Cause for Concern

Governor Spitzer delivered his first State of the State address yesterday to a packed Assembly chamber in Albany. The new governor enunciated a vision of “One New York,” addressing long overdue issues of concern to all citizens of our state.The speech was well received and confidently delivered. The policy proposals were familiar, items that Mr. Spitzer had enunciated over the past campaign year. State government reform and statewide economic revitalization formed the basis of the agenda, which Mr. Spitzer set out for 2007.Unexpectedly and refreshingly, Mr. Spitzer did not attack his predecessor for not solving state problems. In fact he said no one person was to blame but that all elected officials had a responsibility to bring about needed change. He also clearly stated that his agenda would confront special interests that seek to maintain the status quo.New Yorkers should be both reassured and concerned by Governor Spitzer’s speech.They should be reassured by the fact that Mr. Spitzer apparently means what he says about reforming our sclerotic state government. He wants ethics reforms, budget reforms, and campaign finance and redistricting reform, all of which he believes will open up the process and make our government more responsive to the needs of average New Yorkers.Upstate residents in particular should be heartened by the fact that Mr. Spitzer wants to place their need for economic revitalization and renewal front and center on his agenda. He has crafted an extensive list of priorities to deal with the longstanding decline in economic activity and the population losses in this vast region where over 6 million New Yorker’s still live.As a new governor, elected by a convincing majority from every region of the state, Mr. Spitzer is certainly at the beginning of his honeymoon period. How long such nuptial bliss continues after he introduces a state budget later this month remains to be seen.And here is where people should be concerned as to the nature of the Spitzer agenda, for while Mr. Spitzer recited a laundry list of proposals, he has yet to offer details. In fairness it may be early to expect a detailed agenda since the new administration has barely staffed the executive branch. But, the realities of the state’s fiscal position will soon become apparent, and the governor will have to set priorities.The state faces multibillion-dollar structural deficits going forward. Debt service for borrowing already initiated is growing at alarming rates. Mr. Spitzer unwisely made promises for school spending in anticipation of a court order from the state Court of Appeals. Yet, when that order came down late last year, it significantly reduced the amount that the state needs to provide to New York City schools. Education spending proponents are certain to demand that he fulfill the promises he made, even though he is now under no legal obligation to do so. And, upstate schools will clearly argue for parity in any new funding.Moreover, many of the new governor’s initiatives in health care and infrastructure will be difficult or impossible to achieve unless there is true fiscal restraint. Mr. Spitzer says he is committed to being tough on the legislature’s spending impulses and reminded them that state spending increased almost 13% last year, over three times the inflation rate. He very clearly said such increases were unsustainable. Yet, he also outlined plans for property tax relief and higher state aid to school districts and municipalities. Ironically, this last proposal sounds eerily similar to one unsuccessfully made by Governor Pataki last year.While most of these initiatives have appeal, the devil will be in the details. His school property tax plan builds on the existing School TAx Relief program initiated by Gov. Pataki in 1997. Yet that plan has not been successful in arresting the growth of school property taxes mainly because it contains no restrain on local spending or reforms of the costly provisions mandated by state law governing contracts, work rules and pensions. Spitzer’s plan is doomed to a similar fate unless he finds politically palatable ways to address these issues. So far, he has been silent on this question.He says he wants to bring labor and business together to reform the state’s notoriously expensive and often fraudulent workers compensation program. Yet, he has made no substantive proposals in this area, other than saying it needed to be addressed.He has also not addressed the multibilliondollar liabilities that the state and its local governments face in paying for unfunded retiree health insurance programs. It is estimated that New York State alone has over $47 billion in such costs with a similar amount being faced by local governments and school districts. Mayor Bloomberg reserved $2 billion last year in anticipation of New York City’s costs. The state will need to start doing the same, which will leave less for other spending..Mr. Spitzer has clearly brought a new energy and focus on the issues confronting our state. His speech yesterday and that at his inauguration should give New Yorkers hope that he can fulfill his mission. But, we should also be cognizant as I’m sure he is, that the hard part is yet to come.Mr. Faso, a partner in the law firm of Manatt Phelps & Phillips, was Republican candidate for governor in 2006.

Cause for Concern

Cause for Concern

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