Vulnerable New Yorkers Would Lose up to $4.4 Billion in Federal Funding under House Budget Plan

March 30, 2005. The Senate’s plan has considerably smaller cuts in basic low-income programs. Will the Senate accede to the harsher House budget? A press release from the Fiscal Policy Institute.

Contact:  Trudi Renwick, 518-786-3156

New York’s share of federal funding cuts in key programs that assist our state’s low-income elderly residents, families with children, and people with disabilities could be as much as $4.4 billion over the next five years under the budget plan the House passed earlier this month, a new report from the Center for Budget and Policy Priorities finds.  If these cuts are made, a substantial number of vulnerable New Yorkers could lose necessities like health care, child care, or food assistance – and some struggling working families could even face higher taxes – at the same time that affluent households across the nation receive large tax breaks.

Nationwide, the House budget plan could result in an estimated $30 billion to $35 billion in cuts in key low-income “mandatory” (also known as “entitlement”) programs that assist vulnerable Americans, such as the elderly and children.  These cuts are at least ten times larger than the cuts in these programs in the Senate budget plan.

Because the House and Senate are far apart on this matter, cuts in low-income mandatory programs will be a key issue when House and Senate negotiators try to agree on a final budget plan in April.  The House and Senate budget plans are much closer on the issue of tax cuts: both include more than $100 billion in tax cuts, presumably for upper-income households.  Both plans also contain significant reductions in funding for domestic non-entitlement (also known as “discretionary”) programs and significant increases in defense spending.

“If the House has its way on these cuts in basic low-income assistance programs, many vulnerable New Yorkers – including low-wage working families, the elderly poor, and those with disabilities – are likely to face more poverty, receive less help paying for groceries, or go without adequate health care coverage at the same time that out nation’s most privileged individuals will receive a new round of tax benefits,” said Trudi Renwick, Senior Economist for the Fiscal Policy Institute.  “This does not represent a balanced or reasonable policy.”

Medicaid, Food Stamps, EITC, Other Programs Could Face Reductions

The cuts in low-income programs in the House budget plan would come from Medicaid, food stamps, and a set of programs overseen by the House Ways and Means Committee, such as the Earned Income Tax Credit (EITC) (a tax credit for low-income working families), the Supplemental Security Income program (SSI) for the elderly and disabled poor, assistance and services for abused and neglected children and foster and adoptive families, Temporary Assistance for Needy Families (TANF), and child care.  The Center on Budget and Policy Priorities estimates that as a result of these cuts, New Yorkers could lose:

  • Between $2 and $2.7 in Medicaid funding.  Almost 4 million children, elderly, people with disabilities, and other New Yorkers rely on Medicaid for their basic health care.
  • $280 million in EITC benefits.  Roughly 1.4 million working families in New York receive the EITC, which provides low-wage workers with tax relief and wage supplements.
  • $458 million in SSI benefits.  Roughly 624,000 poor elderly and people with disabilities in New York receive modest monthly SSI payments to help them cover their basic expenses.
  • Up to $402 million in food stamps.  Roughly 1.6 million New Yorkers receive food stamp assistance that helps them afford a modest, nutritionally adequate diet.
  • $352 million in TANF funding, which New York uses to provide income assistance and welfare-to-work programs for 507,500 New Yorkers  as well as child care, transportation, and nutritional assistance for other low-income working families.
  • $97 in foster care and adoption assistance funding.  Each month, these programs provide assistance to 61,300 children in foster and adoptive families and funded efforts to find appropriate foster care placements for children and to prepare older children living in foster care for independent living.

Program Cuts Would Be Used to Help Pay for New Tax Cuts, Not to Reduce the Deficit

“What makes these cuts even more disturbing is the fact that they wouldn’t bring down the deficit, in part because Congress also is pushing for more tax cuts tilted toward high-income households,” said Renwick.  Both the House and Senate budget plans would cause deficits over the next five years to be more than $100 billion larger than they would be if no policy changes were made.  The reductions in assistance for poor New Yorkers thus would be used in part to help finance tax cuts going disproportionately to those on the upper range of the income scale.

For example, the House budget plan would use $23 billion to extend existing tax cuts related to capital gains and dividends for two more years, through 2010.  (These tax cuts currently are slated to expire at the end of 2008.)  That cost is equal to about two-thirds of all cuts in low-income mandatory programs in the House budget plan.

Nearly half of the tax cut benefits of extending the capital gains and dividend tax cuts, however, would go to households with annual incomes of more than $1 million.  These very high-income households would receive an average annual tax cut of $10,000 apiece from extending these tax cuts, on top of the $90,000 a year apiece they already receive from other tax cuts enacted since 2001.

Looked at another way, this means that although the House budget plan includes up to $5 billion in food stamp cuts, it finds room for more than $10 billion in tax cuts for people with incomes of over $1 million under the capital gains and dividend provisions alone.

Congress could have extended the capital gains and dividend tax cuts but offset their cost by adopting revenue-raising measures that close unproductive tax breaks and reduce tax avoidance.  In January, the Congressional Joint Committee on Taxation issued a major report outlining options to achieve about $190 billion in tax savings over the next five years through such types of measures.

“The time to stop the House’s cuts in vital services and supports for the nation’s poorest and most vulnerable families is now, before they become part of the final budget resolution,” said Renwick. “The Senate needs to hold firm and say that these program cuts reflect the wrong priorities.  This country stands for something better than hurting vulnerable people at the same time that we lavish more tax cuts on those who least need them and already are benefiting handsomely from the tax cuts enacted to date.”

Simulations of the fiscal impact of the Schools for New York’s Future Act

March 25, 2005. District by district impact of the Schools for New York’s Future Act, prepared by FPI for the Campaign for Fiscal Equity.

Fiscal Stability for New York City

March 23, 2005. Testimony presented by FPI’s Deputy Director and Chief Economist James Parrott to the New York City Charter Revision Commission. This testimony deals with the Charter Commission’s interest in determining if any of the expiring provisions of the New York State Financial Emergency Act for the City of New York should be incorporated into the New York City Charter.

One Million Elderly New Yorkers Rely on Social Security for At Least Half Their Income

March 23, 2005. News from the Fiscal Policy Institute:

More than one million elderly New Yorkers depend on Social Security for at least half their income and 571,000 depend on Social Security for more than 90% of their income, according to a new study released today by the Fiscal Policy Institute and the Economic Policy Institute.  The study, Social Security and the Income of the Elderly, co-authored by Michael Ettlinger, director of the Economic Analysis and Research Network (EARN) and EPI economist Jeff Chapman, shows a high reliance on Social Security for the well-being of the elderly across boundaries of sex, race, or state of residence.

“Like earlier studies that found that absent Social Security more than 800,000 elderly New Yorkers would live in poverty, this study confirms that cuts in Social Security benefits, now or in the future, would have a devastating effect on the standard of living for elderly in New York, ” noted Trudi Renwick, Senior Economist for the Fiscal Policy Institute.

Highlights from the study show that for New York:

  • 64% (1,112,000) of those 65 or older receive 50 percent or more of their income from Social Security;
  • 33% (571,000) of those 65 or older rely on Social Security for more than 90% of their income.

The report shows that  Blacks, Hispanics and unmarried women are particularly dependent on Social Security.  The study estimates the percent of income coming from Social Security for the median elderly married couple or individual for a number of different categories.  The percent of income from Social Security for the “median” means  that half the couples or individuals in that category will have a higher percentage of their incomes from Social Security, while half of the couples or individuals in each category will have a lower percentage of their income from social security.  For example, half of nonmarried women in New York rely on Social Security for more than 84% of their income.  Half of Hispanic elderly couples and individuals rely on Social Security for more then 82% of their income.

Percent of Income from Social Security for Median Elderly Couple or Individual in New York
65 or older
75 or older
Nonmarried men
Nonmarried women
Married couple

This heavy reliance of the elderly on Social Security income means that replacing the current system’s prescribed benefit levels with a system that is susceptible to risks inherent in private stock market investment returns would have a significant impact on the quality of life for those who do not secure the best-performing investments.

11 Point Plan to Reform the Zones

March 22, 2005. FPI joins with environmental, human services and other budget watchdog groups in releasing a plan to reform the State’s Empire Zones Program.

Reform Groups Urge State to “FIX THE ZONES” or Let the Program Sunset on March 31 as Scheduled

Environmental, human services and budget watchdog groups joined together today to call upon state leaders to fix the state’s Empire Zones Program and released an 11-point plan designed to end the abuse, corruption and favoritism inherent in the current administration of the program. The groups estimate that the state could save approximately $100 million per year in much needed revenue, if the program is reformed.

Members of the Economic Development Conference Committee seem to have reached a consensus today on expanding the Empire Zone program to include 12 new Zones throughout the state. The Committee members were silent however on what reforms, if any, they are proposing to make the Zones program more accountable.

The Zones program is currently scheduled to sunset on March 31, 2005. The reform groups believe that the programs shortcomings are so great that it should NOT be renewed without real reforms.

“In its current form the Empire Zone Program has encouraged businesses to leave New York’s urban areas to locate in undeveloped rural areas. This wastes state and local investments in infrastructure, wastes natural resources, wastes state tax dollars and hurts our cities,” said John Stouffer, Legislative Director for the Sierra Club – Atlantic Chapter.

New York’s Empire Zone Program was originally created in 1986 to focus on promoting job growth in economically distressed communities. And the programs benefits were greatly increased in 2000 to increase its ability to achieve that end. But an administrative change in the program’s rules in that same year, allowed for a boundary amendment process that all but ended the program’s targeting. According to the Fiscal Policy Institute’s Frank Mauro, “In recent years, the program has become a game of `We bring the zone to you.’ The Zones program’s powerful incentives are now being used indiscriminately to subsidize favored businesses in areas of the state that are relatively well off while similar businesses in similar areas of the state pay taxes at the state’s regular rates. How can New York State justify maintaining a tax system in which businesses whose operations are the same in all material respects are paying taxes under what amounts to substantially different tax codes?”

“The eleven reforms we are suggesting will create an empire zone program that helps rather than hurts New York’s economically distressed communities and one that conserves our tax dollars as well as our natural resources,” said Stouffer.

Others expressed concerns that the program has moved far from its original intent of helping distressed cities throughout the state attract new businesses. “If the zones program’s extremely deep tax discounts are made available for those who want to develop in greenfields or set up shop in the plushest of suburban office parks, then how in the world can those incentives ever be effective in the revitalization of the areas of the state that are truly characterized by pervasive poverty, high unemployment and economic distress,” stated Ron Deutsch, Executive Director of SENSES.

The Luther Forest proposal in the towns of Stillwater and Malta in Saratoga County is a prime example of how the Zones program is being used to subsidize sprawl. This “Field of Dreams” approach of “if you build it they will come” is being undertaken by the Saratoga Economic Development Corporation. Bob Radliff of Saratoga County stated, “By providing Empire Zone benefits to this massive and inappropriate project, New York State taxpayer’s will be encouraging the abandonment of our urban cores, while subsidizing the destruction of open space and inducement of uncontrolled sprawl in Saratoga County. Smart growth principles apparently do not apply when we let industry dictate the future of our region. Empire Zones are powerful economic development tools — they should be used to solve the Capital Region’s most pressing needs.”

“In this era of multi-billion state budget deficits and moribund upstate economies, it is essential to ensure that public funds invested in job creation produce the intended results. The first five years of the Empire Zones have fallen woefully short of revitalizing inner city neighborhoods. Instead they have all too often been used to divert essential public resources to the political powerful and well-connected. The Governor and Legislature need to dramatically overhaul the Empire Zones and other economic development program to protect our tax dollars. The proposals we have outlined today are a small but critical step in restoring integrity to this program,” said Mark Dunlea, Associate Director of Hunger Action Network of New York State.

The 11-Point Plan to Reform The Zones

The state law authorizing the Empire Zones program should NOT be renewed without real reforms including:

1. implementing full, annual disclosure of the benefits received and the jobs provided by each participating business.

2. strengthening rather than weakening the program’s focus on the state’s neediest areas by prohibiting zone designations in areas other than census tracts that meet economic hardship criteria and immediately adjoining census tracts in the same community. Similarly, the extension of existing zones boundaries into areas other than census tracts meeting economic hardship criteria should be eliminated.

3. ending the current annual boundary amendment process (the “we bring the zone to you” approach) that has opened the operation of many of the state’s zones to favoritism and corruption.

4. halting the benefits going to businesses that used re-incorporation and other ruses to get into the program.

5. tightening the program’s certification requirements to ensure that firms that violate (or have, in recent years, violated) labor, health and safety, environmental or other important statutory safeguards are not certified to receive zone benefits; or, if they are already certified, that they lose such certification

6. requiring the Commissioners of Labor and Economic Development to hold well-advertised and timely public hearings on all proposed business certifications, all contested de-certifications and all proposed boundary amendments. (Note: Hearings on boundary amendments are currently required but the Commissioner of Economic Development views this requirement as being met by the hearings held by local legislative bodies on the local laws making those boundary amendments. Public hearings are not currently required on business certifications and decertifications.)

7, requiring that all of the tax breaks and other benefits available to participating firms be based on the number and quality of the jobs actually created. (NOTE: Some but not all of the program’s benefits are currently tied to the number of jobs actually created.)

8. strengthening the program’s job quality standards and the application of these standards to all zone benefits. (NOTE: Under current law employers are eligible for an enhanced wage credit [$3,000 as opposed to the ordinary $1,500 wage credit] for a targeted employee who is paid an hourly wage of at least 135% of the minimum wage for more than half of the period involved.)

9. limiting the total amount of all tax benefits available “per employee,” in any given year, to the lower of (a) $10,000 or (b) 20% of the total of the wages paid to the employee involved and the health insurance premiums paid on behalf of such employee.

10. applying de-certifications for cause to all periods beginning with the earliest documented date of the infraction on which the de-certification is based and require that any benefits received during such period by a decertified firm should be subject to mandatory repayment.

11. ensuring that the program promotes revitalization of the State’s existing cities, towns and villages, efficient use of municipal services and avoids the environmental problems associated with unplanned sprawl development, by limiting zone designations and boundary revisions to areas that are served by public sewer or water infrastructure, previously developed areas, or brownfields.

Expenditure of Payments in Lieu of Taxes (PILOTs) in New York City

March 22, 2005. Testimony by FPI Deputy Director and Chief Economist James Parrott at a hearing of the City Council. This testimony deals with the discovery of the fact that Mayor Bloomberg and several of his predecessors have been spending some PILOT payment revenues without appropriations by the City Council. Related: Mayor Bloomberg’s veto message explaining his June 9, 2005, veto City Council legislation requiring greater accountability in the expenditure of PILOT revenues. Testimony >>