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Cut state budget with a chain saw, not a penknife

Paterson, budget announcement

On one hand, the proposed budget Gov. David A. Paterson released Tuesday goes further than many in the  status quo minded State Legislature would like. Through that prism, his spending plan is kind of bold.

But, given the state's grim fiscal reality -- it's staring at the prospect of a $7.4 billion deficit -- Paterson's proposed budget doesn't go nearly far enough. The state's legacy of over-the-top spending calls for structural changes, and that's largely absent in what Paterson has submitted.

Here's what I find striking:

-- No employee layoffs. How can a significant reduction in payroll costs not be part of the equation, given the size of the budget deficit?

-- A cut in school aid of just 5 percent. Given that school aid has skyrocketed in recent years -- up an average of 7.2 percent annually over the past decade --  and spending on education in New York is among the highest in the nation, the state has been generous to a fault  -- and will continue to be, even if the Legislature were to go along with Paterson's proposed cut.

-- For that matter, the governor is calling for only a small cut in aid to local government, no more than 5 percent. Let's see, Buffalo is sitting on top of a $48.2 million surplus and a $33.6 million rainy day fund, which has prompted the mayor to float the idea of a property tax cut to "share the wealth," which, of course, comes from Albany. It seems like City Hall, for one, could weather a deeper cut.

-- The budget calls for nearly $1 billion in higher taxes and fees that come on top of $8.34 billion in increases last year. Enough already.

-- The Legislature, with its lulus and other perks for lawmakers, and its bloated staff, sets its own budget and it needs to tighten its belt -- by a lot, not a little. Let's see what they do.

A suggestion: Lead by example.

A prediction: They won't.

For years, the governor and Legislature have increased spending, raised taxes and avoided making hard budget decisions. New York is now in financial crisis and while Paterson's spending plan takes some steps in the right direction, too many of them are baby steps, given the task at hand.

As the adage says, it's time to "go big or go home."

Or, as my boys sing, "Let's see action."

Hit it, Pete.

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Hey big spenders -- comparing local government spending

Yao ming OK, for starters, we know taxes and spending are high here in New York State. So the comparisons I'm about to make are akin to comparing the heights of all the centers in the National Basketball Association -- i.e., they're all big.

That said, the Empire Center for New York State Policy has come out with an interesting online tool that allows taxpayers to compare how local governments -- counties, cities, towns and villages -- are spending money. And by spending money, I mean, to quote the center, "effective property tax rates and per-person (i.e., "per-capita") values for the spending, debt and tax levels." Locales outside of New York City are included.

You can do a lot of different sorts, and I encourage you to play in this sandbox.

Me, I took a look at total spending per capita, and here's what I found out.

Counties: Most of the costliest spending is in Long Island and in rural counties, where economies of scale suffer. Erie and Niagara counties are a little below the median, which is to say spending per capita is a little lower here, about $1,600, vs. about $1,900.

Cities: Buffalo, at about $1,700 per head, is just about in the middle. Salamanca and Jamestown are sky-high, Niagara Falls somewhat high. Lackwanna is on the low end.

Towns:The median is about $580. Ellicottville spends the most of the locals, $1,343. Yipes! A lot of other towns in Erie and Niagara counties are well above the median, including Niagara, Amherst, Tonawanda, West Seneca, Grand Island, Cheektowaga, Wheatfield, Evans, and my good friends in Brant. Bringing up the rear, and I mean this is a good way, is Attica, at $134. Yeah, it's not in our immediate metro area, but I wanted to report some good news.

Villages:  The big spenders locally include Arcade ($4,650) and Ellicotville ($3,578). The median is about $1,000, which has me wondering what they're doing in Arcade and Ellicottville.

Again, I urged you to explore. I don't dare use the word "crowdsource," as my last effort fell flat. But feel free to share your findings with the class.

Are we already soaking the rich?

As someone who believes in soaking the rich, I found this report  from the Congressional Budget Office to be a bit of an eye-opener.

Higher-income groups pay a disproportionate share of federal taxes because they earn a disproportionate share of pretax income and because effective tax rates rise with income.

In 2006, the highest quintile earned 55.7 percent of pretax income and paid 69.3 percent of federal taxes, while the top 1 percent of households earned 18.8 percent of income and paid 28.3 percent of taxes.

In all other quintiles, the share of federal taxes was less than the income share. The bottom quintile earned 3.9 percent of income and paid 0.8 percent of taxes, while the middle quintile earned 13.2 percent of income and paid 9.1 percent of taxes.

The five-page report is a little dry, but has some other interesting facts and tables. It held my attention, anyway. Given that your federal tax returns are due next Wednesday, it might be worth a read.

Regardless, this is worth a look. Hit it, George (with a little help from his friend, EC).

Property taxes: Worse than you realize

There are 3,141 counties in the United States.

Of the 20 with the biggest property tax bite, 19 are located in Upstate New York.

Nineteen of twenty. In the freakin' nation.

Niagara County ranks No. 2; Erie County is No. 12.

Rounding out the ranks are most of the remaining counties in Western New York and counties in and around Rochester, Syracuse, Albany and Binghamton.

I knew property taxes were bad here. But this bad?

The depressing data comes from a report issued by the Tax Foundation, an outfit out of Washington, D.C., which studied Census data from 2005-2007 for counties with a population over 20,000. They sliced and diced the data different ways. Where Upstate comes out worst is when median property taxes are calculated as a percentage of median property values.

In places with dirt-cheap property taxes, starting with Louisiana, property taxes are well
below 1 percent of property values. As low as one-tenth of one percent. (I'm not sure many of
us would be satisfied with the quality of government services in those places.)

Meanwhile, back in Upstate New York, property taxes equal 2.4 to 3 percent of median property values. I figure it's a result of relatively modest property values and high tax rates.

Here's the "Top 20" list. Only a county in Texas, west of Houston, keeps us from batting 1.000.

Orleans County, NY: 3.05%
Niagara County, NY: 2.90%
Allegany County, NY: 2.87%
Montgomery County, NY: 2.86%
Monroe County, NY: 2.84%
Wayne County, NY: 2.74%
Cortland County, NY: 2.69%
Genesee County, NY: 2.69%
Chautauqua County, NY: 2.67%
Livingston County, NY: 2.61%
Fort Bend County, TX: 2.57%
Erie County, NY: 2.56%
Onondaga County, NY: 2.56%
Seneca County, NY: 2.52%
Oswego County, NY: 2.50%
Wyoming County, NY: 2.49%
Fulton County, NY: 2.47%
Cayuga County, NY: 2.46%
Chemung County, NY: 2.44%
Schenectady County, NY: 2.43%

Not outraged enough?

Here's a link to a spreadsheet with more complete data. Go to the tab entitled "Sorted by % of value."

Read it and weep.

The last refuge of a scoundrel is a tax break

Some 9,400 American corporations operate foreign subsidiaries. They don't pay U.S. taxes on their earnings overseas so long as they keep the money stashed overseas. There's a whole lot of stashing going on. Topped $800 billion by the middle of this decade.

If and when corporations bring their profits stateside, they usually pay the normal corporate tax rate of 35 percent. But Congress in 2004 passed a one-time tax break: corporations that brought their money to the U.S. during 2004-06 would pay a rate of only 5.25 percent.

Some 843 corporations took Uncle Sam up on its offer -- and saved $265 billion.

This at a time when the country was at war and dealing with record budget deficits. But bet your bottom dollar all those CEOs are wearing their flag pins on their lapels.

Read all about it in The New York Times. Comment below.

Your tax dollars at play

School_busMy wife is going to say I'm being a grump, but can someone explain to me the educational value of having students attend yesterday's Bisons game?

The Bisons hosted their annual School Kids Day and packed in the biggest crowd of the season, 15,640, including some 10,500 students and 500 teachers and other adult chaperons. Tickets went for $6.75, $11 if you took the food package.

After talking to the Bisons, my math shows ticket revenue added up to about $87,425. In some cases, schools paid for tickets, in other instances, the kids did.

Regardless, that's not a bad take for the Bisons, and it doesn't include revenue from additional concession sales. There are other costs, as well. Teacher pay (I can't imagine riding herd on 25 kids is exactly a walk in the park) and the 250 buses used to transport the kids (photo is file art from the Bisons).

Add it all up and the day at the ballpark cost more than $100,000. And the educational value was what?

About the same, you say, as one of my other favorite school field trips, to Darien Lake?

Not exactly change agents

Council_6What's up with the Common Council?

Vetting the city's annual operating budget, and, to a lesser degree, the federal block grant budget, are among the major responsibilities of a Council member. After all, money is what drives city operations.

This year, however, the Council all but rubber-stamped both budgets. It's becoming a trend.

The Council changed Brown's proposed $435 million operating budget by $653,456. That's less than 1 percent -- 0.15 of 1 percent to be exact. Last year, the Council changed the budget by 0.22 of 1 percent.

The Council this year gave the mayor the budget he wanted largely in exchange for a small boost -- from $75,000 to $110,000 -- in what each member can spend in his district at his discretion. In other words, a little more pork.

One could argue that there was a lot to like in this year's proposed operating budget. More cops. Lower property taxes. Pretty safe, politically.

I've pointed out in previous posts, however, that the Brown administration's budgeting strategy relies on continuing increases in state aid to balance the books. There's no effort being made to close a huge structural budget deficit.

Shouldn't that strategy be worthy of debate? By not only the Council, but the Control Board? It's the elephant in the room, if decision makers want to acknowledge it or not.

111404 Then there's the block grant budget. I did an investigation in 2004 detailing how the city had squandered more than a half-billion dollars in federal block grant funds, going back to the days of Jimmy Griffin. Too little spent in the poor neighborhoods the program is intended to help, too much on the salaries of bureaucrats and the follies of ill-fated projects of developers with political connections.

It's still going on. Steve Banko, whose local HUD office oversees the city's use of block grant funds, fussed in an Artvoice story a couple of weeks ago that little has changed under Brown.

Reported Artvoice:

"What bothers Banko ... isn’t just that the city administers its block grants so poorly, it’s that it tries to be sneaky about it."

Where is the Council in all this? Demanding change? Insisting that money be put to use in smart ways in the neighborhoods they represent?

Nope. They're approving what Brown puts in front of them.

This year, the Council changed the mayor's proposed $23.8 million block grant budget by $250,000. That's 1 percent. More than the rate of change with the operating budget, but still infinitesimal, especially considering the block grant program's continuing problems.

You're in hock worse than you think

What are you on the hook for?

Probably a mortgage, maybe a car loan, student loan or credit card debt.

If you're the average American, it's in the range of $120,000 per household. But that's just the beginning.

USA Today reports that your share of the government's long-term debt is more than a half million dollars -and growing. The debt doubled just last year alone. The online version of the story has a neat interactive graphic that provides breakouts.

Reported USA Today:

"Taxpayers are on the hook for a record $57.3 trillion in federal liabilities to cover the lifetime benefits of everyone eligible for Medicare, Social Security and other government programs ... When obligations of state and local governments are added, the total rises to $61.7 trillion, or $531,472 per household. That is more than four times what Americans owe in personal debt such as mortgages."

Of course, this is not the way the government sees it. Government-style accounting pegs the debt at $162 billion. Using corporate accounting standards, the debt is nearly 16 times greater. Buy, hey, what's a couple trillion between friends in the United States of Enron.

Q&A with city control board director

The Common Council is continuing its review of Mayor Byron Brown's proposed budget, which relies on the state for 42 percent of operating revenues. In an earlier post, I pointed out the budget has a huge structural deficit that is growing larger because of the Brown administration's growing reliance on state aid and its strategy of cutting property tax rates in the face of increased assessments, thus negating what would otherwise be an increase in property tax revenue.

The city control board keeps probably the closest eye on the budget and city spending practices. I interviewed its executive director, Bertha Mitchell, to get her take. Here's our exchange.

How do you compare this year's proposed budget with the last couple of years of the Masiello administration?

"It's a bigger budget than in the last few years of the Masiello administration, but they have more resources, primarily from increases in state aid."

Where do you see progress under the Brown administration?

"There has been progress in the sense they've managed to get their priorities into the budget and have been able to pay for them with available resources."

What are the continuing areas of concern?

"There is no real advance in getting their fiscal needs to balance without recurring increases in state aid. Given the situation with New York State, we're afraid aid could be reduced or at least not increased.  They are budgeting conservatively by lagging some of the state aid increases by one year, which shields them from the immediate impact of an unanticipated cut in aid."

Any other concerns?

"We have concerns over the growth in fringe benefits, primarily the cost of health insurance. Without proactive contract settlements that address this particular issue, the city can not do very much about it. They also need to control the cost of increases in staffing and overtime in the uniformed forces."  Personnel costs continue to make up a very large portion of city expenditures, and these costs are expected to be the largest cost driver year after year.

Does the budget have a structural deficit?

"Oh, definitely. These structural imbalances are difficult to change, but present huge opportunities to restructure and reform the way government works.  Buffalo is not alone in this, many municipalities across the State face a similar problem and are becoming more dependent on state aid."

What's the source of the problem?

"In the short term the city has limited ability to raise new revenues, outside of additional state aid to cope with increasing needs.  Property tax margin has been increasing over the last few years, but the growth is slow and sales taxes have been strong this year, but the weaker economy may impact any additional growth.

Brown has been cutting residential property tax rates, thus negating what would otherwise be an increase in revenues. Is that a sound fiscal policy, given the structural deficit?

"Taxpayers have been hit hard over the last few years. The city has some resources from certain pockets of state aid which allow them to give taxpayers a breather and they are using them this budget year for such purposes.  They have a balanced budget, a growing fund balance and now might be the time that taxpayers saw some relief.

Is the city getting closer to being solvent?

"I think they're closer and making progress, however they're not there yet, and additional progress will be necessary before the city is fully solvent."

Comparing school taxes and spending increases

The joke is that Buffalo has a bar on every corner. To that I would add, Erie County has a school district at every intersection.

There are 30 school districts in the county. One as small as 710 students. Many in the 1,400 to 2,500 range. Or about the size of my high school when I graduated all those many years ago from Kenmore East.

My colleague Tom Precious, in an April 20 story on the recommendations of the New York State Commission on Local Government Efficiency and Competitiveness, wrote:

"Consolidation is recommended not just for cities, towns and villages but also for the state's 698 school districts, which levy the biggest local property tax hit. Consolidating two, 900-pupil districts can save 9 percent, and merging smaller districts can save taxpayers as much as 20 percent, the commission noted."

Meanwhile, back in Albany, the governor and State Legislature this session increased education aid to districts by a record 8.9 percent - in the face of a huge state budget deficit. That aid has enabled local school districts to increase spending in proposed budgets for the coming year well beyond the 2.6% inflation rate the state used in calculating its budget. Only Lakeshore increased spending below the inflation rate.

An informative two-page spread in Monday's edition of The News provided budget details for voters, who go to the polls May 20 to say "yea" or "nea" on the spending plans. I took a look at two categoties of information -- how much proposed spending is up in the budgets, and the property tax bill for the owner of a house assessed at $100,000.

My analysis looked at 27 districts -- no data was available for Akron and Lackawanna, and Buffalo doesn't levy property taxes for schools.

First let's look at property taxes on a $100,000 house:

District Taxes
Cheektowaga-Sloan $     2,770
Cleveland Hill $     2,498
Depew $     2,005
North Collins $     1,959
Grand Island $     1,954
Kenmore-Tonawanda $     1,905
Amherst $     1,890
Williamsville $     1,823
Springville $     1,785
Lakeshore $     1,778
Tonawanda (city) $     1,771
Eden $     1,770
Hamburg $     1,762
West Seneca $     1,732
Alden $     1,710
Cheektowaga $     1,694
Gowanda $     1,670
Maryvale $     1,646
Holland $     1,638
Clarence $     1,587
Iroquois * $     1,538
Lancaster $     1,532
Orchard Park $     1,512
Frontier $     1,485
Pioneer $     1,421
Sweet Home $     1,287
East Aurora $     1,037
* average of six different tax rates within district

Next up: How much proposed budgets grew:

District Increase
Maryvale 7.7%
Gowanda 7.6%
Lancaster 6.8%
Grand Island 6.5%
Springville 6.1%
Frontier 6%
Hamburg 5.8%
Eden 5.2%
Amherst 5.1%
Kenmore-Tonawanda 5%
North Collins 4.8%
Pioneer 4.7%
Cheektowaga-Sloan 4.6%
Cleveland Hill 4.5%
Clarence 4.4%
Orchard Park 4.3%
Williamsville 4.1%
Cheektowaga 4%
Iroquois 4%
West Seneca 3.9%
Alden 3.9%
Sweet Home 3.8%
Depew 3.4%
East Aurora 3.3%
Tonawanda (city) 3.1%
Holland 3%
Lakeshore 1.2%

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