| NEW YORK
NEW YORK Dec 18 Costs for Medicaid, education
and employee retirement benefits are threatening to overwhelm
state and local government budgets in New York, a report by a
national task force issued on Tuesday found.
"Healthcare costs and retirement costs are rising a lot
faster than revenue. And unless one sees something on the
horizon that will change that essential dynamic, then that means
we're not on a sustainable path," said former New York
Lieutenant Governor Richard Ravitch in an interview.
The report, which can be found at www.statebudgetcrisis.org,
was one in a series released by the nonpartisan State Budget
Crisis Task Force, led by Ravitch and former Federal Reserve
Chairman Paul Volcker.
By mid-2012, at least six New York cities and counties were
in fiscal distress severe enough to see possible state
intervention within the coming year, the report found.
The counties of Nassau and Suffolk on Long Island, and the
cities of Yonkers and Syracuse, have all been struggling with
significant budget stress.
New York is one of 15 states that forces its cities and
counties to contribute to Medicaid funding.
Localities in New York are now paying $8.6 billion annually
in Medicaid costs, or 16 percent of the total bill. The state
pays another 39 percent and the federal government the remaining
45 percent, according to the report.
NEW YORK'S MASSIVE MEDICAID SPENDING
"New York's Medicaid program is by far the largest, most
extensive, and most expensive in the country," the report said.
The Empire State spends more of its own money, as opposed to
federal funds, on Medicaid than Florida, Texas and Pennsylvania
combined, according to the report.
Spending per enrolee was $9,056 in 2009, or 69 percent
higher than the national average of $5,337.
"For many years, New York created state health care programs
and leveraged the new entitlements into Medicaid to get 50
percent federal matching funds," the report said.
Medical providers, labor unions and interest groups have
also pushed for institutionalization of patients, which
contributes to higher costs, the report said.
The state has taken significant steps to rein in Medicaid
spending growth in fiscal 2012 and 2013, including placing a cap
on the growth of state Medicaid spending. The cap is linked to
the Consumer Price Index.
But it is unclear whether the changes will reduce the
underlying health care costs themselves, or simply shift costs
onto providers and possibly beneficiaries, the report said.
EDUCATION AND DEBT
New York's public education system for elementary and
secondary school is also expensive. The average expenditure per
pupil was $18,618 for the 2010-2011 school year, compared to
$10,615 nationally, the report found.
Here, too, the state has capped growth on education aid,
putting school districts on notice that they need to control
costs, many of which are driven by pension and retiree health
care costs that are hard to contain, according to the report.
But with a 2 percent property tax cap limiting how much
revenue school districts can raise, the state also needs to make
it easier for school districts to control personnel and other
costs if it doesn't want to see service deteriorate, the report
Currently, only 5 percent of the state's outstanding debt is
general obligation debt approved by voters.
But in order rebuild infrastructure after Superstorm Sandy,
"the state may need to put infrastructure bonding before the
electorate and make the case for broadly supported general
obligation debt," the report said.
New York had about $287.3 billion of real long-term debt
outstanding in 2009, second only to California, which had $372.5
billion, according to the report.
Retirement costs are also on the rise. Contributions from
state and local governments to the New York State Common
Retirement Fund are increasing by more than $3 billion annually,
the report found.