Remarks to the Association for a Better New York
Hilton New York
New York
Monday, April 8, 2008
Thank you. It’s flattering to be introduced that way by such a good friend, but the problem when your friends introduce you is sometimes they just overemphasize whatever abilities you might have. And you know they have gone over the edge, as Bill just did, by wanting to know about what my vision for the State of New York is. It’s really very little, Bill!
I am thrilled to be here to join all of you here at ABNY. I remember my first ABNY breakfast 23 years ago in November of 1985, right after Mayor Koch’s third election. I have come here many times, listened to many speakers and like most people in public service hoped maybe one day I would get to speak here, but I never thought that when that day came that I would be Governor.
The circumstances under which I have taken this office are troubling. Four weeks ago and a day when what happened happened; my first thought was to call my father. I told him what appeared to be transpiring and he said to me “I think you need to say a prayer.” I told him that I had said a prayer for my dear friend Eliot Spitzer, for his family, for all of the turbulence that I know they are going through and would go through. And then my father said, “well, actually, I meant that you need to say a prayer for yourself!”
I said that prayer, but in many ways, I am still struggling with it. Eliot Spitzer is a dear friend of mine. You last saw him on February 28th, right here, outlining the economic development plan for New York State. He has been a great public servant. I don’t think the last chapter on Eliot Spitzer’s contribution to our society is complete and I think in the resilience that has always underscored his life he will again make great contributions to his neighbors in this society.
As is our government and our custom and our constitution, the time moves on and we are weathering the storm that has beset us in Albany, all around New York City, and in the greater Metropolitan area and all around the state. That is one of two storms that has confronted our New York in the last few weeks.
The first being a crisis in government - in the confidence of our government. Albany’s relationship with the public already in many ways fractured and sensitive, has now created an even greater mistrust in government.
And also the crisis of our economy. We have a national economy reeling. The subprime mortgage crisis has affected us in so many ways. Who knew that so many investment banks had plunged millions of dollars into the mortgage situation? Who knew for instance that the teacher’s pension system in Florida would put 40% of their resources of investment into the subprime mortgage issue and now do not have the money to fund schools and teachers in the state?
Obviously New York is the commercial capital of our country. Wall Street’s revenues generate 20% of our economy. Our economy obviously is more stagnated than any others. And yet, taking office with two weeks to go in our budget process, probably created the most difficult transition in New York State’s history. But at a time when it was most needed, a new spirit of cooperation has been struck and over the last three weeks we have worked night and day. We have continued to try and address some of these issues. And I would say that with a little luck, we will pass New York State’s budget today! At least that’s what they said this morning.
But the reality is that in passing this budget we recognized that there are greater obstacles to overcome. When I was inaugurated just three weeks ago, I borrowed from the remarks of Robert F. Kennedy speaking at the Democratic National Convention in 1964 -- one of only two times he publicly addressed the death of his brother.
But then in speaking about society and the ability to affect change, Robert F. Kennedy said, “No matter how much talent an individual may have, no matter how much energy he may possess, no matter how much honesty or integrity he or she may aver, that if that person is alone and does not have the cooperation of others they can accomplish very little.”
What we have seen the past few weeks is the opportunity of individuals to work together and I want to publicly thank the Speaker of the Assembly Sheldon Silver and the Majority Leader of the Senate Joe Bruno along with the other leaders Jim Tedisco and Malcolm Smith and all of my colleagues in government from the administrative end to the legislative end to the support staff for the great work they’ve done over the past few weeks.
We have passed a budget, but we have to take a realistic view of what that budget that is.
The budget that was presented to me was too big and too bloated. It had somewhere between a 4.8 to 5.1 percent growth in our state economy. It followed what was really the growth of personal income.
Now I am not going to be critical of the formulators of the budget in light of some of the national effects that have seeped down to the New York economy just the past couple months, but I maintain that those signals were in the air and we knew about them.
The economic crisis that dictated and pervades most of our activities last year, that took a vacation over the summer but came in a vengeance in the late fall have beset on us by January.
How much more foresighted would it have been to have addressed a budget growth on the inflation rate about 2 to 2.5, rather that a budget a rate that ballooned out a lot of our revenue forecasts and our expenditures.
Had we taken that other approach, even if we were wrong, we would have then returned a billion to a billion and a half dollars to a sagging economy in which we have in our budget for 2009-2010, a built-in 3.6 percent budget deficit.
So even if we had misestimated we would have addressed our problems down the road. But rather we created a situation where by the time there was a transition in the administration in mid-March, we were now going down a road where the legislature had set their priorities based on the budget forecast that we had already acquired.
Who can blame them? No one, but who can remind them – we can. Remind them of the terrible truth that governments have faced when they have misestimated revenues, when they have used one-shots to solve all their problems, when they have used debt to try to refinance their accounts, and when they have come up with gimmicks to solve real problems.
This is a circumstance that is being faced by many states in this country. The state of California has alerted 20,000 teachers and support staff that they may be laid off. The state of Vermont has made it clear to those who benefit from subsidized health care that their out-of-pocket costs will increase. The state of Maine has threatened to cut all out of pocket costs to those who benefit from health care. The states of New Jersey and Florida have cut their budgets considerably. New York that of which is more adversely affected by the economy, has to do better than what we are doing. The reality is that in the last quarter of 2007 that the state and local spending comprised 13 percent of our gross domestic product.
The decrease in expenditures creates a demand and effect on unemployment. Therefore, this is what I told some business and labor leaders, this is what I told the legislature, this is what I told legislative leaders in the last week of March. In the last quarter of 2007, we did not receive many taxes from our 20 largest taxpayers, corporations and banks. To be specific, by the third week of March in 2007, we had received $533 million from those top 20 donors. In 2008, we have received $72 million – 14% of the resources that we gained last year at an analogous time. Therefore, though we have cut our budget, and for only the second time in 30 years, we have a Governor’s budget with a growth less than that which was advanced in the original presentation, dropping it from about 4.8% to 4.4%.
The fact is most of those savings will be eaten up as soon as the April economic forecast hits. So though our budget is sound now, it will be dependent on whether or not people get the message that we so vitally need to understand, which is that our economy is reeling. That we have got to address these issues, not by taxing anybody, because that creates the notion of coalesced dreams that is shared in a bi-partisan way, that means extra resources means extra spending. And somehow, someway, every time we have extra resources, that is what we do. The first thing we have to do is tighten our belts and be far more fiscally sound and prudent in terms of the revenues that we are spending that taxpayers comprise.
This is a difficult concept for many of my colleagues to endure because they set their budget priorities two weeks before the budget deadline. But this is where government has got to respond more quickly. You don’t need three straight months of private drop in unemployment plus six months of evaluation to know we’re in a recession. You can feel it every place you go. 80,000 jobs lost, reported last Friday, staggering unemployment, a continuation of problems we are going to have to address. Fewer homes being sold, property taxes not coming in the way they had before. In last week’s Economist, in an article on April 3rd, entitled “Turn the Lights Out,” they talk about these issues all over this country. That now, 17 states have already cut their budgets. More people are living in states that have deficits than prior. The National Governors’ Association estimated that 30-40 states will have to cut their budgets this year. So the outlook is clear, but the message has to be taken.
Now we have to remember how this great metropolis, how this great New York that we live in, got the way it got in the first place. In 1820, when our national population was about 20 million people and New York’s population about 600,000, we were about 3% of the national population. All of the eastern seaboard cities basically accounted for their proportional share of economic development. So Philadelphia, who had 2% of the nation’s population did 2% of the business. Charlotte, North Carolina 1% of the population comprising 1% of the country’s economic development. Well everyone knows the story of Clinton’s ditch. And of course between 1820 and 1840, New York changed its whole economic face, with the building of the Erie/Lackawanna railroad and the establishment Erie Canal. Because of those great movements by those who were foresighted at that particular time. The interesting fact is that New York grew to generating 47% of the economic development of the country. It came from the greater metropolitan area, basically New York City. And the population rose from 3% to 11%. The people moved where the jobs were. Now the people are moving away.
One of the interesting aspects of rising to become governor of this state is that I got to hear from people I didn’t know since I was a child. The ones I owed money had contacted me a lot sooner. But I heard from a friend of mine who I went to primary school with, Randy SanAntonio, he told me he moved to Dallas, Texas 20 years ago. I heard from another friend of mine, Randy Watts - he moved to Reno, Nevada. I had a friend when I was at Syracuse - we were in a skills training for blind students program where they taught you how to go to classes, how to use the library, and they taught you mobility. I remember one day they sent us to find this street in Syracuse called Marshall Street and we’re walking along and we find this sign and we can’t read it, so since he was bigger than me he held me up and I read the sign to him. His name is Marvin Lee Simmons. Well he said he’s working in lower Manhattan. I said great Marvin maybe we’ll get together on the weekend and he said, “Well I don’t live in New York, I live in Western Pennsylvania.” There were some friends of mine – Jeff and Stacey Stackhouse – they wanted to start a business on Long Island. They moved two years ago – they’re trying to start their business in Charlotte, North Carolina.
The fact is that 28% of college graduates from Long Island are leaving the State, 30% of college graduates from upstate are leaving the State to places like South Carolina, to Nevada, to even parts of California, New Mexico, Arizona, Florida – looking for opportunity.
And that’s what they all told me – they couldn’t pay the taxes since the combination of State and local taxes impacts on a New York citizen greater than any other and they couldn’t find opportunity right here in this State that all of us love. And they love it too, but they feel that they had to move to a greater horizon.
New York has 14% less African American families than it had 12 years ago. They are going back to the states of South Carolina, Alabama, and Georgia. If you add those three populations up it’s 15% less that New York, but they are three times the businesses owned by African Americans in those state than we have here. African Americans comprise 8% of the pre-approved procurement contractors in 2004 and got .66% - in other words two thirds of one percent of the contracts. For Hispanic Americans it was worse. They comprise 11% of the pre-approved contractors and got .74% - three quarters of one percent. Suppose you were a Hispanic woman trying to get a contract from New York State. You got .12%. I teach my son at math – I can’t tell you what percentage that is of 1% but we are going to find that woman and we’re going to have a party for her after we regenerate minority and women’s business enterprises.
If you drive over the George Washington Bridge – you go to Paramus, New Jersey, you go to Edgewater, New Jersey you see your neighbors who are Puerto Rican who used to live in East Harlem. They fought, and they worked, and they became middle class. They didn’t move to the suburbs of New York. They moved to the suburbs – they moved to New Jersey. That’s where they moved. And this is a problem that’s impacting on all of us whether we be Asian, Hispanic, black or white. Whether we be upper middle class or dependant on social services, people are leaving our State and yet the government has got to respond to that latest crisis.
Now when I first started, I was a State Senator around the time I came to my first ABNY breakfast, I remember I had a staff of about six or seven people and I used to tell them about all these problems. And then I’d come back three months later and I found that the problems were never solved. After two or three alliterations of the same procedures to no avail I realized what my mistake was. And I am sure that those of you who own businesses or manage individuals know this problem. If you tell a group of people about a problem, they intellectually acknowledge it, but they don’t think it applies to them. That is the problem that we’re having in Albany.
So I’ve decided that when we get this budget passed I am going to go to every legislator and talk to them eyeball to eyeball about the problems with this economy. And we are going to fight to address the issues in our state budget that need to be addressed.
These Industrial Development Associations – they come into neighborhoods, like in Binghamton, such as in an article on June 24 in the Binghamton Sun Bulletin, that talked about how the economic development was not actually increasing business in Binghamton, it was replacing business.
The enterprise zones, which became the most glorified discretionary member items in New York state history, where the economic zones were not employing people who were collecting tax payer resources; that probably needs to be investigated. But the question is have the economic empowerment zones actually solved the problem? They have not.
What about the STAR program? This has been glorified by several administrations and several leaders. The idea was to give back to individuals who have high property taxes. Since we established STAR about 11 years ago, property taxes between 2001 and 2005 went up 7 percent every year. Maybe we should change the system. Maybe we have to retract STAR. Sending back rebates to individuals who are hoodwinked and cajoled into thinking that 5 percent of the money that they sent to the state got sent back them, and somehow they’re supposed to be happy about it is patently ridiculous.
The reality is that we have 640 public authorities in this state; only 11 of them regulated by the public authority control board. Maybe we should find out what the other 629 do, because they consume billions of your and my dollars every year in taxes.
This is the kind of hard core cutting that we need to do in our budget next year, so that we can cut 5 to 10 percent off the top, and not balancing the budget on those who need services, on the middle class, or people who are lucky enough to make a million dollars. We hold individuals hostage because of our inability to manage effectively in this crisis.
And so, as we look at this budget prioritization, what I want you to understand is that this is not a new governor responding to an economic crisis. This is a new governor trying to create fiscal reality in the minds of those who are in decision making capacities in this state. What this state is going to need to reverse its spending binge is strong leadership from the executive levels. So when we balance this budget, and when we put our economy back on the right track, that will be the most important test of leadership, because that will be the time when we learn, when we have added resources, whether we have the prudence that guides our fiscal decision making process.
And then we have to go on from there to face other challenges; challenges that we must face right here in New York City. We have to build an infrastructure that will allow us to continue to be competitive. We have to develop the East Side Access. We have to build the 2nd Avenue subway. We have to rebuild the Tappan Zee Bridge, and we have to create a fourth major airport at Stewart Airport. We have to develop the far west side of this area, creating a third downtown center in the downstate region, with the development of the Hudson Yards and the establishment of Moynihan Station.
We’ve got to go back and revisit the issue at Ground Zero, where as we stand right now, it will be September 11, 2011 before anything is actually built, and estimates are that that may be two or three years off. We can do better than that because Ground Zero should always be a symbol of our resilience and an engine of our downtown economy.
And we have to find a workable and sensible plan to develop one of our great civic treasures as we redesign the structure and outlook at Governors Island.
Yesterday, the deadline for the $354 million, which would have been acquired by our economy to establish congestion pricing has expired. The legislature did not pass any meaningful legislation that would have continued congestion pricing. I thought that the bill that I introduced would have decreased congestion and preserved our economy. I thought it would have been outstanding for transportation and created revenues for transportation and done something about the overcrowding of the inner part of our city. I think that this was the most important thing we could be doing right now and the plan that Mayor Bloomberg put forth was a plan. It might have had flaws, it might have needed some redevelopment, but it is a plan and frankly no one else has come up with a plan and so that would have been the way to address this problem.
Nonetheless, the same problems that we had yesterday we have today. Even with a congestion pricing legislation to act on, we would still be confronted with somewhere, experts say, between an $11 and a $13.5 billion shortfall on our MTA Capital Plan. Because of that I am announcing there will be a blue ribbon panel of business leaders, civic leaders and economists to try to figure out how to ameliorate the hole in our MTA Capital Budget, and I have asked the chair of this commission to be the former chair of the MTA Richard Ravitch.
Basically, I want the commission to examine three basic issues. One is how to balance the subsidizing of the MTA Capital Plan, through the subscription of those who use the services and a broad balance of taxes for businesses and the rest of the public.
Secondly, what we want to look at are the elements of Mayor Bloomberg’s plan that all of us like, and that perhaps we can still weave them into the process
And finally, we have to get the MTA out of its habit, which is 25 years old, of refinancing and basically covering debt with excessive borrowing. By 1998, in this country the five largest borrowers were the State of California, the State of New York, the City of New York, the State of Massachusetts and the MTA. The MTA doesn’t even have a Governor and they are the fifth largest debtor in the entire country. That has to be changed.
Finally, I just want to address the issue that I’m sure many people have, that how can we be talking about all of these creative projects at a time when we have fiscal deficit. It is actually I think the paradigm that most separates the foreparents of the State of New York and the City of New York from others, that even in the midst of crisis they fought, they suffered and they paid for it, but they went ahead and what they won was the greatest city in the world, developed from the dreams and aspiration of people who looked doubt in the face and went forward anyway. It is really amazing that six of the nine years that they were starting to establish the economic development, between 1820 and 1840, their budgets were in deficit. On January 20, 1930, right at the outset of the Depression, they put a shovel in the ground to build the Empire State Building. By March 1, 1931, it was built and it was open. Thirteen months. This was done by people we knew.
In 1939, still reeling from the Depression, on November 1st, John D. Rockefeller hammered the final nail into the construction at 10 Rockefeller Plaza, and introduced the public to Rockefeller Center. We can prevail during these particular times. No one knew this better than Gov. Franklin Delano Roosevelt, when he said in the early 1930s that out of crisis, out of tribulation, out of disaster human kind raises itself to share what is a greater vision, what is a greater ability and what is a more pure purpose. We can do this if we engage that new spirit of cooperation, and work toward a common goal. And if we work hard enough there will be a time when people will stand on this stage at another ABNY breakfast and talk about how the New York at the turn of the century endured its financial problems. And if we try hard enough, we may be able to look back in just a very few years and be very proud of the work we’ve done.
I want to thank Bill Rudin, I want to thank Mayor Koch and Mayor Dinkins, and I want to thank all of you who have supported this great organization that has brought us together since the early 70s, in the spirit of our ancestors who worked unremittingly and courageously to build a viable New York that was a national leader not only in the economics of how to build a city but also culturally and how to treat the people who live in it. I am delighted to be your Governor, I want to work with you, and I thank you so much for inviting me this morning. Thank you.
