10/30/08: Letter to Governor Paterson regarding state budget cuts

         October 30, 2008                                                                                                           

Governor David A. Paterson

Majority Leader Dean G. Skelos

Speaker Sheldon Silver

State Capitol                                                    

Albany , New York 12224                                   

Gentlemen:

Everyday we read about New York State's deteriorating budget situation due to Wall Street upheaval and general economic decline. The state must close a gap between expected revenues and expenses in the 2009-10 fiscal year that is predicted to be as high as $12.5 billion. To avoid further harm to the state's economy, businesses, taxpayers and families, the state must not raise taxes.   Rather, a significant reduction in spending will be crucial to getting our state budget back on track. With that in mind, we have outlined for your consideration a carefully thought out plan for potential savings in 2009-10.

Since education and health care comprise 70 percent of the state budget, significant changes are required in these areas. We recommend:

Education

§          $2.4 billion in savings by holding school aid spending flat to current year level (2008-09).

To achieve that goal, several specific cost-saving suggestions include:

§          Reducing mandates in special education. School boards estimate that state mandates add as much as $1.3 billion to the cost of educating disabled students.

§          Consolidating small school districts where merited, which could save at least $160 million (state Local Government Efficiency Commission estimate).

§          Consolidating transportation maintenance and dispatch, facilities maintenance, and special education administration within BOCES districts, saving approximately $88 million to $137 million (state Local Government Efficiency Commission estimate).

Health Care

§          $2.7 billion in savings by holding Medicaid spending flat to current year level (2008-09).

To achieve that goal, several specific cost-saving suggestions include:

§          Cutting reimbursement rates to hospitals and nursing homes in least need of financial assistance, recognizing the unique financial circumstances of upstate rural centers.

§          Cutting long-term care benefits to those who are not poor to save approximately $454 million (Citizens Budget Commission estimate).

§          Reducing excessive use of some services (including personal care) and improving management of care for high-cost populations, a savings of nearly $609 million (Citizens Budget Commission estimate).

§          Increasing efforts to combat fraud and abuse. Potential savings can be reasonably estimated at 10 percent of the overall Medicaid budget, or $3.2 billion.

§          Cutting coverage for optional services.

State Government Consolidation, Public Employee Compensation

§          $2 billion-plus in savings by consolidating services, centralizing administrative functions, and restructuring public employee compensation.  

In terms of state government consolidation, several cost-saving suggestions include: consolidating services and/or merging the Thruway Authority and Department of Transportation; operating correctional facilities at capacity; closing underutilized state facilities (i.e., state psychiatric centers); centralizing payroll, purchasing and personnel functions for state agencies.

In terms of restructuring public employee compensation, several cost-saving suggestions include: imposing a moratorium on all new collective bargaining agreements and calling upon state unions to renegotiate their most recent deals in light of the growing financial emergency; implementing a 40-hour work week for state employees vs. current 37.5-hour week; requiring state employees to contribute to health insurance at the national average rate (i.e., state pays on average 82 percent of premium costs for family plans vs. 71 percent national average).

To realize significant longer-term budget savings, the state should also restructure public employee retirement benefits for new employees by implementing a defined contribution system in place of the current defined benefit system.

The savings we've outlined above total more than $7 billion for 2009-10 alone.

Many of these suggestions will be opposed aggressively by organizations that have long demanded increases in state government spending in consideration for their political support; groups whose Albany lobbying over the years has led to the size and cost of many state programs that far exceeds those of our peer states across the nation.

In this economic and public finance crisis lies the opportunity for state leaders to undertake long overdue reforms.   Closing past budget deficits significantly relied on fiscal gimmicks and "one-shots."   The severity of the state's current and projected fiscal problems, however, requires a much more thoughtful and enduring response - a restructuring of state government programs that brings their cost in line with realistic, long-term revenue projections.

As always, Unshackle Upstate is committed to supporting you to do what's necessary and right for the future of New York's citizens, communities and economy.

Sincerely,

Cc:        Laura Anglin, New York State Budget Director

Bill Cunningham, Acting Secretary to the Governor

Dr. Jon Cohen, Senior Advisor

Dean Fuleihan, Secretary, New York State Assembly Ways and Means Committee

Charlotte Hitchcock, Chief of Staff and Director of Financial Regulation

Robert Mujica, Secretary, New York State Senate Finance Committee