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Commentary By Steven Malanga

N.Y.'s problems are huge - probably too big for Paterson

To say that the reform agenda that Eliot Spitzer campaigned for as a gubernatorial candidate has been largely unachieved would be an understatement. Whether Spitzer's replacement, Lt. Gov. David Paterson, can now bring big changes to Albany is an open question—but the early indications are not promising.

When Spitzer ran for governor in 2006, lack of confidence in Albany was widespread, with 58% of New Yorkers saying they were dissatisfied, according to a poll commissioned by the Manhattan Institute's Empire Center for New York State Policy. Nearly half of poll respondents said that either they or a family member had considered leaving the state—perhaps not surprising, considering that New York led the 50 states in outmigration in the 2000 census.

Behind state residents' discontent were a number of well-known problems. Powerful special interests—from public employee unions to health-care groups—controlled much of the agenda in Albany, driving up spending. Legislators treated the state budget as a personal cookie jar, filling it with spending requests by individual members that often get approved under the radar screen.

In 2006, legislators and the governor divided some $200 million in such "member items" among themselves.

Not content with this taxpayer-funded cookie jar, the state has also created a bevy of public authorities and commissions—at last count, a staggering 640 or so—that operate mostly outside the state budget. They have accumulated an incredible $100 billion in debt.

This lack of accountability is a key factor in New York's ballooning budget and its $4 billion deficit. The state's Medicaid program, for instance, is nearly twice as large as California's—the state with the next-biggest program—even though California's population is nearly twice New York's. Similarly, most New York public employees can count on lavish health care and retirement benefits that are a far better deal than most private-sector workers have.

All this has helped create a knee-buckling tax burden that has dramatically weakened the state economy. A recent Tax Foundation study found that nine of America's 10 most heavily taxed counties—out of a total of 783—are in New York State.

Little wonder, then, that New Yorkers have been yearning for change. The Manhattan Institute's 2006 survey found that two-thirds of state residents favored a constitutional limit on the growth of state spending, and more than two-thirds favored term limits for state officials. About 64% said the state should cure its persistent budget deficits by cutting spending rather than raising taxes.

Spitzer had promised to pursue reform—including taming Medicaid, reining in public authorities and reducing pork. He accomplished little of that, and in fact the state's budget grew sharply during his short tenure.

To truly reform New York, Paterson would have to do better—stifling the Legislature's tendency to overspend, grabbing greater control of state authorities and clamping down on out-of-control Medicaid spending.

But there's little in his past to suggest that he's ready to take on these weighty problems. Instead, he may turn out to be an agent for even higher spending and higher taxes in New York. Indeed, the Working Families Party, which continuously lobbies for higher taxes in New York—including a recent proposal for a controversial income-tax surcharge on wealthy residents—is closely aligned with Paterson, having helped him gain his previous position as state Senate minority leader.

If Paterson can't, or won't, embark on a reform agenda, New Yorkers face three more years awaiting any hope for true change. In that case, other reformers—perhaps Attorney General Andrew Cuomo, Mayor Bloomberg or maybe even Rudy Giuliani—would be lining up for a shot at the governor's office in 2010. At least, New Yorkers have to hope so.

Malanga is senior editor of The Manhattan Institute's City Journal. A version of this appeared online at

This piece originally appeared in New York Daily News

This piece originally appeared in New York Daily News