New York State’s Executive Budget

February 8, 2010

Every year the Governor publishes the Executive Budget, the starting point for further negotiations with the State Legislature that results in a finalized state budget.  Rarely – if ever – does the Legislature reduce the size of the budget.  I am positive that this year will not be any different.

The Comptroller’s office is required to review the budget and provide opinion (but not authority).  Comptroller DiNapoli’s analysis reveals that the budget is unrealistic, relies on questionable assumptions, balances this year’s budget by moving even more debt (mainly, your state tax refunds) into next year’s budget, and over the next four years has a projected structural imbalance of $61 billion.  And that’s just the first page.

• The Executive’s anticipated growth in revenue from the Personal Income Tax and other sources is based on an economic recovery, the timing of which remains uncertain.
• The lingering recession adds to fiscal stress by increasing the demand for programs and services such as Medicaid.
• Several revenue producing measures (sugared beverage tax, wine sales in grocery stores, Video Lottery Terminal and Quick Draw expansions) have similarly been proposed in the past, but not enacted.
• Numerous programmatic cuts have been proposed previously, but either were not enacted or were not fully realized. School aid, higher education and health care reductions are notable examples.
• Tax audit recoveries, new Medicaid audit recoveries and abandoned property transfers are budgeted aggressively at $1.1 billion.

Debt Service is the largest-growing budget category. It is growing even faster than both Medicaid and Education.

The growth in spending outpaces the growth in revenue, 7.7% to 2.9% – indicating that little if anything is being done to reduce the state’s structural imbalance.

On the upside, the state does plan to trim its workforce from 196,375 to 196,701 – a reduction of 674 positions (I’m being sarcastic).  And under current law, our long-term debt cap cannot exceed 4% of our residents’ combined income.  This won’t cause problems until the 2012-2013 time frame when our collective income is expected to fall and we exceed the cap.

The 34-page report is a pretty easy read.  Recommended if you have an hour to spare in your busy day and prefer something like this over hitting yourself with a hammer.

The Executive’s anticipated growth in revenue from the Personal Income Tax
and other sources is based on an economic recovery, the timing of which
remains uncertain.
• The lingering recession adds to fiscal stress by increasing the demand for
programs and services such as Medicaid.1
• Several revenue producing measures (sugared beverage tax, wine sales in
grocery stores, Video Lottery Terminal and Quick Draw expansions) have
similarly been proposed in the past, but not enacted.
• Numerous programmatic cuts have been proposed previously, but either were
not enacted or were not fully realized. School aid, higher education and health
care reductions are notable examples.
• Tax audit recoveries, new Medicaid audit recoveries and abandoned property
transfers are budgeted aggressively at $1.1 billion.
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How to Fund a Waterfront Project

August 19, 2009

East River Esplanade

Read this article; it’s about the $148 million that New York City and the state will spend to renovate two piers along the East River.  It creates 400 new jobs in Gotham.

That’s about $370 thousand per job created.  All it takes is David Paterson, Sheldon Silver and the mayor of a great city to pull it off.

Well, we have all three, right?  This means that Buffalo will be next, right?  We need some state-funded jobs like that.


Small Business Week in Buffalo

June 6, 2009

This past week was Small Business Week in Western New York.

  • Monday:  UB’s Center for Entrepreneurial Leadership (CEL) annual meeting
  • Tuesday:  Small Business Innovative Research grant writing seminar specifically targeted to small businesses and start-ups
  • Tuesday Night:  Buffalo Niagara Partnership Endurance All-Stars event.
  • Wednesday:  CEL Class of 2009 graduation ceremony
  • Thursday:  UB Business Partners Day

Before you say “Small business, so what?  Who gives a crap?” know that small businesses account for half of all employment in the U.S., and since the mid-90s have created 60-80% of net new jobs.  A very recent NPR report cited that small businesses accounted for 100% of all new hiring in 2009 so far.  Small business is Western New York’s future, for God knows that until New York State’s government is overthrown changes we are not going to be attracting any large companies to this area despite the best efforts of the Buffalo Niagara Enterprise and our local politicians.

Some big corporations were represented at most of these events, too:  Moog, National Fuel, Greatbatch, M&T and others are sponsors of many of these programs, in part as a giveback to the community in which they operate.   I am grateful to the big guys who probably get little in return, other than some friendly PR.

UB Business Partners day was an unequivocal success.  Attendance was probably twice last year’s, and it will continue to grow.   UB and the CEL both recognize that entrepreneurialism is the seed by which business will blossom in Western New York.


Not Riding the Bus

May 2, 2009

empty-bus

A couple weeks ago my wife and I were returning from an evening party at the Buffalo Convention Center to our car, parked in the Convention Parking Ramp one block away.  During that very brief walk we watched four NFTA buses go by.  There were two passengers, total.

Running a regional bus service like this does not appear to be very cost effective.  But with all the available surface parking in Buffalo, maybe there’s no other way.

I wonder if the decentralization of the bus system – doing away with the hub-and-spoke model that forces every bus to the central bus terminal, and replacing it with smaller, more localized shuttles – would make more sense.  It’s hard to believe that 50-person buses only filled to 2% capacity could ever be profitable.


The Next GM Pension Plan

March 30, 2009

gm-car

Because of its long term pension liabilities, GM is worth more dead than alive.  I doubt any automaker or wealthy investor (other than the U.S. Government) will touch it prior to its evenutal bankruptcy.

The company’s crazy pension commitments are just crazy.   As of last year they were costing the company $1,300 per car.  With GM sales down something ridiculous – over 50% in February from the year prior – pension costs this year will cost over $2,000 per vehicle.

What’s a GM pensioner to do?  Well, nothing, really.  The pensioner can sit on his or her ass all he or she wants and will still collect until the company is sucked dry.  After that, who knows?  For some reason I think I’ll be helping to pick up the tab.

Here’s my suggestion after the bankruptcy:  Offer up a pension amount fixed at some amount per car.  Let’s say the company agrees to put $1,000 per car into the pension account.  Take the total car sales for the year, multiply by $1,000 and divide by the number of pensioners; that’s the amount each pensioner will get the following year.

This has some real advantages over the current scheme, mainly that pensioners could make out really well in good years, and they have an incentive to help GM make sure it has good years.  And I won’t have to subsidize them through some government support package.

Just a thought.


$300B Treasury Bond Purchase

March 18, 2009

When the Fed buys Treasury bonds with money it doesn’t have, isn’t that the same as taking out a loan on a loan?

Wall Street is cheering right now.  Maybe they understand in some perverted way.  I don’t.


Wal-Mart and the Internet Cheapen Everything

March 15, 2009

bitterness-poor-quality

The fill valve on my toilet broke for the third time in two years.  I blame the Internet.  And Wal-Mart.

Our refrigerators used to last 12 or 15 years; today they last 7 before the compressor burns out.  We shrug as if this is how it has always been.  It has not.  Our collective desire for cheap is an enabler that allows Wal-Mart and others to trade off quality for price and in the process lower our standards of acceptance.  Likewise, thirty years ago our highly competitive newspapers were thick with articles and quality writing because, well, because they were competing on a level playing field with other newspapers.  Today they are vacuous and on the verge of extinction, unable to beat free no matter how much they cut their overhead.  A major paper is shutting down nearly every week.

The creep toward cheap was relatively slow and insidious.  So was the decline in the resulting product quality.  It is our acceptance of this decline that chews at me.

Wal-Mart and the Internet have led this race to the bottom.  It’s a disease.  The first symptom was the societal shift toward diminished quality because it made products more economical.  Cheaper plastics.  Thinner metal.  Smaller sizes.  Fewer parts.  The Internet forced the print media to compromise as well.  Less research.  More opinion.  Fewer sources.  Poorer writing.  We sat back as the competitors to these low-cost suppliers lowered their costs – and reduced product quality – in a futile effort to remain competitive.

In the end, the only fill valve that I can get for my toilet is from the same manufacturer that made the last two.  I don’t expect the next replacement to last any longer than the others.

There will always be a few boutique stores and BMW-like merchandisers that put quality first; some of us will be willing to pay for that quality.  But for Everyman, Wal-Mart and the Internet will reign, churning out product that would have been unacceptable a generation ago.