Albany, NY - The New York State Senate has passed a constitutional amendment to enact a cap on state spending at two percent or 120 percent of the Consumer Price Index, whichever is less. Under the legislation, the state spending cap for 2011-12 would be 1.92 percent.
“The spending cap is needed more than ever because of the $11 billion deficit caused by years of overtaxing and overspending,” said Senator Ranzenhofer. “The unchecked growth in spending has resulted in New York having the highest tax burden in the nation. Thirty states currently have some kind of a spending cap. New York must enact a cap now to force fiscal responsibility and enable us to reduce taxes.”
Senator Ranzenhofer introduced and sponsored the legislation, Senate Bill No. 1892. The legislation is a constitutional amendment which would require passage by two separate elected Legislatures before it could be placed on the ballot for a public vote. The November election of 2013 would be the earliest opportunity for the public to vote for the measure.
In any given year, 50 percent of tax revenue that exceeded the cap would be placed in a reserve fund and the other 50 percent would be returned to taxpayers in the form of direct tax rebates. In addition, the proposal would force the Governor to resubmit a balanced Budget to address any shortfalls in revenue that occur after the submission of the Executive Budget and adjust spending to reflect the declining revenue. The constitutional spending cap proposal would grant the Governor the authority to exceed the cap in the event of a fiscal emergency or other extraordinary circumstances; however, the Comptroller would be required to independently certify the financial crisis.
State spending increases averaged 5.5 percent every year for the last 10 years. If a spending cap had been implemented during that same period, the 2011 State budget would be projected to spend $30 billion less. Enacting a spending cap now would force the State to cut spending by $9 billion next year. According to a report by the National Conference of State Legislatures, 30 states have put in place statutory or constitutional tax or spending limits.
The spending cap is part of the Job Creation and Taxpayer Protection Act of 2011. The three-point plan also enacts a two-thirds “super-majority” vote to increase taxes and tax incentives for businesses that create jobs.
The plan imposes a moratorium on any new business taxes and fees and eliminates the corporate franchise tax for hundreds of small businesses and manufacturers with 50 or fewer employees and less than $2 million in net income. It also phases out the personal income tax increase.
The plan provides businesses with a three-year tax credit of up to $5,000 for each new job created. The credit could reach as much as an additional $3,000 per job if new hires are taken from the ranks of the unemployed.
Senator Ranzenhofer voted for the tax incentives and two-thirds “super-majority” vote to increase taxes.
“People are leaving the state in droves because of high taxes and something needs to be done about it,” said Ranzenhofer. “Enacting a moratorium on new taxes and offering tax credits to businesses that create jobs are only first steps to ease the tax burden on our residents.”