Governor Cuomo Declares New York "Functionally Bankrupt", Seeks Spending Cuts; California Governor Jerry Brown Cites Egypt, Demand Tax Hikes

In an interesting compare and contrast scenario, democratic governors from the two largest states have vastly differing ideas regarding what to do about huge budget gaps. New York Governor Andrew Cuomo seeks spending cuts on schools and Medicaid, while California Governor Jerry Brown wants to ram through tax hikes.

The LA Times reports Brown cites unrest in Egypt to make his case for budget vote

Citing the pro-democracy unrest in Egypt and Tunisia, Gov. Jerry Brown called it “unconscionable” that GOP legislators are vowing to block his attempt to ask voters to extend tax hikes to balance the budget.

“When democratic ideals and calls for the right to vote are stirring the imagination of young people in Egypt and Tunisia and other parts of the world, we in California can’t say now is the time to block a vote of the people,” Brown said in his first State of the State address in nearly 30 years.

He said the budget has tough choices but that the people “have a right to vote” on the package. He challenged both parties to take the difficult votes necessary to balance the budget.

Jerry Brown Is Disingenuous

The moment a vote is put to the people, the teachers' unions, the police and fire unions, the prison unions, the transit unions, and in fact every union in the state will bombard taxpayers with promises of Armageddon if tax hikes are not approved.

Money for those ads will come from taxpayers of course.

Hopefully Republican tell Brown to go to hell, and if not, then hopefully taxpayers tell the unions to go to hell.

California does not have a revenue problem, it has a spending problem. The way you fix a spending problem is to cut spending. Until the governor is willing to do that Republican should hold their ground.

Cuomo’s Budget Cuts Spending on Schools and Medicaid

The New York Times reports Cuomo’s Budget Cuts Spending on Schools and Medicaid.

Declaring New York State “functionally bankrupt,” Gov. Andrew M. Cuomo proposed a $132.9 billion budget on Tuesday that would reduce year-to-year spending for the first time in more than a decade, sharply cut back projected spending on education and health care, and cut the budget for state agencies by more than half a billion dollars in the next fiscal year.

In a novel and potentially risky move, Mr. Cuomo’s budget defers specific Medicaid cuts to the work of a task force he appointed last month and which includes lawmakers and representatives of labor and health care interests. The task force’s recommendations are due in one month — time that may buy Mr. Cuomo protection from the withering attack advertisements that those same interests typically unleash on governors seeking Medicaid cuts.

Presenting his budget to lawmakers and other officials at a state theater in Albany, Mr. Cuomo sounded stern, even angry, about the way past governors and lawmakers have built inexorable spending growth into future budgets, even as he urged the Legislature to join him in reigning in government expenditures.

He decried current budgeting practices as a “special interest protection program” that led to too much spending with too little accountability for performance, and called for a return to what he described as “reality-based” budgeting.

“It’s not about the industry of government,” Mr. Cuomo said. “It’s not about the bureaucracy of programs. Government is there to serve people.”

like Mr. Paterson, Mr. Cuomo is proposing to eliminate the annual cash subsidy that New York City receives through a state program, setting up a battle with Mayor Michael R. Bloomberg.

Offering a further glimpse of how he will seek to negotiate with the Legislature and outmaneuver unions and other special interests that dominate the budget process in Albany, Mr. Cuomo will seek agreement with lawmakers to reduce spending on adult and juvenile prisons.

But his proposal would defer decisions on which of the state’s dozens of adult prison facilities to close to a task force of lawmakers and state prison officials. Should the task force fail to agree on prison closings, under Mr. Cuomo’s proposal, the commissioner of the corrections department would be empowered to make the decisions unilaterally.

Similarly, the budget proposal would empower the executive branch to unilaterally make any Medicaid cuts that Mr. Cuomo’s task force is unable to agree on its own.

Mr. Cuomo is seeking to reduce the budget for state operations, among the larger pots of spending, by 10 percent, one of the steepest proportional reductions to any area of the budget. About $100 million in savings would be sought through agency mergers, but the bulk of the amount, $450 million, is intended to come through what Mr. Cuomo’s budget proposal terms a “Labor Management Partnership.”

Mr. Cuomo’s budget also offers a more expansive glimpse of his plans to redesign New York’s sprawling state bureaucracy, with plans to merge 11 existing agencies or authorities into just four entities. Mr. Cuomo will seek to consolidate the department of corrections, one of New York’s largest agencies, with the state division of parole, and to move several agencies that handle programs for domestic violence and crime victims into the state division of criminal justice services.

Mr. Cuomo also proposes to reduce projected spending on the State University of New York, the City University of New York and their community colleges by about 10 percent, which would save more than $200 million. The budget saves another $135 million by eliminating subsidies for SUNY’s teaching hospitals at Brooklyn, Stony Brook and Syracuse.

Band-Aid Approach

I applaud all of those moves, but most are nothing but Band-Aids. Cuomo needs to get at the root of the problem. To do that he needs to end collective bargaining of public unions, make New York a right to work state, kill prevailing wage laws, and make sure all new state employees do not get defined benefit plans, and go to merit pay for teachers.

Those moves would not only help the state, but would ease the pain of cuts on New York City. Moreover, if he did all that, I bet Republicans would agree to some tax hikes. The same applies to California Governor Brown.

Governor Cuomo is better than expected (but still off the mark). Meanwhile, Governor Moonbeam remains in outer space in regards to addressing California's problems.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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