Prospects for Reform

Can the Empire State Be Fixed?

The self-serving politicians, labor unions, trial lawyers, and other special interests that dominate the New York State Capitol have created an array of problems that is truly formidable—but not insurmountable. A series of basic reforms could do much to break Albany, Inc.’s growth-stifling stranglehold on the Empire State.

Cap spending growth. New York needs to join the 28 states that have put into place some form of constitutional limit on the growth of state and local budgets. The best, most comprehensive model for such an approach is the Taxpayer Bill of Rights (TABOR) adopted by Colorado voters in 1992. Instead of capping tax rates, TABOR attacks the source of the problem—spending by legislators—by capping it at the prior year’s total multiplied by the rate of inflation plus annual population growth. Surpluses must be returned to taxpayers in the form of tax reductions. Any increase in state or local debt or tax rates needs voter approval.

If New York’s budget had been subject to TABOR limits between 1995 and 2005, spending growth financed by these taxes would have been two-thirds the level actually spent during that period. The cumulative savings would have been nearly $23 billion.

Encourage consumer-driven health care. The more Albany, Inc. wrings its hands about the shortage of affordable private health insurance for New Yorkers, the worse the situation seems to get. That’s because the state government’s own policies are making health coverage more expensive—through heavy taxes on private coverage, through a Medicaid program that shunts some costs for the uninsured into the private sector, and through laws requiring all policies to cover a wide range of treatments that most people wouldn’t consider essential.

A far better policy option would be to give consumers—not managed-care executives and politicians—more freedom to shape their own health-insurance coverage. Under a “consumer-driven” approach, individuals could choose from a wide variety of health-insurance plans for themselves and their families. One increasingly popular variant, coupling tax-free Health Savings Accounts (HSAs) with high-deductible policies, promises savings of up to 40 percent compared with more traditional plans sold in New York.

Expand school choice—not school budgets. The Campaign for Fiscal Equity has been right about one thing: kids in poor inner-city schools aren’t getting the sound, basic education to which they are entitled under the state constitution. But the answer isn’t CFE’s preferred solution: rewarding failure with even more money. Families stuck with lousy public schools should have what more affluent New Yorkers already effectively enjoy—choice in education. The 1998 law allowing for a limited number of charter schools in New York was an important start—but only a start. The cap needs to be lifted to permit more such schools, and the charter-school funding formula must be adjusted to recognize the higher cost of opening facilities in places like New York City. With U.S. Supreme Court backing, the state of Ohio has shown how to create a limited state-sponsored education voucher program for kids stuck in the worst schools. Even if courts in New York blocked such a plan on state constitutional grounds, other options to promote choice exist, such as tax credits to create incentives for contributions to public or private school scholarship funds.

Revoke abused authority. The state’s statutory “cap” on borrowing, enacted in 2000 and already circumvented, clearly isn’t enough to prevent the excessive reliance on public authorities as sources of “backdoor” debt. The state constitution should be amended to limit the number of public authorities, to flatly prohibit borrowing to pay operating expenses, and to limit the state’s ability to issue new debt without taxpayer approval.

Promote competitive contracting. Laws that stifle competition and boost the cost of public construction should be repealed, including the Wicks Law and Triborough provision. The state’s Taylor Law, governing collective bargaining by public unions, should be amended to give employers—i.e., taxpayers—a stronger hand at the bargaining table. Public outrage over the TWU’s illegal strike over the holidays helps set the stage for these desperately needed changes in the law.

Depose lawmakers-for-life. The lengthy list of needed reforms would certainly include a prohibition on fund-raising during legislative sessions and on the use of campaign contributions for non-campaign purposes. The legislature’s own procedural rules are ripe for overhaul, as the Brennan Center detailed in its widely publicized 2004 report. Term limits would at least ensure that names and faces periodically change—but, absent other reforms, attitudes in Albany seem unlikely to budge. The single most crucial step to clean up the state legislature would be the creation of a nonpartisan commission to redraw district lines after each census. Ending gerrymandering would restore at least a semblance of political competition—something almost totally missing from the process of choosing legislators for decades.

Enact tort reform. Reforms in ethics and fund-raising statutes would help reduce the legislative influence of trial lawyers, paving the way for needed reforms such as a cap on “pain and suffering” in malpractice actions, limits on lawyer contingency fees, and repeal of outmoded New York statutes such as the Scaffold Law.

Let the people be heard. Ideally, a state’s elected officials are dedicated to protecting the interests of their constituents. But that obviously isn’t the case in New York. Given Albany, Inc.’s overweening power and entrenched resistance to real reform, New Yorkers most desperately need one overarching reform: a constitutional amendment allowing voters to initiate changes in state law. In the 24 states that already allow it, the policy of initiative and referenda—“I&R,” for short—has provided voters with an end run around the seemingly hopeless corruption of, or partisan deadlock between, politicians. Case in point: California. Sure, bad initiatives also make it onto the ballot—and sometimes into law—in I&R states. But the people themselves are ultimately responsible and can eventually find a way to correct mistakes.

Until recently, the very notion of direct democracy in New York seemed like sheer fantasy. But lately, there is mounting bipartisan support in the legislature for convening a state constitutional convention—which could open the door to I&R even in the Empire State. This could be the last best hope for returning control of New York’s government to the governed.

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