Reducing New York’s Budget Deficit and Reforming Local Government: The Need for Consolidation

Shane J. Egan, Staff Writer

New York State is facing growing budget deficits that are a threat to the long-term viability of the state.[1]  New York State leaders will have to make some very difficult choices in the months and years ahead about how to close these record budget deficits.  The financial panic of last fall combined with the historic economic downturn that followed will mean that the state will have to spend less.  According to State Comptroller Thomas DiNapoli, New York depends on Wall Street for up to twenty percent of its revenue.[2]  While it is likely that we have made it through the worst of this recession, the New York State government will have to adapt to this new economic reality. 

New York has very few good options to close the budget gap.  The state could, of course, raise taxes, but in this author’s opinion, this is not the right course of action because raising taxes on an already overtaxed state[3] will only stifle economic growth and innovation.  Borrowing money is another option that is simply not feasible.  The Governor has stated that he, “fears rating agencies would downgrade the state’s credit standing if New York used loans to address the financial crisis.”[4]  Finally, the aid New York State receives from the American Investment and Recovery Act is only a short-term solution to the state’s budget deficit, which does nothing to solve the underlying problem — too much spending.

One area where spending can be cut is in the form of state aid to local government entities.[5]  Reducing the number of local government entities will allow the state to reduce its expenditure on aid to local government entities and at the same time help avoid painful cuts in important areas like education and healthcare.  New York State Attorney General Andrew Cuomo has put forward a plan that overhauls the current process of municipal consolidation.[6]  The plan streamlines the process of consolidation by allowing municipalities to consolidate in a more efficient manner. 

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