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Solving New York State's Fiscal Crisis

A Much-Needed CPA Perspective

Joanne S. Barry

New York was recently ranked number one in a top 10 list of states expected to see more residents move out of the state than move in this year due to high taxes and a high cost of living, according to a December 8, 2010, article in Forbes magazine, which used numbers derived from Moody's Analytics. Add to this the looming specter of future underfunded pension benefits, the current 26-year high in unemployment, out-of-control property taxes, and this year's $9.2 billion state budget gap that newly elected Governor Andrew Cuomo referred to in his State of the State speech, and our economic picture looks pretty grim.

It is impossible to examine economic conditions in a vacuum. When a domino falls, it causes a series of seemingly inexorable events that can only be stopped through a well-planned intervention. When individuals and companies give up on New York, they leave those of us who remain with a shrinking tax base, an increased tax bill, and, thus, reduced state and local services. This type of flight affects all sectors of the economy and the community at large: Small businesses such as restaurants and retail stores see a reduction in sales, New Yorkers lose jobs, and programs for the poverty-stricken and the working poor are discontinued due to reduced government funding, fewer donations, or both. According to Cuomo, many New Yorkers have been “voting with their feet” over the past decade and leaving the state in search of greater economic opportunities or states with friendlier business and property tax rates. A January 15, 2010, piece in Forbes found New York to have property taxes that are 79% above the national average, and the state's corporate tax burden, at 7.1%, is one of the highest in the nation.

New York is not the only state with a troubled economy; in fact, the trend is so widespread that some policymakers, according to the New York Times, are researching a constitutionally viable way for states to declare bankruptcy, which could allow them to alter retiree pension benefits. On the local level, our own Nassau County's finances are now controlled by the state due to the county's inability to balance its budget. New York State is not facing bankruptcy yet, but politics should not be the driving force in determining our fiscal policy. Who better than CPAs to provide state leaders with an analysis of our financial problems, along with proposed solutions?

How the Profession Can Help

Cuomo says he's trying to fix this broken economy. The State Senate recently approved the governor's property tax cap bill, which would limit increases of municipal property taxes to 2% a year, or the rate of inflation (whichever is lower)—a proposal that has been met with loud opposition from the teacher's union. Assembly Democrats are noncommittal, making the proposal's passage uncertain as of press time. Cuomo has appointed a number of panels whose collective purpose is to save money and contribute cost-saving solutions to heal the New York economy. His Medicaid Redesign Team is tasked with determining ways to meet the governor's proposed $2.8 billion cut to the state's more than $53 billion Medicaid budget. The Spending and Government Efficiency Commission (SAGE) is supposed to reduce the number of state government agencies, authorities, and other such bodies by at least 20% and streamline those that remain, while the Mandate Relief Redesign Team is charged with reducing the cost of unfunded and underfunded state-mandated programs on school districts, local governments, and other taxing districts.

There are no NYSSCPA members on any of Cuomo's panels, but we do not have to wait for an invitation. CPAs have the precise knowledge and skills necessary to help New York State lift itself from its current fiscal predicament. The NYSSCPA counts among its membership CPAs in government, taxation, auditing, personal financial planning, consulting, compliance, and education, with the expertise and the perspective to provide invaluable advice to put this state on the road to recovery. Similar to the efforts of the Society's Committee on Practical Reform for the Tax System, which developed a proposal for national tax reform, the time is right for the NYSSCPA to establish a task force that would be charged with providing practical solutions to the state's fiscal woes by issuing an independent, objective report on the state's current economic problems and proposed solutions for fixing them.

What do you think the Society should do to help fix the state's broken economy? Your perspective is valuable and needs to be a part of the public conversation. Please send any ideas and comments to me at jbarry@nysscpa.org.

Joanne S. Barry. Executive Director. NYSSCPA jbarry@nysscpa.org.

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