city property taxes. Any payment-in-lieu-of taxes (PILOT) they might negotiate with the city would be used to help the Jets pay off the Jet Bonds. In other words, the city will now be part of a deal that issues tax-exempt bonds for the Jets share of the construction costs.

What may be most troublesome about this arrangement is not simply its unaccountability but its presumption of joint control by state and city. In state law, cities are always creatures of the state, and in politics, cities are generally at the mercy of the state. This will not, on the record, be an equal partnership.

Moreover, such an unequal partnership can further blur solutions to and accountability for much bigger problems, such as the city's deficit and the $5.6 billion education-aid problem. Both problems will require complex negotiations between state and city. The existence of a new joint public authority in which huge city/state trade-offs can be negotiated outside the normal budget processes is not a healthy prospect.

The airspace that the new authority would lease back and forth has a value ‚ ignored by the Empire State Development Corporation ‚ that should be factored into any decision about land use on the West Side. The new report (In pdf format) from the Regional Plan Association shows that over a 30 year period the city would gain $510 million from rents, development fees and property taxes from a mixed-residential-commercial development over the rail yards rather than a stadium.

The stadium deal is moving quickly and the mayor and governor are intent to break ground in the spring of 2005. A hearing will take place on December 16 on the Empire State Development Corporation's project report. Thereafter, creation of the Local Development Corporation and state funding streams would seem to require state legislative approval. Assembly Speaker Sheldon Silver then becomes, potentially, the significant city counterweight to the mayor and governor's dealing. But in a world of secretive negotiations among various private and public interests involved in the stadium deal there is no telling what will happen.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Monitors Check And Balance The Mayor


Despite projected deficits of $3.7 billion, the mayor and the city council were not deterred from a $300 million tax-cut program (primarily a $250 property tax rebate to each residential owner). Tellingly, that exact same amount, $300 million, is what the mayor has quietly asked city agencies to cut during this fiscal year.

It is only one of the questionable actions taken by this mayor, using his extraordinary budget power under the city charter. But the mayor’s power is not absolute. The democratic checks and balances embedded in the charter and state law have actually been working in recent weeks.

The West Side Plan

The city comptroller has raised serious questions about the fiscal wisdom and the decision process of the mayor's West Side plan, calling the Hudson Yards part of the plan (the #7 subway extension and other infrastructure) "a backdoor financing schemethat not only is fiscally imprudent, but also flouts the principles of responsible government." It sets a precedent that any mayor could "divert funds from the city's operation without City Council consent."

At the same time, a combination of local activists and elected city and state officials has apparently blocked the use of Battery Park City Authority revenues for part of the plan. (See a report by State Comptroller Alan Hevesi, in pdf format, for details) The mayor will presumably come up with an alternative borrowing plan for the Javits part of the plan, but the decision re-opens questions raised by housing advocates about the use of Battery Park City Authority revenues.

Contracting Procedure Questioned

The consequences of cutting back on informationin recent mayor's management reports are evident again in recent questions about city contracting.

The contracting information -- much of which is now handled separately, for a much smaller audience, at the mayor's office of contract services -- is itself now suspect. At an October 18 city council hearing of the contract committee, Deputy City Comptroller Greg Brooks testified that the mayor's office of contract services September report on agency procurement indicators is inaccurate(in pdf format). He challenged its claims of "substantial improvement" in getting contracts registered faster.

On the number of contracts and transactions registered in 2004, the deputy comptroller testified that in fiscal year 2004 there were 3,978 contracts registered, as well as 8,210 transactions below the small purchase limits, totaling almost $10.3 billion. That is almost three quarters of a billion dollars more than the mayor's office reports.

On the old problem of "retroactive contracts" -- contracts registered after services have begun -- the deputy comptroller said that in the last fiscal year the city registered 1,748 human services contracts totaling $3.8 billion. (Contractors don't get paid until contracts are registered.) Of these, 55 percent were over 30 days late. But the mayor's office says that only 25 percent of such contracts were over 30 days late. Finally, the deputy comptroller said the mayor's data on the comptroller's own timeliness in registering contracts are "grossly inaccurate."

Less Money For Schools

The other city checks-and-balances institution that helps monitor the strong mayoral power over budgets is the Independent Budget Office, now approaching its 10th year of charter-defined budget analysis. Illustrating its independent role, two new IBO reports help fill the vacuum created by a skeletal mayor's management report and a general reluctance to share important budget information.

The October 26 IBO study, "Go Figure: How a Bigger Education Budget Became Less Money for Schools"(in pdf format), shows how an increase of $570 million in this year's education budget translates - because of "rising costs and a complex allocation process" - into less money to individual schools. At a time when the mayor and council, like the state legislature and the governor, are dodging the future new education costs associated with the Campaign for Fiscal Equity case, the IBO study shows how state/city budget politics and city bureaucratic procedures delay and obfuscate school services and planning.

Transit Riders Shouldering More Of The Budget Burden

The other IBO study, the November fiscal brief, "Running on Empty: The MTA's 2005 Budget and Financial Plan"(in pdf format), helps explain the connections among the Metropolitan Transportation Authority’s current fiscal crisis, the mayor's West Side plan, and the city's own fiscal condition. The MTA's capital plan, for example, includes the mayor's $2 billion Hudson Yards funding plan for the #7 subway extension.

The study points out that the eastern and western rail yards at the heart of the mayor's west side plan, as well as their development rights, are owned by the MTA and the cost of their sale to the city is currently unknown. What's good for the MTA here is not automatically good for the city and vice versa. The closed negotiations in such authority-based discussions only add to the unknown consequences of the West Side plan.

The IBO fiscal brief shows how the average transit rider is paying an increasing share of the MTA budget and points out that one option to ease that burden would be using new revenue sources for the MTA, including a reinstatement of the city's commuter tax and tolling the East and Harlem River bridges.

The IBO estimates the commuter tax (with its old basic 0.45 percent rate) would raise $550 million a year by 2008 and the tolls nearly $700 million a year. These two sources together would wipe out the MTA's projected budget gap in 2006. But both these revenue sources, of course, have at various times been on the mayor's list of proposed city revenues. The city currently provides only about $190 million a year to the MTA's operating budget, so giving up these revenue sources to the MTA would substantially add to the city's long-term structural budget problems.

All this monitoring offers some hope of limiting, or at least highlighting, the mayor's fiscal powers. But then there is the recent news that the city has agreed to assume the state’s $300 million contribution for the Jets stadium deal, if necessary -- yet another reminder how much the governor and mayor use state and city authorities to get their way without any public participation.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

The Mayor's Management Report Skimps On Information About Education And Everything Else


Mayor Michael Bloomberg has put his own stamp on the semi-annual mayor’s management report, sharply reducing its size and its Giuliani-era political rhetoric. But smaller does not mean better. The 2004 Mayor’s Management Report (in pdf format), released in mid-September, dodges the key city-charter mandate – to show accountability by comparing policy goals with actual performance.

Its biggest feature – an endless accounting of the 311 calls into 38 city agencies – identifies a mayoral priority without providing much insight into managerial results. Yet the focus on this $25 million venture gets many more pages than the mayor’s other big priority, the overhaul of the $15 billion education department.

And the few pages of educational information are especially spotty. A reader has little sense of where the department’s money actually goes, or what it produces. The education database has been cut to the bone. What is left is often out of date. Most recent policy initiatives – new administrative and managerial hires, the re-organization of curriculum and teaching, and the extensive use of contractors to provide training, coaching, and tutorial help -- are simply ignored in the report.

As recently as 2001, the Mayor’s Management Report had 248 education indicators (including subcategories). Today it has 81. Of those 81 indicators, 41 have no 2004 data available in the September edition. Of the 23 indicators that measure general education performance, 20 have no current data. The result is that there is actual data from a grand total of three performance indicators for the school year ending in June 2004:

  • Students in grades 3 to 8 meeting or exceeding standards in English Language Arts (42.7 percent).
  • Students in grades 3 to 8 scoring below standards progressing from below standards to meeting standards (37.6 percent).
  • Students in grades 3 to 8 progressing from below standards to meeting standards in English Arts (14.6 percent).

That’s it for the 2003/2004 school year. (For the record, the first of these three indicators shows about the same result as the previous year, and the other two show declines.) The remaining 20 general education indicators have data for the fiscal year 2003, which ended 15 months ago.

311

With the exception of promoting his new 311 system, Mayor Bloomberg has shown little interest in the Mayor’s Management Report. He cut the print version by more than two-thirds, but he chose not to invest in alternative methodologies that would better measure performance. The 311 data get top billing, included in more than 16 percent of the report’s 237 pages on city agencies. The numbers show what kinds of complaints and requests for service New Yorkers have in 38 of 39 city agencies.

 

True, this information is mildly interesting in many cases. For instance:

  • 352 callers who wanted to sue the city were referred to the law department;
  • 3,079 people complained to the investigations department about discrimination;
  • and nearly 135,000 New Yorkers complained to the police department about noise from a neighbor.

(The one agency that registered no calls, the Economic Development Corporation, suggests that those businesses in search of tax-free loans and tax exemptions have a direct line!)

 

But the report’s shuffling of these 8 million-a-year requests and complaints doesn’t tell the public what the city is doing in response.

One common complaint about the 311 data is that it doesn’t translate into information that community boards or community organizations can use because it’s not disaggregated to discrete neighborhoods. And no one knows what’s now driving mayoral responses. Is it the “squeaky wheel” callers alone? If so, is that a good idea?

On the question of disaggregating information, the City Council’s Committee on Technology in Government has held hearings on a proposed law (Intro 174-A) which would require breaking down data on, say, noise complaints by specific blocks or neighborhoods.

Measuring Educational Performance

In education, the report is a skeletal version of the Giuliani documents, and most of it is out of date. It does include useful five-year comparative data, back to 2000, but here, too, there are gaps, as in the case of the new Regents exams. About the only performance data thus available are these:

  • Graduation rates, within 4 years of entering high school were 53.4 percent in 2003, up from 49.9 percent in 2000.
  • Graduation rates, within seven years of entering high school were 68.6 percent in 2003, down from 69.7 percent in 2000.
  • 20.3 percent of general education students dropped out within four years of entry into high school, up from 19.3 percent in 2000.

Not much of a performance record for either Rudy Giuliani or Michael Bloomberg. But more to the point, it’s not much of an information/analytic base for future measurement.

The one innovation in the education section is a set of five new indicators (no data until next year) that ostensibly will test the performance of the over 1,200 parent coordinators in the schools. They include the number of coordinator-parent phone calls, parent walk-ins, parent workshops, and parent-teacher contacts. This is hardly the stuff of serious fiscal and service analysis.

Interestingly, these soft indicators replace a Giuliani indicator which would seem to be a more useful accountability measure – the percent of parents grading their school “A” or “B”, which had only a two-year (2001-2002) lifespan. And why no indicators to track the performance of the many new administrators and managers whose power has raised some worries about excessive mayoral control over the schools?

Following the Money

One of the few pieces of fiscal information is in a pie chart (on page 24) that breaks down where the $12.708 billion of education went in 2003. (Not included is an additional $1 billion in pension and debt service costs.)

But here, too, the data beg for more detail. Dividing $12.708 billion by 1.1 million students means expenditures of $11,640 per student. But “Classroom instruction” is only 54.7 percent of that total, or just under $7,000 per student.

There is another wrinkle. Total expenditures for high school students were under $10,000 a year, while those for full-time special education students were nearly $48,000. Then there are huge non-classroom expenses in 2003, beyond the traditional expenses for food, transportation, and school safety ($1.82 billion in total):

  • District/superintendency costs were $394 million.
  • Leadership and supervision costs were $1.067 billion.
  • Student support costs were $1.474 billion.

Those three categories add up to nearly $3 billion, or about $2,700 per student. The mayor has said he has cut central administrative costs. But given the recent addition of new administrative, managerial, and training initiatives throughout the school system, it would be helpful to have some kind of staffing data base. (In the 2001 Mayor's Management Report there were 14 categories of administrators listed. Today there are none, leaving only an indicator that says there are over 134,000 education employees.) Further, there is no information in the latest report about the total value or kind of education contracting.

Accountability in the Future

Last November the mayor tried to eliminate the February Mayor’s Management Report (which covers the first four months of the new fiscal year) through a ballot proposal. Voters rejected that elimination, but the mayor apparently continues to show little interest in making the report a test of his accountability.

The City Council, whose oversight role on the report is required by the charter, has reduced its actions in recent years. Its Governmental Operations Committee holds hearings on the report, and until three years ago its several committees held separate agency hearings on the report; each committee prepared extensive analyses and recommendations on the report. In the past two years, those hearings have been replaced by joint hearings on the report and the preliminary budget.

What to do? One possibility is to add a review of the Mayor’s Management Report mandates to the agenda of the new charter revision commission the mayor named in August – what looks to be a more independent and representative group than last year’s commission.

There are many technical questions they might consider.For instance, the commission might look at the so-called “units of appropriation,” or categories of spending, which are supposed to help trace the flow of money. The units are often so large ("UOA #301" in the education budget, for district instruction and support services, is $2.8 billion) as to be useless in analysis.

The larger, political question is how to give the public some assurance through mandated reporting that its elected officials can be held to account. The mayor now holds the reins. Perhaps more independent mechanisms could be considered, such as professional management firms and university-based evaluation teams.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

The Mayor's West Side Gamble


The mayor's plan for the development of Manhattan's West Side rests on "expensive, shaky and undemocratic assumptions," according to several new reports by the city's official fiscal monitors. Glenn Pasanen supplies the details.

Reforming a Tax on the Middle Class


Year after year, more than three million American families file their federal and state tax returns and learn a sad truth. Because of the Alternative Minimum Tax (AMT), and President George W. Bush's support of it, middle-class families - particularly New Yorkers - are being punished for not being millionaires.

Listening to President George W. Bush, one could be led to think his tax policies are good for the middle class. Nothing could be further from the truth. In August 2003, the Congressional Budget Office confirmed what thousands of New Yorkers have known -- that the Bush tax cuts are causing middle class families to shoulder a larger tax burden than the wealthy, reversing the way things were before Bush took office. And for New Yorkers, the biggest tax bite can come from the Alternative Minimum Tax (AMT).

The Alternative Minimum Tax was first created in 1969 when it was discovered that the super wealthy were avoiding paying any federal income taxes by using tax shelters and deductions. To reform this, Congress created the alternative tax to insure that all Americans pay their fair share of taxes.

However, the threshold for having to use the tax has never been indexed to keep up with inflation. This means that over the past 30 years, as incomes have gone up along with the cost of living, the number of families being drawn into this tax has gone up as well -- an estimated 400,000 more in 2003 than in 2002. So, a well-to-do family making $60,000 and paying the alternative tax in 1969 has today become a middle-class family making $60,000 and now getting unfairly slammed this tax.

Fixing the Alternative Minimum Tax is essential for New Yorkers because it hits New Yorkers at a higher rate than most other states. In fact, close to 10 percent of the U.S. taxpayers who earn $50,000 to $75,000 and must pay the tax live in New York City. This is because residents of the Empire State pay higher state income taxes than most states, and the Alternative Minimum Tax eliminates any federal deduction for state taxes.

President Bush came into office promising tax relief and continues to campaign across the country saying that he has passed tax cuts for average Americans. But, if the President and the Republicans in Congress really wanted to provide tax cuts for average Americans in New York and elsewhere, they would have dealt with the growing problem of the Alternative Minimum Tax. Instead, they made the federal deficit balloon by enacting tax cuts for millionaires and for corporations that use overseas office fronts to avoid paying their taxes here in the United States.

Looking at which Americans have benefited from President Bush's tax cuts paints a very clear picture of who this Administration is watching out for. Upon entering office, the Bush Administration advocated a permanent end to the estate tax that only affected 49,000 of America's wealthiest families rather than fixing the Alternative Minimum Tax that affects 3 million middle-class families.

America's priorities should be just the opposite. This nation should reform the Alternative Minimum Tax before an estimated 41 million families are drawn into it in 2013. Sadly, the Republican-controlled Congress is using the income generated by the alternative tax to pay for tax cuts for the wealthy.

Our leaders in Washington should concentrate on relief for working people in New York and around the country. Today all over New York, middle-class families are feeling the squeeze of higher prices, unemployment, lower retirement earnings, and a strained economy.

Instead of using average Americans as a political football, President Bush should have provided real leadership during the past four years and ed the alternative minimum tax for good. That way, working would be keeping more of their earnings and our federal deficit would not be a burden on the backs of New York’s children and grandchildren.

Eliot Engel, a Democrat, is the U.S. Representative from the 17th Congressional District in the Bronx.

 



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