Gotham Gazette

The Place for New York Policy and politics

Is Albany Odious?

Diana Fortuna – Citizens Budget Commission

Alfonse D'Amato – Former United States Senator, New York

Mark Shaw – Former Deputy Mayor, NYC

In a time-honored tradition, Mayor Michael Bloomberg headed to Albany earlier this month to complain about how the state is shortchanging New York City with its proposed budget. True to form, the mayor decried one of Governor Eliot Spitzer's budget proposals, saying it "would produce an enormous hole" in the city's budget. But Bloomberg also departed from the usual fare of recriminations, praising the governor for "righting a historic wrong" – the state's chronic underfunding of city schools.

For decades, New York City and New York State have had a tenuous relationship; the organizers of a recent forum at Baruch College described it as "odious and oppressive." New York City has felt that it was being abused by Albany. It was not alone. Many local governments have been blaming the state government for failing schools and soaring labor costs and property taxes.

"It's not just that New York City does not get the support and attention of Albany and does not have a good relationship with the state – nobody does," said former State Comptroller Carl McCall at the Baruch forum. "New York City is just one of the victims." But it's the one that's been bitching the loudest, and the longest.

From the looks of it, things are changing. This raises two major questions. First, will Governor Eliot Spitzer really change the way Albany works? And secondly, will reform in Albany mean that New York City gets what it wants from the state government?

One thing is certain: Spitzer has shaken things up in the state capital. When State Senate Majority Leader Joe Bruno (caricatured as one-half of the two-headed monster in the illustration above) presented the new governor with a bouquet of roses last week for Valentine's Day, he was riffing on how loveless Albany has been be so far in 2007.

In his first six weeks in office, Spitzer has gone to war with the Democratic-led Assembly over the comptroller issue (punishing Carl McCall in the process), and presented a budget that alienated some of the state's most powerful political interests. Even as Bruno was handing him flowers, Spitzer was reportedly hatching a "secret plan" to strip the senate leader of his power.

Spitzer says that all this confrontation will lead to the end of "business as usual" in the state government, which has come under intense criticism as a dysfunctional body. When the new governor talks about reform in Albany, he is generally referring to making state government more accountable to its constituents through changes in campaign finance reform and redistricting laws. This will lead to a more sensible approach to spending public money and a more open legislative process that is not so tightly controlled by legislative leaders or so beholden to powerful special interests, according to reform advocates.

City officials have a large stake in Albany's efficiency, because they must rely on state action to enact many of their own ideas. After 9/11, for instance, city officials wanted to borrow money to pay for operating expenses, and later raise property taxes to help plug huge deficits in its budget. The state signed off on both. Similarly, both Mayor Michael Bloomberg's plan to extend a homeowners tax rebate and City Council Speaker Christine Quinn's idea to create a tax credit for renters must go through Albany.

"When we talk about the state helping the city, it's really granting the city permission to help itself," said Diana Fortuna.

City officials squirm under these requirements, especially since there practically every political observer agrees that New York City's government is run much better than Albany's.

If held to account for their actions, state officials would presumably be less inclined to sweeten pension deals with municipal unions, leaving the city to foot the bill, or set expensive Medicaid policies while requiring local governments to share the cost. A favorite example of policy wonks railing against such abuses is the state's repeal of the commuter tax, when Democratic assembly members from the city agreed to eliminate a measure that brought hundreds of millions of dollars into city coffers in order to gain a political advantage in a special election. Despite such arguably destructive decisions, state lawmakers are almost never voted out of office.

Many concede that there is bound to be consistent tension between Albany and City Hall, reform or not.

Spitzer's budget illustrates this, said Fortuna of the Citizens Budget Commission. The city and the state immediately reached an agreement on the Campaign for Fiscal Equity – a seemingly intractable lawsuit concerning school funding – with both Spitzer and Bloomberg committing to increase funds for education.

But Spitzer also left New York City out of a program called revenue sharing, through which the state gave unrestricted funding to cities that needed it.

Bloomberg immediately objected to being cut out. But former deputy mayor Mark Shaw argued that from Spitzer's perspective not sending money to New York City, which has a $4 billion surplus this year, could be seen as a reform.

"He looks at revenue sharing and says, 'you know, this is a program that I want to transform to go to distressed cities that really need it. And you know what? New York City doesn't need it right now."


Diana Fortuna – Citizens Budget Commission

Is the relationship between New York State and New York City odious? Is it oppressive? I wouldn't judge that according to how it is so often framed: what I call the giving and getting perspective. This is when you look at the state budget, and say, "Is New York City getting a good deal? How much does it give in to the state coffers, and how much does it get out of the state budget?"

Mayors tend to cite those numbers, and depending on how you count, you can say that the city contributes between 40 and 48 percent of the revenues to the state budget. The difference is how you count what commuters who live in the suburbs but work in the city pay in taxes. I don't think that this is the right framework because state government is not in existence in order to collect a certain amount of money from certain of its residents and then turn around and give the exact same amount back.

But if you do look at what Albany does for the city – to the city – there are still plenty of places to judge it woefully inadequate: Medicaid, education, transportation, employee benefits such as pensions. It's really deeply dysfunctional, and in many ways New York City suffers from its relationship with Albany.

In terms of Medicaid, you have the unprecedented situation of the state requiring its counties to pay roughly one quarter of the cost of its program. That has been somewhat blunted the last few years by policy changes, but it's very unfair to have the places that have the poor people to turn around and finance services for poor people. This is mainly a New York City issue, because two-thirds of Medicaid expenditures are in the city.

In terms of education, we have close to 40 percent of the students, including many of the neediest students. But the share of the pie has been determined totally politically. The state is not letting sensible formulas run in the education arena.

In municipal employee pensions, New York has a weird, bifurcated system where employees are allowed to make end runs to the state legislature after the collective bargaining negotiations with the city have concluded.

In the public arena it is always good to put responsibility for making decisions in the same place where the responsibility lies for paying for those decisions. These are cases where that is not true. New York State gets to decide, for example, "let's put a pension sweetener," but New York City has to pay the bill. Albany gets to decide what the Medicaid program looks like, but New York City gets to foot a good part of the bill. That's part of where the dysfunction comes from.

New York State is not unique because of its powers over the city. Generally speaking local governments are creatures of the state, and there's no power that New York State has over New York City that is unusual compared to the other 49 states. But it is unusual in other ways. Part of this is the size and sophistication of New York's government and population. I don't think another state comes close to having a city that is 40 percent of its population.

I would also assert that since the fiscal crisis, New York City has had fairly good government – sophisticated, held to very high standards, professional, and held to a pretty high standard. I would submit that over the same period of time New York State's government has deteriorated for a number of reasons to where it is not performing professionally enough or driven by what's right. We are all talking about that a lot now, and it's possible we are going to see a change. It makes you think: Couldn't New York City do this better on its own?


Alfonse D'Amato – Former United States Senator, New York

The relationship of New York City to New York State is dynamic, and constantly changing. There was once a body of thought where the rest of the state said, "We'd love to have New York City go on its own. We're doing everything for it." Those who come from the suburban communities – Nassau, Suffolk, Westchester, and the upstate communities – probably could have made a good argument that they are just sending money to the city to support a broken welfare system, a broken educational system, a system that is tuned in to nothing but political graft, corruption, and cronyism. That was a very prevalent, dominant thought going back to the late 1950s and early 1960s.

Things have changed dramatically. The city, as a number of major urban centers, has come to life, while the once powerful suburban and upstate communities have not enjoyed a similar revival. Indeed, in some cases these communities have almost gone into a state of depression. Buffalo, once the Queen City, with a population of over half a million people, has shrunk in half. The thriving steel industry off the Great Lakes is gone. Rochester, the home of Kodak, Bausch & Lomb, another great entrepreneurial base, has been reduced to half of its population. In Syracuse, General Electric alone employed over 30,000 people when I was a student there. Not one person, I don't believe, is employed by GE there today.

This is the deterioration of the upstate economy. It's easy to blame it on politics, on one governor or another. But they have nothing to do with it, except at the margins. You're not going to influence the real process of whether these areas are going to thrive. You can try to create a climate to attract people. Still, there are a number of reforms that would help bring construction or development projects, and I believe the new governor will look to implement such reforms.

On the broader scale, how does upstate redefine itself? What strengths can it build on? What hope is there? You don't just throw up your hands in despair. That's probably a tougher job than dealing with New York City, which has so much going for it.

We can build on its academic strengths, making centers of destination: the Finger Lakes, Lake Placid, Saratoga. Rebuild the infrastructures of these cities.

But without there being some basic reform, you cannot have legislators carrying on as they are now. The finance of this state will collapse altogether. The pension system is out of control; if you run for public office you can't say that, because you will have every single major union turn against you. But you have to change it. This is a system that cannot sustain itself. You can't have people retiring after 25 years, breaking the bank. You don't take away the benefits of those who already have it, but you set up a new system for the new employees. But don't talk about that – you'll be running for dogcatcher.

It the relationship between the city and the state odious? No, I think the pendulum swings back and forth. At one time, it was considered to be an odious relationship by those outside the city. Now, I think some of the people inside the city consider it to be an odious relationship, because the city is booming. It is prosperous. But it is a prosperity that is short-lived unless there are some fundamental reforms that can be undertaken. I believe the new governor really wants to bring about change, so I think it is a great opportunity to deal with these problems in a significant way. Not just at the margins.


Mark Shaw – Former Deputy Mayor, NYC

The modern relationship between the state and the city in New York dates back to the fiscal crisis in the 1970s. A lot of the odious and oppressive nature that people feel about state government as it relates to the budget has to deal with the system put into place in the 1970s to deal with that crisis. The city had a terrible accounting system, it was doing a lot of things it shouldn't be doing with its money, both in terms of how it was getting its money and how it was spending its money. The city almost went bankrupt, the state had to step in.

The story surrounding the Daily News headline FORD TO CITY: DROP DEAD has gotten some attention recently because Ford just died. But that was the sidebar story. The real story was the state taking over the city's finances in many ways. The senior colleges of City University, for example, were taken over by the state of New York. People still think of CUNY as a city institution, but the fact is that the senior colleges get 100 percent of their funding from Albany (the community colleges are split 50-50).

These fiscal relationships are important, and people need to understand them.

In order to figure out where New York City and New York State should be going, we need to deal with the fiscal crisis structure that was set up.

The truth is that New York City now has a far superior system than New York State. Governor Spitzer is trying to do now is to treat the state budget a little more like the city budget. This year, for instance, he came up with a four-year plan for the first time. This is a planning tool, but it is also useful in making decisions about how to spend money. These decisions are how you, as governor, affect people.

At the end of the day, the budget is what drives policy in government. Governments raise money from people through taxes and then find ways to spend this money, and a lot of money is at play. Budgets are about choices. Since government is run by politicians, and politicians are very smart people, they are going to make choices that will get them reelected.

In order for these issues to play out in the political framework, I think the media needs to come up with a better way to cover them, so that people out in the streets have a better understanding about the decisions that are getting made. The budget is a large document, and very few people read it. It is complicated, and reporters have a hard time understanding it. It's a terrible story to put on television. That means that it is a very difficult story to put out in the media. But the reality is that it is a very important story to put out.


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