Assemblymembers Cahill and Tonko Medicaid Reform and Tax Equity Act of 2005

March 3, 2005

There is no denying that a Medicaid funding crisis is severely impacting the fiscal health of counties. This crisis has been exacerbated by an unjust fiscal policy – a Medicaid funding scheme that is breaking the backs of struggling county governments across New York State. Unfortunately, the state’s recent tax policy is in reality a tax shift from the progressive income tax to the more regressive property tax, which has served to make problems in the economy, especially upstate, worse.

While income inequity has grown during Medicaid’s history, we have seen the reduction of local aid coupled with an increasingly burdensome Medicaid responsibility. This has forced some counties to come desperately close to their constitutional property tax cap. Counties are bleeding profusely, and we need major surgery to solve this crisis. We can do better. We must do better.

When we look at New York’s total state budget, we see that the majority of funding goes into two main areas – education and Medicaid. We fund education by creating a system that is based on a locality’s ability to pay. Districts with high needs and small tax bases receive more state aid than districts that are located in strong economic bases. This raises the fundamental question of why New York State insists on providing education funding, the largest portion of the state budget, in this manner, yet chooses not to do the same with Medicaid, which is nearly one-quarter of that very same state budget.

We must also be honest about the situation that our counties currently face – not all counties are created equal. Some counties are expanding services and maintaining property tax stability. Other counties are faced with fiscal disaster and are forced to limit basic and essential services while increasing taxes dramatically. Many are close to their constitutional property tax limits and are unable to increase their already exorbitant property taxes.

This is why we propose providing real relief to all counties and creating a new ability-to-pay based funding formula. Each county should only be required to contribute an equal percentage of its property and sales tax revenue toward Medicaid, rather than the varying percentages of revenue that they currently pay. Let us be perfectly clear – this is strictly a funding reform. Do we need additional reforms on the spending side? Of course we do. We believe greater efficiencies and achieved savings can be realized without reducing necessary health care services. This is a discussion that is being conducted as we speak both in Washington and Albany.

We should not separate the debate on income tax from that of property and sales tax. Rather, they should be one common discussion. In keeping with that guiding principle, this plan takes resources currently collected by the state treasury and redistributes benefits to undo the property tax shift that is draining our homeowners, as well as our tenants and businesses large and small.

In the end, it is important that we have this real, honest discussion, and that it creates real, honest reform. The burden that counties bear has become too great. We can do better and we must do better.

What's New