Dependence on Wall Street Caused Crisis

By Carlet Cleare

Rochester, NY – A policy researcher says New York is in a budget crisis because it depended too much on Wall Street bonuses to fund state government. When the markets crashed, those high incomes went away - and with them, the state's revenues.

EJ McMahon is the director of the conservative Empire Center for New York State Policy. He spoke at the Rotary Club Tuesday afternoon about New York's fiscal crisis, and how to remedy it.

McMahon says the state's financial situation won't improve and citizens can expect things to get worse going forward.

"During the last 25 years, and particularly over the last 10 years, New York has become dramatically more dependent financially, as a state government, on taxes generated by very high income people. Particularly very high income people connected with Wall Street, both in investment banking and the securities industry, and connected with it."

McMahon says in 2007, some 70,000 households were generating more than half of New York's tax revenue.

His prescription for getting New York back on its feet would involve drastically cutting back on public spending, to help stablize state finances. He recommends freezing public sector wages for three years, capping school property tax levies, closing defined benefit pension plans, and trimming back union benefits.