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MACNY Testimony on Governor's DRP Proposal

Testimony To:

New York State Assembly Ways and Means
Legislative Hearing:

Examination of Governor Paterson’s Deficit Reduction Plan:
$3 Billion Reduction for 2009-1010 State Fiscal Year

Presented By:

Karyn Burns
Director of Communications & Government Relations
MACNY, the Manufacturers Association

October 23, 2009


To start, I would like to thank you for asking me to speak today, and also for recognizing the immediate need to address the significant and increasing tax burdens affecting New York State residents and businesses through the introduction of Governor Paterson’s Deficit Reduction Plan.. My name is Karyn Burns, and I here representing MACNY, The Manufacturers Association.

As you may know, MACNY is a trade association representing over 330 member companies with over 55,000 employees within a 19-county region, and we advocate for the growth and development of the manufacturing sector of New York State. Founded in 1913, we advocate for causes that will enable New York State manufacturers to thrive in today’s competitive global market.

First, I am encouraged by Governor Paterson’s DRP proposal. After last year’s budget, where the three parties passed a $132B budget, it is apparent that the Governor intends to reduce the budget deficit without hitting hard working taxpayers and businesses in New York State. As I will discuss in my testimony, there are pieces of the proposal I disagree with, but again, overall, I support the Governor’s first attempt at this difficult task. Revisions are necessary, but let’s use this plan as a starting point on the path to economic recovery for New York State.

One critical proposal in the Governor’s plan is the $471M in cuts from Medicaid. This is a significant and costly burden and MACNY supports the Governor’s attempt to begin making cuts to the current program, a longtime burden.. In order for our business community to remain competitive with the rest of the nation, it is essential for Albany lawmakers to restrain the large and increasing tax burdens imposed by Medicaid.

MACNY has always maintained that MEDICAID programs are significantly higher in cost than in any other state, and a logical component in the task of reducing program spending for New York State. However, this cut in Medicaid should be considered the beginning of many: despite the cuts proposed, Medicaid spending this year, with the addition of federal increased assistance is slated to be more than $36B, $3.3B or 10% higher than FY09 levels.

As part of continued efforts to reduce spending in Medicaid, MACNY encourages the following :

First, reduce “medically needy” loopholes. One obvious example of this is to address the high cost of long term care by plugging the “spousal refusal” loophole allowing wealthy elders to shift the cost of a spouse’s care onto taxpayers simply by refusing to pay the bills. Additionally, scrutinizing asset transfers and enforcing stronger eligibility rules for the elderly and disabled will promote more control in Medicaid costs.

Second, lower the “local cap” on Medicaid spending by one-half percent each year, so that the inflation rate paid by individual counties will decrease significantly. If this reduction were implemented, inflation rates are estimated to decrease to 2.5 percent by 2009, and down to zero by 2014, easing the burden on taxpayers.

Third, implement more aggressive fraud prevention and detection programs. With only 37 cases of fraud investigated across the entire state in 2004, more aggressive action needs to be taken in order to locate cases of fraud and ease on the overall burden of taxpayers. Governor Paterson’s proposal to address more fraud cases is strongly encouraged by MACNY’s membership.

Fourth, expedite the implementation of disease management programs. An increase in the efficiency and overall improvement in patient care through the usage of disease management practices will provide a more coordinated approach to patient care.

Fifth, rationalize the hours spent on personal care services. The added costs of home attendant services, such as home shopping, need to reviewed and drastically adjusted.

Another positive measure supported by the MACNY membership is the Governor’s attempt to address our Government’s biggest liability: ever higher levels of SPENDING. His overall and across the board spending reductions on a myriad of government programs are proposed to reduce costs on a number of government supported programs, with anticipated savings to the State being $1.8B in 2009-2010, and $2.0B in 2010-2011. These programs high costs are a result of previous government decisions, including increases in state spending at high levels significantly above the rate of inflation that have been enacted year after year. But as Paterson has shown in his attempt to reduce costs in these programs: something has to give eventually. Cuts and reduction in spending were simply inevitable.

While we agree the DRP begins to reduce government spending, it is obvious that more can be done. . One missing component is the need to reduce both the size and cost of the state’s workforce, and simply put, more must be done. The Governor’s proposal of a Tier V pension system is certainly a step in the right direction, but how about a hiring freeze? Or a give back on state salaries that were increased by 3% last April? MACNY represents more than its share of manufactures and businesses that every day must implement these changes as a means of staying open and keeping jobs . As Governor Paterson said himself, “This budget deficit has affected all of us, and all of us are going to have to sacrifice.” Programs need to ensure their share of reductions and cuts just as businesses and taxpayers have done. MACNY encourages the Governor’s recommendations for reduction in spending programs, and remains hopeful this will be seen as just the beginning.

Although we believe that the DRP is a good step in the right direction, we do have objections from our membership to the Governor’s plan. One such area is the proposal to sweep revenues collected from the 18a assessment into the General Fund. The inclusion of the assessment in the first place as part of the budget was a large and an indirect tax on businesses and taxpayers. MACNY strongly feels that 18a should NOT be considered a part of the mid year solution and rather the government should repeal the legislation (there are two existing bills calling for this, Hawley/Ranzenhofer), and make additional cuts in spending. The inclusion of the 18a assessment in last year’s budget came as a shock to taxpayers throughout New York State. We object to this added TAX (which it is) as part of the solution. This tax reduces jobs and makes our businesses less competitive all in an attempt to avoid reducing the state’s overspending.

While referring to additional repeals, another significant reason for our higher energy costs is the statewide energy efficiency and environmental initiatives. The Energy Efficiency Portfolio Standard, the Renewable Portfolio Standard, the Systems Benefit Charge, are all concrete examples of past enacted electricity initiatives that, coupled with the already included general sweep on funds generated from RGGI and the Public Service Law 18-a assessment, will be costing upwards of $1.5 billion annually to New York State taxpayers. MACNY urges the Government to reduce these programs and not to rely on revenue generated from them, particularly during such difficult fiscal times. This is simply another example of asking the state taxpayers to cover the costs for programs that while important, are certainly not a priority over balancing the budget, reducing the deficit, and maintaining important private sector jobs.

As I stated before, there are always ways to improve anything. I strongly encourage Albany to use the DRP as a starting point, and continue down the path of making cuts and reductions in government spending. The Senate Republican caucus recently introduced their version of a deficit reduction plan. Some components within it that MACNY feels would be a welcome addition to the Governor’s proposal include:

• Cutting back $2.2 billion in general fund spending added to the Executive Budget proposal
• Cutting state agency non-personal services by ten percent to save $480 million;
• Cutting state agency contract balances by five percent to save $300 million.
• Freezing planned Medicaid expansions to save $200 million
• Cutting Medicaid optional services to save $150 million
• Freezing state purchases of recreational lands to save $78 million;

MACNY believes these ideas should be considered, and ultimately be part of any DRP plan.

For over 96 years, MACNY has been representing the region’s manufacturing and business needs at the state and federal level in creating and revising policy to allow for a better business climate. In working with manufacturers and businesses across New York State, I am more than aware of the difficult decisions manufacturers are forced to make everyday to compete during a difficult economic climate, stiff national and international competition, and high taxes and fees imposed in New York State. On the long and arduous road the State Government is about to endure to reduce the deficit and balance the budget, take a lesson from a day in the life of New York manufacturers and businesses - cut costs, make difficult business decisions and implement lean practices. New York State manufacturers and businesses make these difficult decisions everyday as a means of staying open. It hurts, yes, but if done correctly its effective. The Governor’s proposal is like any sound business plan, more review is needed, and more can always be done to improve and enhance its impact.

With that, I strongly encourage the Assembly and Senate to work with the Governor in perfecting and enacting this plan. With a future projected deficit for Fiscal year 2011 of upwards of $11 billion dollars, much more work needs to be done. But if treated as the beginning stages of a long term fix, which includes significant reductions in the size and cost of government, we can overcome the fiscal crisis ahead and enhance the life of every New York resident.