News from STATE SENATOR
Liz Krueger
New York State Senate, 26th District

COMMUNITY BULLETIN – February 2003

Message from Liz . . .
As most of you probably know by now, the Governor has released his executive budget for the coming year. It paints a grim picture, and represents an implicit acknowledgement of what most New Yorkers have known for months – that our state faces a fiscal crisis of unprecedented seriousness. The Governor’s unwillingness to admit this during the campaign season has only exacerbated the problems we now face, since it has delayed the implementation of measures to deal with the shortfalls we face this year and in years to come.

In the months ahead those of us in the State legislature will need to evaluate the Governor’s proposals and, when we disagree, present reasonable alternatives. While much of that work will take time, some key principles are already clear. The Governor’s budget does not adequately balance the need for maintaining basic services – most importantly access to education and health care – with the need for progressive revenue generating measures. Those of us in the legislature will have to fight for such measures, at the same time we accept the reality that some cuts are inevitable. We must also make sure that we do not permit the Governor to hide “job killing taxes” in the form of increased fees that fall primarily on New Yorkers of modest means. The proposed subway fare increase is a classic example of one such measure.

One area where I will be vigorously opposing the budget proposal is education funding. The Governor’s budget currently includes devastating cuts to our educational system at all levels. The governor cuts over 2 billion dollars from primary and secondary educational programs, including close to 500 million dollars from New York City schools. Over 500 million more comes out of higher education. The impact of such severe cuts on the future of our state, and on our children, is simply unacceptable. If we permit the deterioration of our public education system, we will kill jobs, to borrow Governor Pataki’s language. The jobs we kill will be those of future generations of New Yorkers, who will be left without the tools to compete in the twenty-first century economy.

But given our fiscal difficulties, where can the money to pay for an adequate education system come from? The fact is there are opportunities for generating revenue by restoring balance to the state taxation system. The last decade has seen a dramatic shift in tax burden away from corporations and wealthier New Yorkers. In the Policy Spotlight below I offer some preliminary ideas on revenue generation.

District Office: 211 East 43rd Street, Suite 1300, New York NY 10017 (212) 490-9535 Fax: (212) 490-2151
Albany Office: Room 302, Legislative Office Bldg., Albany NY 12247 (518) 455-2297 Fax: (518) 426-6874

Community Spotlight

Update on United Nations Plans for Development on Robert Moses Playground at 41st Street and First Avenue:
Earlier this month, I participated in a panel organized by the Turtle Bay Association on United Nations plans for development of Robert Moses Playground. The New York City Economic Development Corporation (EDC) recently presented plans for replacing the parkland that would be lost due to this development. I share the concerns of the community that the proposal does not adequately mitigate the effects of losing one of the areas only active parks. Much of EDC’s proposal includes improvement such as an esplanade that would eventually be developed even if Robert Moses Playground was not closed. It is essential that there be a real gain in quality active parkland on the East Side before any existing park is eliminated. Since any proposal to develop city parkland requires state legislative approval, I will be taking an active role in assuring that community concerns are addressed before this or any other proposal is allowed to proceed.

Tax Clinic for Seniors and Low Income People:
Eviction Intervention Services is offering a tax clinic for seniors and low-income people every Tuesday through April 8th. The clinics will take place every Tuesday from 10:30AM to 2:00PM at the Eviction Intervention Services offices, located at the Lexington United Methodist Church at 150 East 62nd Street between Lexington and Third Avenues. For further information, please contact Shari Goodman at 308-2210, x.207.

Free Heart Screenings Available for Women:
On Friday, February 21st the American Heart Association and other organizations are sponsoring a health fair at Madison Square Garden that will provide free heart screenings, as well as information on the treatment and prevention of heart disease, the number one killer of women. The fair will take place from 8AM to 4PM. In addition, the Heart Association is sponsoring community screenings on Monday February 17th from 10AM to 4PM at the Cardiology Division, 17 South, Bellevue Hospital, 27th Street at First Avenue, and on Wednesday February 19th from 1PM to 4PM at Bellevue, 2 South Clinic.

Web Resource on New York City Public Schools:
Advocates for Children has created an excellent resource for parents of New York City public school children: http://insideschools.org. This site has tips on getting what you need out of the school bureaucracy, updates on current issues and reviews and rankings of individual schools, among many other valuable resources. I encourage any interested parents to visit this site and see what it has to offer.

New York Council for the Humanities Scholarships Available:
The New York Council for the Humanities is conducting a research essay scholarship competition, which will award 30 scholarships ranging from $250 to $5000 to winning essays. This year’s topic is “The Source of Ideas.” The deadline for submission is May 2, 2003. For more information, visit the Council for the Humanities website at http://www.nyhumanities.org/ysc2003/ysc2003contestpage.html, or call
(212) 233-1131 x24 and request a brochure.

Spotlight on Policy

Tax Policy

It is important to recognize that decisions made during the “good times” of the 1990s are what have created our fiscal difficulties now. During the 1990s, state tax cuts implemented by Governor Pataki and the state legislature reduced the corporate tax burden and changed the state income tax in ways that provided the most benefit to wealthy New Yorkers. At the same time, taxes that fall primarily on New Yorkers of more modest means were not reduced. This has resulted in a tax system that places a disproportional burden on the poorest New Yorkers. According to the Fiscal Policy Institute, New Yorkers with incomes at the bottom 20 percent pay 12.6% of their incomes to state and local taxes, while the top 20% pays only 8.3%.

This history is important to remember as we now evaluate how to deal with our current fiscal crisis. It will be essential to identify reasonable alternatives to the draconian cuts proposed by Governor Pataki as the legislature develops its own budget proposals. Fortunately, organizations such as the Fiscal Policy Institute have identified a number of alternatives that both generate revenue and create a more progressive tax structure. I believe that such proposals must be a part of such solutions.

Among the proposals that I am exploring are:

· Adopt “combined reporting” of corporate income. This prevents corporations from shifting income from New York to states where they can avoid paying any tax on the income. According to the Fiscal Policy Institute, the adoption of combined reporting would generate an additional $340 to $392 million in revenue for New York state.
· Adopt a Corporate Alternate Minimum Tax based on the model of the Alternate Minimum Assessment recently adopted in New Jersey. This tax would apply to businesses with gross profits over $1 million dollars. New York currently has a Corporate Alternate Minimum Tax, but it is riddled with loopholes, and was cut by more than 28% in 1999. A tax based on the New Jersey model would generate between $400 and $460 million per year for New York State.
· Eliminate the “bonus depreciation” deduction. In 2001 the Federal government created a new bonus depreciation deduction, which affects state tax revenues because the state calculates the depreciation allowance based on the federal rate. Since the federal government instituted the bonus, thirty states have decoupled their tax calculations from the federal rate to preserve state tax revenues. New York could generate an additional $270 to $545 million by doing the same.
· Establish a “throwback rule,” which collects taxes on any profits from products or services originating in New York State not subject to tax in the state in which it was sold because the corporation’s presence in that state is too small to make it subject to corporate income tax. Twenty-four states already have such a rule in effect.
· Increase the progressivity of the income tax. Currently the top tax bracket for state income tax of 6.85% applies to all incomes over $20,000 for individuals and $40,000 for married couples. Establishing a rate of 7.85% for incomes over $100,000 for individuals, $200,000 for married couples, and $150,000 for heads of households would raise an additional $1.4 to $1.6 billion dollars per year.

These are just a few ideas as to how we can address the fiscal crisis in a way that establishes a more equitable tax structure. The proposals above would raise enough money to restore all of the governors proposed cuts to education. In the months ahead I will be working with my colleagues and fiscal policy experts to evaluate these and other alternatives that may allow us to preserve essential programs.

It is of course also critical that the state act to assist New York City in its dire financial situation. I have long supported restoration of and expansion of the commuter tax. In addition, the State should agree to the City Council proposal that New York City be granted the authority to impose an absentee landlord surcharge on property taxes. I also believe we must explore granting New York City the authority to impose tolls on East River bridges.

While no one likes tax increases, the reality is that they are sometimes necessary, and may do less damage to the economy than the draconian cuts that would be required without them. In times of fiscal crisis all options must be considered, and it is irresponsible of the Governor to attempt to take revenue measures such as these off the table given our current budget realities.

Proposed MTA Fare Hikes and Service Cuts

Earlier this month, I testified at the Metropolitan Transportation Authority hearing regarding proposals to close token booths and increase subway and bus fares to two dollars. I am extremely concerned that these proposals will undermine the significant progress that has been made in improving our public transportation system in recent years.

In the ‘90’s, the MTA focused on enhancing service reliability and personal safety, spending public investments on new subway cars and buses, track replacement and station renovations. New Yorkers responded by embracing public transportation, with subway ridership increasing 34 percent and bus ridership increasing 27 percent. I fear that with a fare hike and the closure of 24 percent of its token booths, the MTA is on the verge of enacting two counterproductive measures that would significantly set back public transportation.

The MTA claims to have a $1 billion deficit, however, previous claims were as much as $2.8 billion. These fluctuating estimates call to question the MTA’s bookkeeping practices, especially in light of myriad corporate accounting scandals. Critics of the MTA contend that it has been deceptive about its finances and has not made a convincing case for a fare increase. I am cosponsoring legislation introduced by Senate Minority Leader David A. Paterson to make the MTA’s budget more open to public scrutiny. The inquiries into the MTA’s finances are justified for many reasons. Until late last year, the MTA was projecting a large surplus, and one-shot cash infusions provided by the state were intended to ensure that growing debt would not result in a fare increase. The legislation we proposed is an important step in ensuring that public monies are used responsibly. Public Authorities, such as the MTA, already are excluded from oversight by the legislature. Thus, it’s even more critical that elected officials and the public know where and how taxpayer funds are being spent.

The proposed fare hike constitutes a regressive tax on working New Yorkers. By avoiding the options of personal and corporate income tax increases, Governor Pataki is shifting the burden of closing the state’s budget gap to the New Yorkers who can least afford it – an increase in subway and bus fares is just one appalling example. In the event of a fare increase the MTA must restructure its fare packages to make fare discounts more accessible to low income riders. The current discounts are fundamentally inequitable, as they are only affordable to, and primarily purchased by, middle and upper-income riders. The MTA should explore unlimited ride passes that could be used on nonconsecutive days, offer bi-weekly unlimited ride passes, and other proposals that promote a more equitable fare structure.