Years of aggressive tax reductions and a new effort to contain the state's debt are receiving credit for two positive new announcements about New York's fiscal health made recently by Governor Pataki.
The Governor announced on Dec. 19 that Standard and Poor's Rating Agency (S&P) had upgraded the state's credit rating to AA. That is New York's first-ever two-step rating upgrade, and it gives New York its best credit rating in more than 21 years, the Governor said.
The next day, the Governor announced that the state is using $500 million from the state's Debt Reduction Reserve Fund (DRRF) to eliminate high-cost state debt and to increase pay-as-you-go funding of state budget priorities. The state created the DRRF in 1998 at Governor Pataki's urging.
"These announcements are a great New Year's gift for New York State taxpayers and New York's business community, and it is a credit to Governor Pataki and the state Legislature for enacting the tax cuts and debt-reduction policies that made this progress possible," said Daniel B. Walsh, president/CEO of The Business Council.
"Remember those who opposed tax cuts with the argument that we couldn't afford them? This news clearly refutes that argument. The fact is that New York has never had more revenues than it has collected since it began cutting taxes seven years ago. Tax cuts have helped revitalize the state's economy, and thus its tax base.
"Let's not stop now. If lawmakers cut taxes more and enact further debt reform, there will be more of the same fiscal benefits for New York and New Yorkers."
The new S&P rating moves New York from 42nd to 23rd among all states, the best improvement in state history. This is the state's third credit-rating upgrade in three years. Nine different state public authorities also received rating upgrades.
Before Governor Pataki took office, the state had received only credit rating downgrades for nearly a decade, the Governor's press release noted.
"The fact that the experts at Standard and Poor's have increased our credit rating once again provides further proof that we are on the right track," the Governor said. "Our sweeping tax cuts and prudent, fiscally responsible budgeting practices have directly contributed to New York's ongoing economic resurgence and placed New York in its best fiscal shape in more than a generation."
The Governor vowed "to continue to push for a series of fiscally-prudent initiatives." Examples he cited were a Constitutional Debt Reform Amendment, responsible use of any potential surplus, and an increase in the size of the state's fiscal reserves.
In announcing the rating upgrade, S&P cited New York's "consistent and successful efforts to improve its financial performance, definitively reversing a longstanding pattern of imbalance." The agency also said, "the fiscal disciplines adopted, in parallel with substantive tax cuts, have yielded solid results."
The $500 million debt-reduction move will save taxpayers $800 million, the Governor said in a release. High-cost debt to be eliminated was incurred mainly in the late 1980's and early 1990's for the construction and reconstruction of various state facilities, the release said.
The state's Debt Reduction Reserve Fund will still have $250 million in it after this debt-reduction move.
The Governor has asked the state Legislature to pass a constitutional amendment to make these changes a permanent part of the state constitution. Earlier this year, the Senate unanimously approved the Governor's Constitutional Amendment, and the Governor said he will again aggressively work to see that the amendment is approved by both houses of the Legislature during the upcoming legislative session.