Letter to the Editor – Municipalities Must Control Spending

March 24 2011
By Charles C. Schoenau

It is tough that cuts in public worker jobs, their benefits and pensions, cuts in Medicaid, education, childcare, public park spending, funding of arts, social service programs, have to and are going to occur because we have budget deficits at the city and State level in excess of $10 billion on each level. Hence the cuts are double edged, coming from two sources in some cases.

What makes the taxpayers frustrated is that too much time is spent pretending that or protesting or hoping and praying that no cuts will occur. If every agency or public institution started with the private sector mind set that we are going save at least 5% or more over last year’s budget and we are going to be creative and efficient and make sure that we are not ripped off or overcharged on anything; put everything out for more bids and think of other ways to do things. If enough savings were made on many expenses perhaps fewer teachers or professors would be fired; if the union sought to reduce benefits to maintain jobs to help the students get as good as possible education, everyone would be proud and pleased, including the taxpayers who would really appreciate department heads with sharp pencils and green eye shades trying to cut and save in many areas in order to save some cuts in areas considered most important.

In the end the slower growing tax revenues of the city and state and the escalating medical, pensions and benefit costs will necessitate the cuts. We need to accept and embrace this reality and be smart, creative, thoughtful and ingenious to do much more with less. How do the Catholic Schools do it? They spend much less and are very effective in many cases. The vast majority of employees in the private sector have taken either job losses, huge salary and benefit cuts, or both, but some companies found an expense level to survive and managed to be more efficient and only a 401K plan funded by themselves not their company. Michigan public workers are going to understand very soon what the fortunate employed private sector employees face and how their pensions work.

A very unfortunate theme of your article and almost all the labor press articles is that: if only we keep the millionaire’s tax or we raise taxes more on earners over $200,000 none of the social programs, Medicaid, pensions and benefits, public worker jobs, social service programs would have to cut at all, and maybe even increased. This fantasy is false as well as a very misguided policy. Our fiscal problems have probably more to do with the almost geometrically escalating costs of Medicaid, Medicare, retired public employee pensions and benefits, than the lack of increases in tax revenue. It is likely that there will be increases in tax revenue this year but not enough to keep up with the much faster escalating costs of our programs and benefits. Much of these cuts would be required even if tax revenues were higher or taxes on individuals, corps were higher.

A 1 or 2% tax increase on a limited number of wealthy people is not a panacea, it is only naive pipe dream; It would not allow public spending to continue growing like it has over the last 10 years. Public worker pension costs have grown over 300% in 10 years. I'm sure healthcare benefit costs are growing equally as the cost and quality of health care grows and the number and age of retirees soars. Pensions costs alone have grown $7 billion in ten years. This has been a completely foreseeable problem no matter what type of economic environment, but a bad economy makes it clearer much sooner which is actually good in the long run if you make the necessary changes.

My most important point is that increasing taxes on a limited of individuals and LLC’s or corps who often provide capital and take risk for profitable companies to start and grow is a prescription for further disaster. The economic wasteland of many parts of upstate New York, Michigan, Ohio, many parts of Wisconsin, NJ, Ct, Illinois, is in large part a reflection of individuals and companies voting with their feet and leaving these states for other lower tax states or other countries which provide more hospitable economic circumstances and better growth opportunities and more jobs. Failing to recognize that NY and other states have spending and tax problems which either bankrupt or drive out large numbers of their best businesses, employers and sources of tax revenue, means that there is no hope for meaningful effective change. We will not create more jobs or induce more companies to start, relocate, or grow in NY if our politicians and residents believe that higher, “fairer” taxes is the answer and not the problem. Where we are today fiscally in NYC, NY State is only reflection of the misguided policy of pushing high taxes and increasing government spending on some very fast growing programs and benefits.

Why would shrinking your tax base and number of jobs as a result of high taxes, fees, help expand spending on services, pensions, and benefits? The leaders of NY State need to do all they can to make NY State a more attractive economic environment so businesses will not continue to die, leave, or refuse to locate here.


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