Thursday, March 25, 2010

Eight Days, Two Houses, One Governor

Senate Dems Cut Schools,

Show Awareness of Deficit

But Are Still Billions Short

By Henry J. Stern
March 23, 2010

Eight days from the deadline for adoption of the New York State budget for fiscal 2011, the legislature has begun to move on questions of finance.

Yesterday the State Senate, which has been the less functional of the two houses, took a step which has distressed what is probably the state’s most powerful interest group, the education lobby. The Times' account of the action, by Jeremy W. Peters, appears on pA25, under the head, STATE SENATE, TRYING TO TRIM DEFICIT, OFFERS BUDGET PLAN CUTTING $1.4 BILLION FROM SCHOOLS. The lede:

"School financing, a perennial third rail of state politics, would be cut by $1.4 billion under a plan put forward on Monday by Senate Democrats trying to plug a budget deficit estimated at $9 billion.

"The resolution the Senate passed constituted a grab bag from the $134 billion budget Gov. David A. Paterson introduced in January. It cut in many of the same areas the governor had, but also restored many of the reductions he had called for and rejected his most prominent revenue proposals.

"The plan, which also counts on $700 million from the refinancing of tobacco bonds, was the Legislature's first step toward laying out its own budget; it has a deadline of March 31. The Assembly is expected to adopt its own spending plan later this week."

Peters' article continues:

"Advocates for public school teachers and administrators reacted with outrage to the Democrats' plan.

"The New York State School Boards Association estimated that it could cost 14.000 teachers their jobs.

"Ernest Logan, president of the Council of School Supervisors and Administrators, called the plan 'unconscionable.'

"Michael Mulgrew, president of the United Federation of Teachers, said it would result in deteriorating conditions at New York City schools, just as the financial crisis of the 1970's had. 'The Senate's proposal is a disaster in the making for the children in New York's public schools,' Mr. Mulgrew said."

Governor Paterson praised the outline of the Senate Democrats' plan, which like health care in Washington, was adopted without a single Republican vote. There were no Democrats who opposed the senate plan, however, because if even one had abstained the plan would not have passed. To enact any legislation in the Senate requires 32 votes out of its 62 members. The election of Jose Peralta to succeed Hiram Monserrate brought the Democrats their 32nd vote. While the seat was vacant, between Monserrate's expulsion on Feb. 9 and Peralta's induction on Mar. 17, neither party had a Senate majority.

If the 2010 elections result in a working Senate majority for either party, we will be spared the ungainly spectacle of control of the legislature swinging back and forth between the parties at the whim of turncoat members who are motivated by desire for personal advancement and larger slices of pork. Last year the Senate was inoperative for over a month because of personal maneuvering. In that case, the pirates were successful, returning home with their loot. The collateral damage of Albany anarchy led, however, to a beneficial result for the public: the appointment by Governor Paterson of Richard Ravitch as Lieutenant Governor, and the 4-3 decision by the Court of Appeals which validated the process.

What is the significance of the Senate budget plan? It is a first step, although it deals with only part of the problem, and the budget remains billions out of balance. Still, it indicates forward motion, and we can read tea leaves to find that, somewhere in the middle distance, wisps of reality are penetrating the legislative chambers. This will be an extremely difficult budget to balance, and the legislature is likely to use every bookkeeping device or one shot gimmick it can unearth to minimize the reductions that will be necessary. They will loot every cupboard they can find to secure funding for purposes they prefer. The problem they face this year has been intensified by the fiscal irresponsibility that has repeatedly been demonstrated in prior budget cycles. Rule 26-C: "The chickens come home to roost."

As the deadline approaches, and then recedes (since it is highly unlikely that it will be met) public attention will focus on the state's financial distress. If state aid to cities and counties is reduced substantially, that will spread the tsunami to functions of local government. Laying off employees always has a negative effect on the local economy, which is intensified if the people laid off are unable to find work elsewhere. In small towns where the principal employer may be a state institution, the closing of that prison or mental institution, even though it has hardly any inmates and its continued operation is unjustified in terms of public benefit, will hurt the town’s economy, which may be already reeling because of the Great Recession and lack of development upstate.

The larger the public sector grows, the greater the economic impact of decisions affecting its personnel and facilities. New York State has a large number of state and municipal employees per capita. In 2006, New York had 62 state and local governments per 1000 residents. That is 14% above the national average, and makes New York 11th in the nation. The analysis, now three years old, found the average salary of a public employee to be $54,503, fourth highest in the nation, and 21% above the national average. These figures come from the Public Policy Institute, which is affiliated with the Business Council of New York State. As far as we know, they have not been disputed. Rule 29-T: "The trouble is the charges are true."

One proposal that would reduce the number of layoffs needed is an immediate state-wide freeze on salaries. But this would violate collective bargaining agreements already entered into, and would therefore require superseding legislative action, which would have to stand up to a challenge in the Court of Appeals. It is difficult to predict outcomes in that body, as the Ravitch case has demonstrated. Even the United States Supreme Court occasionally divides 5-4.

It would be in the public interest to allow the modification of contracts in the case of a statewide fiscal emergency, particularly if that emergency would interfere with the delivery of essential services. Several years ago the Court of Appeals arrogated to itself the authority to evaluate education budgets to see if they reached Constitutional requirements, despite the fact that New York State was fifth in the nation in per capita school spending, surpassed by only Alaska, Wyoming, New Jersey and Vermont.

Most recently they overruled the legislature to vote themselves a salary increase, which they deserve on the merits. But who knows when judicial restraint starts or stops. Precedents here don’t seem to count as they do in other areas of jurisprudence.

For seven and one half years we have warned in the pages of this blog of fiscal turmoil approaching. On September 22, 2002 we wrote the headline, DRIFTING FROM ERIE, TOWARD ONTARIO. To reach Lake Ontario from Lake Erie, one can drift north on the Niagara River. The current quickens, first slowly and then more rapidly, as one approaches the precipice of Niagara Falls. The plunge is 176 feet, then the waters continue on their northward course to Lake Ontario. Maybe it’s not that bad.

We will watch the laborious process as the State of New York attempts to extricate itself from the disasters it faces. We hope that the stakeholders will work together, so that the economic pain can be widely shared, rather than concentrated on those who may be least able to bear it. We hope that the jolt is not too great for the economy to withstand. We hope we have been unduly concerned, and that all will be well in the end. Maybe it will.

StarQuest #656 03.23.2010 1289wds

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