New York#39;s Spitzer Proposes Tax Cap Lottery Sale (Update2)
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Jan. 9 (Bloomberg) — New York Governor Eliot Spitzer,
facing a $4.3 billion budget gap and his lowest poll ratings,
started his second year in office with proposals to study
limiting local property taxes and to sell or lease part of the
lottery to fund an endowment for public universities.
The property-tax study is a response to rapidly growing
real-estate taxes amid state-funded rebates to homeowners. New
Yorks combined state and local tax burden is the nations third
highest at 13.8 percent of income, according to the Tax
Foundation, a tax-research group based in Washington.
“We must focus with a singular purpose on an agenda for
economic growth and opportunity, Spitzer said in his State of
the State speech. “We need a world-class education system from
pre-K to graduate school. We need an affordable health-care
system available to all. We need lower taxes, strong
infrastructure, great places to live, and, above all, good
jobs.
There was little mention of revamping campaign finance and
ethics laws, which the governor called the “first objective
in last years speech. Spitzer, a 48-year-old Democrat, was
elected by a record 69 percent of voters in 2006, and has since
slumped, with 36 percent of poll respondents holding a favorable
opinion of him, according to a December survey by the Siena
Research Institute, Loudonville, New York.
Campaign Finance, Ethics
Campaign finance and ethics took a back seat in this years
speech “because this is an election year for legislators,
said Barbara Bartoletti, legislative director of the League of
Women Voters of New York State. “One way for the governor and
lawmakers to increase their poll numbers is to talk about issues
voters care about, like economic development, property taxes,
health care and education.
Senate Majority Leader Joseph Bruno wasnt at todays
speech, following his wifes death on Jan. 7. Last week, he said
the priority for the Republican-led Senate would be to increase
state-funded property-tax rebates to $2.3 billion from $1
billion last year and to eliminate the reduced rebates for
wealthier households favored by Spitzer. He said Republicans
would oppose any tax increases, including those Spitzer might
describe as closing loopholes.
Spitzer pledged in his speech not to raise taxes.
Chilly Relations
Chilly relations between Spitzer and Bruno, who is the
leading Republican in the state, brought legislation to a
standstill in the past six months. Since July, the governor has
been ensnared by investigations of his aides efforts to
discredit Bruno by compiling state police records about his use
of state aircraft to attend fund-raisers.
Spitzer praised nine legislators by name during his speech,
in contrast to last year when he described his goals without
acknowledging any lawmakers.
Assembly Speaker Sheldon Silver, a Democrat from Manhattan,
said after the speech that Spitzer learned from experience of
the past year, when support from some fellow Democrats waned.
“He is clearly reaching out and extending an olive branch,
Silver said.
To reduce growth in property taxes, Spitzer proposed
creating a commission to recommend how to limit increases. The
commission, to be headed by Nassau County Executive Tom Suozzi,
will also recommend how to reduce school expenses, including the
cost of unfunded state mandates. Souzzi and Spitzer battled for
the 2006 Democratic gubernatorial nomination.
School Tax Increase
School property taxes totaled $26.3 billion last year and
have increased an average of 7.3 percent the past five years,
after the states rebate payments to homeowners.
Teacher and school-board resistance stymied Spitzers
predecessors proposals for caps on real estate tax increases.
“We oppose a flat-out cap because it reduces local control
and takes away the publics voice in determining how much they
want to spend on public schools, said David Albert, director
of communications and research at the New York State School
Boards Association.
Silver, who opposed a property tax cap proposed by
Spitzers predecessor, said he “would absolutely support the
tax cap so long as it is done in a way that doesnt disrupt
education funding.
A 2006 report by the state comptroller found the state-
funded property-tax rebates were causing faster growth in school
and local government spending because the program “lowers the
effective tax rate on homeowners — the largest group of people
who vote on school budgets.
Cap Flexibility
E.J. McMahan, director of the Empire Center for New York
State Policy, said capping property taxes wouldnt widen the
states budget gap, while increasing rebates would. He said a
cap could be flexible enough to accommodate special situations
and has been successful in other states.
School boards would support a proposal for a commission to
study school funding, “in a comprehensive way that also
includes how the state could control our costs, Albert said.
The governor also proposed creation of an Upstate
Revitalization Fund for infrastructure and economic development
outside the New York City area and Long Island. Spitzer is
scheduled to deliver another version of the State of the State
speech in Buffalo on Jan. 16.
To improve health care, Spitzer urged creation of a grant
program to pay education loans for doctors in underserved parts
of the state. He also promised to fund expansion of the
Childrens Health Insurance Program to include families with
higher incomes than are allowed by the federal government, and
change medical care payment formulas to encourage more primary
and preventive care.
Health-Care Proposals
Details of his proposals, as well as plans to close a $4.3
billion budget gap, will be part of the tax and spending plan he
is to present on Jan. 22. Spending of state funds would total
$84.3 billion based on current laws.
Paul Francis, director of state operations, said in October
the budget gap would be closed by revenue growth, tapping
reserves of $2.76 billion and one-time transfers between state
accounts.
Spitzer plans to create a $4 billion endowment for the 64-
campus state university system and the City University of New
York intended to provide them $200 million a year to achieve
such goals as development of research centers and hiring 2,000
new professors.
The emphasis on higher education marks a change for New
York, which ranks second in the nation on per-pupil spending in
elementary and high schools, and 45th among the 50 states in
per-pupil expenditures for higher education, according to the
Public Policy Institute, an arm of the Business Council of New
York State.
Sale of Lottery
Francis said there are many ways to tap the state lottery
to fund the endowment, and an independent financial adviser will
be hired before any decision is made. Under any arrangement, the
state would retain regulatory control over the lottery, he said.
Lottery profits, which are applied to education spending,
totaled $2.4 billion last year, making it the most profitable in
the nation, according to the North American Association of State
and Provincial Lotteries. Lottery revenue was less than expected
so far this fiscal year, with weaker-than-anticipated revenue
from new instant games and slot machines at a Yonkers racetrack.
Francis said bankers estimated a complete sale or lease of
the lottery could provide the state with $25 billion to $50
billion. A partial sale or lease is more likely, he said,
because that would protect the state against a decline in the
business, while still allowing it to share in future growth.
Silver said he needs to see more details about a lottery
transaction before he would support it.
A recent study in California found it could be cheaper for
the state to raise a lump sum by using lottery revenue as
backing for bond sales rather than arranging a long-term lease
in exchange for a lump-sum payment.
To contact the reporter on this story:
Michael Quint in Albany, New York, at
