Before raising taxes that are far above average, or reducing services that are already inadequate, New York must cut spending in categories where it is above average. That's Medicaid. New York's Medicaid expenditures are stunningly high, relative to other states, for four reasons, each of which is compounded by the others. First, New York has an above average number of recipients, due in part to above average poverty. Second, the federal government pays for just 50 percent of the Medicaid expenditures in New York, compared with up to 80 percent in other states (using federal taxes collected, in part, in New York). Third, New York covers more categories of people, and provides more services, than other states.

But the main reason for New York's high spending is that New York's health care providers charge far more for Medicaid-funded services than those in other states, even when the higher cost of living in Downstate New York is taken into account. They can get away with charging more as a result of their political power. These industries own what was once called the "reform" wing of the Democratic Party in this state, and Democrats in the state legislature have been willing to trade away just about everything, and sacrifice just about everyone, for their benefit. Yet the health and social service providers still felt free to endorse Republican George Pataki, in exchange for an even better deal, in the election.

Despite its sky-high expenditures, and the low share of them paid for by the federal government, the state taxes that the State of New York collects to pay for Medicaid are only average. The entire additional burden is shifted to the local level, with local governments forced to pay "aid" to the state for Medicaid, something that happens virtually nowhere else in the country. This encourages irresponsible spending, since state officials can increase spending and get the political support of the health care industry, while local officials have to raise taxes and cut other services to make up for it. This entire relationship must be restructured, with the same officials who make the decisions on marginal spending also required to impose the marginal sacrifices - either higher taxes or lower spending on other things - to fund them.

Do you earn double the U.S. average for people doing the same work? Would you be satisfied with double? Only New York's health care providers could answer "yes" to the first question, and "no" to the second. New Jersey, Massachusetts and Pennsylvania are not right-wing states that don't care about the poor and the old. Their health care is not notably worse than New York's. They are simply states with competitive state elections, where elected officials are forced to deliver fair value for the tax dollar. We are simply being ripped off.

Reducing payment levels per recipient to the average level of these nearby states could cause some hospitals and other health care providers, those with high debts and sky-high costs locked in by contract, to go bankrupt. Some of these may default on their State Dormitory Authority bonds, which are backed by federal loan guarantees. But New York can no longer afford to subsidize excessive costs and privileges by raiding a health care program "for the poor." It would be better to let the chips fall, and then use the bankruptcy process to reorganize a system that has both high prices and, as a series of recent scandals indicate, inadequate care. If our health care industry cannot provide average or better care for 35 to 50 percent above average prices, then many of its leaders should lose their jobs. Some should go to jail.

Medicaid cost reductions should be used primarily to reduce local government budget deficits and excessive local taxes, by eliminating the local share of Medicaid. The savings would virtually wipe out the budget deficits of New York City and counties throughout the state, and would eventually permit reductions in local taxes besides. If they chose, however, counties and New York City would be allowed to pay their health care providers more - up to 60 percent more than the national average per recipient - using their own money and federal money, but not state money. They would not be required to do so. Local officials would thus make the decisions, and come up with the money, on the margin.

The demand for something for nothing is insatiable, and the government has proven unable to ration services fairly based on "need." People must be made to give up something in exchange for getting something that other people do not, if for no other reason than to reduce fraud. Workfare did this for welfare; an equivalent is required for Medicaid, especially for at-home care for the elderly.

In 1997, New York State accounted for 50 percent of all Medicaid "personal care" (housekeeping, personal shoppers, etc.) expenditures and 33 percent of home health care expenditures in the United States. Most states, including Pennsylvania, don't even offer "personal care." The rationale for these services is that at-home care substitutes for expensive nursing home care and saves money, but New York has an above average share of its elderly population in Medicaid-funded nursing homes as well. Clearly at home services are being provided to those who do not absolutely need them.

If an elderly person really cannot live on his or her own without assistance (as opposed to just finding a doctor that is willing to say so), he or she will accept living with his or her children or another willing caregiver, or going to a nursing home, two things one would probably rather not choose to do otherwise. Like a work requirement for welfare, an insistence that those receiving these services no longer live on their own would cut the number of recipients right away. Local governments could be permitted, but not required, to continue providing "personal care" and home health care to those living independently, splitting the cost with the federal government with no state funding.

The state should also seek a federal waiver to allow people who are forced to move in with a friend or relative for health reasons to remain eligible for Medicaid-funded home health care, regardless of that caregiver's household income. Why penalize families that care for their elderly relatives, by making them ineligible for Medicaid-funded home health care, while looking the other way while other elderly "give" their money to their children, declare themselves poor, and then apply for Medicaid?

Some people, including Senator Clinton and Governor Pataki, seem to believe that national health insurance can be achieved through the back door by expanding Medicaid. A broader, rationalized health care finance system is a good idea. The federal, state and local governments already pay for Medicare; Medicaid; public, military and V.A. hospitals and clinics; health benefits for public employees; and health care research grants. They subsidize private health insurance through the exclusion of premiums from taxable income, and health care providers through the exclusion of non-profit facilities from taxable property. Adding these together, the government is already paying, directly or indirectly, for 70 percent of third party (not out of pocket) health care spending right now, a share that is bound to rise as the nation ages.

Yet the distribution of this 70 percent is profoundly inequitable. Why it is it fair that the working poor and the self-employed are forced to pay taxes so that the elderly and welfare-dependent can have health care coverage, even though they cannot afford coverage for themselves and their families? Why is it fair that middle-income workers are forced to pay taxes for other people's Medicare and Medicaid for years, yet receive no public health insurance when they are laid off, and are often forced into bankruptcy and the loss of their homes if a family member becomes ill? Why do the Republicans and Democrats have as a top priority providing the elderly prescription drug benefits, something that has already been implemented in New York, while neither party is talking about doing anything for anyone else, nor facing the fact that - given the financial future of the program - many of those now under age 50 may not even receive Medicare when they reach age 65?

Regardless of the merits of universal coverage, achieving it by expanding Medicaid, rather than Medicare or some new system, would destroy New York's economy. Since the federal government only covers 50 percent of the cost of Medicaid here, and 60 to 80 percent in many other states, New Yorkers pay twice - in federal taxes for Medicaid in other states, and in state and local taxes for half of Medicaid here. And New York overpays for health care, due to the political power of its health care providers. Expanding this system further has been and will be a disaster. New York's Medicaid spending is so high, however, that it is actually getting a large amount of federal Medicaid spending today, despite the low federal matching share. Therefore, it is in no position to complain.

If the cost of New York's Medicaid program were reduced, on the other hand, New Yorkers would have the right to demand that inequities in the federal matching formula be eliminated. They could make that demand by voting in representatives who were willing to "pull a Jeffords" to get a fair deal. That deal could be a new national health care finance system, perhaps based on an expansion of Medicare (which the federal government pays for itself with no state or local taxes). Or it could be an increase in the federal share of New York's Medicaid expenditures to 60 or 65 percent, a level justified by the state's relative poverty. Or it could be a decrease in the federal share of other state's Medicaid spending to 50 percent, same as ours. New York needs to stop electing federal representatives who are primarily concerned with symbolic social issues, and start electing those who will do whatever is required to get a better deal.

In the year 2000, New York State was number one in per student public school spending. But it was also right near the top in school spending inequality, as a result of funding formulas that reward those that have, and spend, the most. These include the STAR program, a back-door form of school aid that goes primarily to the most affluent school districts, and a variety of other "spend to get" grants. The additional funding available for mildly disabled children also creates an incentive to spend more. For example, the share of New York City's children in special education is below the state average, despite what you may have heard. It is not that the city's children are healthier; it is that parents elsewhere have a healthier sense of entitlement.

The state implemented the STAR program in the 1997 to 2002 period, at a time when teachers were in short supply. Far from reducing local property taxes, STAR merely provided the additional funding that affluent school districts needed to increase their high spending further, allowing them to attract the best teachers in competition with New York and other financially strapped cities. The state actually collected taxes in these cities, and then strip-mined their children's schools by sending the money elsewhere. Inequalities caused by differences in social conditions or local resources are one thing, but inequalities caused by unequal - and increasingly unequal - state aid are unjust to an extreme extent. The entire school finance system should be scrapped.

STAR, and all other school spending categories, should be eliminated and replaced by one state school aid amount per child. To ensure a decent education for every child, that amount ought to be almost high enough, by itself, to provide a sound, basic education through high school, assuming no waste and no unnecessary amenities. With state aid covering nearly the full cost of the basics, amenities such as smaller classes, school buses, sports or other after school activities, advanced courses, up to date materials and equipment, electives, field trips, etc., could be paid for with local taxes, by parents directly, or by donations. School lunches are already paid for by the students or by the federal government.

In fiscal 2004, both state aid per child and the maximum school spending per child (see below) would be set to a level that allowed New York City to spend the same amount of money as in fiscal 2003 while receiving full state aid. The State of New York has argued that this level of aid is sufficient for New York City's children; equity requires that it apply the same logic to other children as well. Other school districts would have their school aid per child adjusted up or down accordingly. In future years, state school aid per child would be automatically adjusted upward (or downward) based on changes in the average pay per worker in New York State's private sector.

A maximum spending level would reduce inequality, while providing a two-for-one incentive for high-spending districts to cut out extravagances and reduce property taxes. It would make it expensive for affluent districts to make education in poor districts worse, by outbidding them for available talent, and impossible for them to do so using state aid. This is the opposite of STAR and other "spend to get" formulae. The maximum would include everything spent during the regular school day and year - wages and salaries, benefits, pensions, school buses, capital expenditures, debt service, heat and power, supplies - except for school lunches and additional services for the severely handicapped. Money spent for after school and summer school instruction and activities, whether for disadvantaged or mildly disabled children or for other children, would be exempted. The maximum would be adjusted upward in high-wage high-cost areas, based on the difference between average private sector wages and the national average. Similar adjustments are used for federal Medicare payments.

Under this simplified school finance system, the share of public school funding covered by state aid would increase, and the share covered by property taxes would fall, if and only if overall spending were to moderate and equality were to increase. Affluent areas could continue to spend far more, but only by sacrificing the additional state aid they might receive under the single school aid amount per child, and then some. If affluent communities found that the maximum were not high enough to provide a superior quality education, even if they increased their efficiency, then it would logically follow that the minimum would not be enough for an adequate education for the poor. The fair solution would be not to lift the maximum alone, but rather to raise the maximum and the state aid level in tandem. With a maximum tied to the level of state aid, the interests of poor and affluent children would to some extent be aligned, instead of having the latter gain a superior education at the expense of the former.

In addition to the school aid described above, children who, when tested each year, were shown to need additional help - due to a learning disability, social disadvantage, or for whatever reason - would receive two hours of additional after-school instruction three days per week. Children who were far behind would receive summer school for six hours per day for eight weeks. This policy would permit the mildly disabled (those in the "specific learning disability" category) to be "mainstreamed" during the regular school day and year, but also to receive the additional services they require. The same would be true of the socially disadvantaged, non-English speakers, and any other child in need of more instruction, for whatever reason.

Federal education funding, which is allocated to school districts based on poverty and disability rates, would be used for these additional services. This would ensure that such funding was spent on the children it is intended to benefit, rather than just disappearing into general school budgets. If and where federal money was not enough, however, the state should make up the difference. In the long run, providing additional help to the disadvantaged and mildly disabled outside of regular school hours could reduce, rather than increase, costs. Both schools and schoolchildren would have to give something up - more time working and studying - to get additional funding and services. This would help to limit the demand to those actually in need.

This financing system would provide teachers with an incentive to work in poor districts, which tend to have a higher proportion of children in need of additional help. Extensive after school and summer school programs would provide teachers with an opportunity to work additional days and hours for additional pay - up to the number of hours typically worked, and money typically earned, by other professionals - if and when they chose. Today, in contrast, most teachers face low annual pay despite high hourly compensation; many struggle to come up with seasonal work in the summer to earn a good living.

Like the Medicaid restructuring proposed above, a single state aid figure per child, when combined with the maximum expenditure permitted for those receiving full state aid, could lead to the bankruptcy of high-spending local school districts. So be it. The bankruptcy process should be used to restructure them into larger, more efficient, less patronage-ridden organizations.

Under this proposed funding formula, New York State's public school spending would remain well above the national average, even in Upstate New York where the cost of living is moderate to low. Adjusted for income and the cost of living, in contrast, public school spending in New York City has been well below average for decades, only approaching the national average at the end of the 1990s boom. Below average results with somewhat less than average resources were enough to generate a demand that the New York City schools be restructured, and its leadership replaced. If school districts elsewhere in the state cannot provide an average or better education with above average resources, their leaders also ought to be removed, and their governance restructured.

Public employees tend to be paid less than their private counterparts, but they also work fewer years in a career, fewer days in a year, and sometimes fewer hours in a day. This is particularly the case for police officers and firefighters, who can work for just 20 years and retire in their early 40s, drawing a pension for the rest of their lives. Other public employees generally retire in their early to mid 50s, and the state constitution forbids reductions in public employee pensions.

Today most private sector workers, in contrast, no longer receive defined-benefit pensions at all, and many employers do not even contribute to their 401(k) plans, plans that in any event are not permitted to pay out until age 62. Those born after 1960 will not receive full social security benefits until age 67, if then, and many of those working in the private sector have no retirement other than social security. Low pay and limited respect, combined with rich pensions, affects the type of worker the government can attract. Along with increasingly cynical and disappointed idealists that signed on out some idea of "public service," public agencies tend to attract only those who, from their first day of work, look forward to not working. Public employees bitterly resent the low pay, and public employee union leaders seldom mention the rich pensions when advocating raises.

The low annual pay teachers receive, relative to other professions, is misleading given that public school teachers in New York State typically work only 180 days per year, an increasing number of which are half days. Other public employees also work fewer days than private employees, typically receiving 20 vacation days, 12 sick days, 10 holidays, and 2 personal days when hired, with additional vacation days after several years of seniority.

Assertions that local government budgets, such as those in New York City and Nassau County, could be balanced through negotiated public employee "givebacks" are unrealistic. In good years, public employee unions have been able to use their clout in the state legislature to secure enhanced benefits through state legislation, rather than negotiating for them in collective bargaining. In bad years, when local governments cannot offer wage increases in exchange for other things, the unions are content to allow existing contract provisions to continue, as state law requires in the absence of new contracts.

Threatening layoffs doesn't help either, because unions love layoffs. Public employees with less seniority do much of the work in public agencies yet earn less money, so laying them off reduces services by more than it reduces costs. Service reductions in New York City do not concern the unions, since the members that matter are retired or live in the suburbs. Laid off employees do not vote in union elections, and thus do not present a threat even in those unions where the elections are real. A better deal for those in seniority posts, who have retired, who are about to retire, or who work for the unions themselves is all that matters to New York's public employee unions. If many of their members must be laid off, and public services must decline, to ensure these higher priorities, that's a choice they are willing to make.

Private sector workers, the ones who pay the bills for public sector workers, are hurting. It is only equitable that public sector workers sacrifice as well. These sacrifices, however, should also be equitable, designed to preserve services and, when balanced by wage increases when the economy improves, make public employment more attractive in the long run. Since the State of New York handed out benefits, outside collective bargaining, in the boom, it is only fair that it also impose the givebacks, also outside bargaining, in the fiscal crisis. Employment cost reductions can only be achieved without catastrophic service reductions the same way that labor costs were inflated: by state law.

Sick leave allows bad employees to have more vacation than good ones, and the resulting cat and mouse game is one that management can't win. Management often ends up hassling innocent employees, reducing morale, even as sick leave abuse by bad employees, protected from termination by civil service rules, brazenly continues. Recognizing this, most private companies have moved to "personal time off," with sick days eliminated and half as many days added to vacation instead. "Personal time off" is then used when an employee is ill, as well as for vacation.

Given the budget crisis, the 12 sick days could be eliminated now by legislation (with half of existing sick leave balances credited to vacation). The law could become effective when contracts expire. Offsetting increases in vacation time and wages would be negotiated later, when fiscal conditions improve. A state law eliminating sick leave for non-teachers would force public employee unions to bargain to get six more vacation days back for the 12 sick days lost, eliminating the incentive for them to simply not agree to a contract.

The elimination of sick days would be the equivalent of a 5.2 percent reduction in pay, but it would only lead to a 5.2 percent reduction in cost if it were accompanied by a 5.2 percent reduction in staffing. Ideally, this would be accomplished through attrition and reduced overtime. Furloughs would be the second best choice, because they would limit the hardship to any one employee, while keeping workers with vital skills on the payroll. An illegal strike by key personnel such as teachers or police could be catastrophic in the short run, but it is actually the third best alternative in the long run, with two days of cost reduction for every day without services. Layoffs are the worst alternative, but the only one that could be implemented without union cooperation.

Therefore, state and city agencies should cut higher- and mid-level budget lines and titles if the lack of union cooperation forces layoffs. Newer, lower-seniority employees would still be fired, because more senior employees would bump them out of the lower titles, but higher-seniority workers would share the pain. They would be demoted, with lower salaries, and would in many cases face a return to line work. Teachers would be pushed back to the classroom, cops back to the beat, sanitation workers back to the truck, social workers back to case work, etc. Faced with this possibility, individuals might find a retirement incentive more inviting, and unions might find furloughs more acceptable.

Unlike other public employees, teachers cannot use vacation time or "personal time off" if they are ill, since their vacation days are determined by the school calendar. To provide equity, however, teachers should be limited to five paid sick days per year, and the school calendar should be extended to 185 days, by state law. As for snow days, the summer vacation of a particular teacher and class could be extended if fewer than five days of instruction are lost to illness - the teacher would be present for 180 days in any event. And half days should be eliminated. Rather than requiring 180 days of school per year, the state should require 1,080 school hours. Otherwise, there will eventually be 180 half-days.

Under Tier 5, public employees could still leave public service in their 40s and 50s with a pension in hand. But they would have to support themselves with other work until the pensions began to pay; today most do so anyway, becoming relatively wealthy as ex-public employees - with both a job and a pension coming in - after having been poor while working for the government.

A Tier 5 would provide equity between future public employees and the private-sector workers who pay their bills, but at the expense of even greater inequality between new public employees and those with seniority in more lucrative tiers. Thus, it could make it even more difficult to attract qualified and motivated public employees in the future. To offset this, state arbitration rules should be modified to require that future contract settlements vary salary increases by pension tier, and offset the relative value of the pensions. Those in Tier 5 would get higher salaries than those in Tier 4, and those in Tier 4 would get higher salaries than those in Tiers 1 and 2. Among other things, this would bring some of the compensation to police officers and firefighters, now deferred into "retirement," into the present when it may be needed to buy a house and raise a family.

The State Constitution states that public employee pensions cannot be "reduced or impaired." In the last boom, in addition to increasing benefits, the state eliminated pension contributions for those employees with more than 10 years of service in Tier 4. It is possible that re-imposing the three percent contribution may be permissible, and not considered a pension "reduction" or "impairment," since actual payments in retirement would not change. The Court of Appeals should be asked for a ruling.

In addition to increasing benefits and reducing employee contributions, the State of New York and its local governments also reduced their own contributions to the pension funds during the boom, based on inflated stock prices. Now they must drastically increase those contributions during a budget crisis, at the worst possible time. This cycle keeps happening, and state law should prevent it from happening yet again. All public agencies should be required to contribute at least five percent of their payroll to the pension funds each year, regardless of the current level of stock prices and the assets of the pension funds.

Defined benefit pension funds, such as those now provided to New York's public employees, are a bad deal for those who work for the government for less than 20 years. This makes it difficult for state and local agencies to recruit mid-career hires, or young people who are not sure if they will stay in government permanently. Defined benefit plans also include an incentive to leave, and a disincentive to keep working, once the requisite age and years of service are reached. As an option, new employees should be offered a five percent employer contribution to a 401(k)-type plan, matched by a three percent - or more - employee contribution, in lieu of participation in Tier 5.

With these sacrifices, public employees would be owed a debt when the economy improves, and public service recipients and taxpayers would have every incentive to pay it. Given the benefit reductions above, and without offsetting improvements in pay, public agencies would be even less competitive in the market for qualified labor. Rather than once again handing out benefits outside collective bargaining, however, the State of New York should learn from its mistakes and allow local officials and state agencies to negotiate higher pay and increased benefits in the collective bargaining process.

Much of the public higher education budget is spent on services other than education itself. Some is used for the "college experience," a package of social and lifestyle amenities for students residing on campus, and some is used for research, sabbaticals, and other intellectual opportunities for professors. According to the 1997 Census of Governments, sixty-two percent of those employed by New York's public universities and colleges did not work as "instructional" workers such as professors, instructors and deans. They worked for "related enterprises" like food service, dormitories, sports facilities, and recreation facilities. And even among instructional personnel, the amount of time spent actually teaching and preparing to teach is low. The growth of non-instructional work for professors, and in non-instructional activities and personnel overall, explains the persistent cost increases in higher education.

While New York continues to pour money into this pricey model, however, other states and private entities are using technology to provide higher education alone, at a vastly reduced cost. This raises a question: what is the public purpose of public higher education? To provide higher education at a price that the children of working people can afford? To provide a subsidized, amenity-filled experience for the affluent, at a cost the children of working people cannot afford or (due to the low quality of their elementary and secondary schools and the associated lack of scholastic skills) are not permitted to purchase? To provide an economic base for declining upstate towns by pouring state tax dollars into residential colleges for young adults who could be more cheaply educated at home?

Internet-based education is a growing share of the marketplace, but it has its liabilities. First, the absence of in-person contact with professors limits quality. Second, internet universities cannot offer real training in the physical sciences, because they lack expensive laboratories. With the addition of a public subsidy, however, the State of New York could create a new state "internet" university that overcomes such disadvantages. It could offer personal contact without expensive bricks and mortar through a requirement for bi-weekly meetings held in the professors' own homes. And the state could provide centrally located laboratories for the use of its internet university students and teachers, beginning with time-sharing in those of existing public universities and colleges.

The "college experience" is a wonderful thing for those who want and can afford it, but not something that there is a public interest in subsidizing. It is particularly inequitable to subsidize a residential college lifestyle by taxing those who never benefit from it, or by diverting resources from New York's increasingly inadequate high school vocational training. According to the 1997 Census of Governments, the average U.S. state college or university covered 46 percent of its costs, while those in New York State covered only 33 percent. Other states have raised tuition by a greater amount than New York State since then. This must, and should, change. The public subsidy for S.U.N.Y. and C.U.N.Y. should be no greater than that provided for the state's new internet university.

With inequitable subsidies and non-educational costs eliminated, it is likely that an internet education would be far cheaper for the student, and pay far more to the professor, than traditional S.U.N.Y. and C.U.N.Y. colleges. Moreover, internet education is more accessible to those who cannot afford four or five years out of the workforce, and those who want to further their education later in their careers. Still, a traditional college would offer an experience that an internet education would not. Rather than decide on one model or another, the State should allow individual choices by professors seeking the best job and students seeking the best education to prevail, and allocate equal subsidies per student to both models of higher education.

Assuming that the internet leads to far fewer students attending residential colleges than today, the state will be left with a surplus of unused dormitory rooms, most in Upstate New York. The need for housing for the elderly, however, is likely to rise as the population ages. Upstate campuses, with the elderly and students sharing space, could help meet that need.

For the past 20 years, American politics has been driven by increasing middle class anger at the poor, especially the minority poor, particularly the non-working, immigrant, Black and Latino, single-parent, drug addicted, recidivist, government-dependent, "ripping off my tax dollars" poor. Some of this was, and is, the result of legitimate frustrations. Since everyone else has to work, how is it equitable that those on welfare did not, and were not at all grateful to those forced to work, in effect, for them? Why should people who act responsibly have to subsidize those who act self-destructively over and over again? Why were they failing to meet their own responsibilities to their children, and then blaming others for those children's problems? Why were they allowed to get away with acting out and making life unpleasant, even dangerous, for others?

Here in New York, the welfare-dependent poor were a convenient explanation for the state's liabilities. For years, New York's politicians and pundits identified the concentration of welfare recipients in New York City as the explanation for the city's and state's high taxes and poor services. Democrats and liberals assailed the shift of this burden to the city, saying those in better off communities should be paying more to help. Republicans and conservatives claimed that New York City's own public policies were creating a culture of dependency, allowing the poor to live off the rest of us as parasites. Yet they both agreed on where all the money was going and this, at least, was a tolerable explanation. New Yorkers had to balance the advantages of New York State as a place to live against the high taxes they had to pay and, in some case, the poor services they received, because (rightly or wrongly) their tax dollars were presumably going to those worse off than themselves. There is only one problem. It wasn't really true then, and certainly isn't true today.

The decline in the welfare rolls has exposed something. Our tax dollars, it seems, are going not to high quality services for ourselves, which those who live in many parts of the state, beginning in New York City, don't get. They are not even going to the poor, at least not anymore. They are going elsewhere, to those who have (let's say) very good deals, and feel fully entitled to them. Some of those are in New York City, and are represented primarily by Democrats. Some are in the rest of New York State, and in the rest of the United States, and are represented primarily by Republicans.

No wonder, then, that so much of the current fiscal discussion is focused on the 800,000 New York City welfare recipients who are no longer there, with conservatives writing article after article stoking fear that they will come back and drain the public treasury, without explaining how we have a fiscal catastrophe without them; and liberals still pretending that New York's social spending is "for the poor," rather than on other better organized, more influential people whose public benefits dare not be challenged. This is absurd. Thanks to the recently-enacted federal farm bill, farm subsidy expenditures will cost the federal government at least twice as much as welfare payments over the next five years. Few object because unlike welfare recipients (according to the 1997 Census of Agriculture) 98.2 percent of farm owners with farm sales over $10,000 were White. Federal expenditures on cash welfare will also be less than the interest on the debts run up under the first two budgets of the Bush administration. It turns out that welfare recipients were a political bargain, attracting a large share of the blame for a small share of the money. New York's Republicans and Democrats alike must be secretly praying for the rolls to rise.

In this context, state policy needs to maintain equity between those still on welfare and those who work, many of whom are among the working poor. And, it needs to create equity between those who are on welfare because they are ineligible for unemployment insurance, and those who benefit from unemployment insurance payments.

It is inequitable for the State of New York to shift the burden of supporting the poor to those who happen to live near them. Doing so provides a substantial incentive for everyone else to leave high poverty jurisdictions, and leads to urban decline. Many of those who leave New York City move to New Jersey, and take the tax base with them. The welfare burden is also crushing for poor, primarily rural upstate counties, making it difficult to reverse their economic decline. The poor of the state, at least those that are willing to meet their responsibilities to the community in exchange for assistance from the community, should be supported by the state as a whole, if not the nation as a whole.

Nonetheless, those elsewhere in the state have a reason to resent the obsolete, "something for nothing" mentality that continues to pervade the political culture of some places. Since welfare is locally managed, it is the counties and New York City that determine if welfare recipients will be required to work for their benefits, or permitted not to. Residents of other parts of the state, who do not share this political culture, should not be required to pay for it. Local taxes, not state taxes, should be used for payments to those welfare recipients who are unwilling to work, and are not required to do so.

Until recently, the U.S. actually had two social welfare programs, one for those who worked (Medicare, Social Security, unemployment insurance, worker compensation) and one for those who didn't ("welfare," SSI, Medicaid). Today, however, most welfare recipients are workers, since they are required to work for their benefits. Many, in fact, are laid off former employees, just like those receiving unemployment insurance payments.

A growing share of New York's workforce is "off the books," or self-employed "freelancers." Examples include New York City's cab drivers and upstate lumberjacks, almost none of whom are recorded as employees anymore. These workers are not in the unemployment insurance system, and have no recourse but welfare when they lose their jobs. Low wages workers receive no benefit from being off the books, since their income is too low for income taxes and the earned income tax credit offsets any payroll taxes they would have to pay. And being off the books makes them ineligible for all kinds of legally mandated benefits, such as social security, unemployment, and worker compensation. It is the employers who benefit from keeping these workers off the books or making them freelancers, by avoiding the legally required employer contributions to these programs. Therefore, workers are increasingly thrown into the "non-worker" welfare system, sometimes illegally, by their powerlessness in the labor market, and no one is doing anything about it. Then they are made to work in exchange for the benefits they do receive.

To restore equity, those fortunate enough to obtain on-the-books, middle class jobs, and who thus become eligible for unemployment payments, should also be required to work for their benefits. In addition to being more equitable, a work requirement for unemployment compensation would provide an incentive to take another job as soon as possible, even if it were not ideal, rather than remaining on the dole. It might induce those who don't really need the money to avoid claiming the benefit at all. If opposition to freeloading is a morally justifiable attitude toward the poor, even those who are required to work, then it is a morally justifiable attitude for everyone.

Economically efficient taxation includes a low tax rate spread over a wide tax base. In New York State, on the other hand, politically efficient taxation includes high tax rates spread over a tax base narrowed by exemptions, privileges, deductions, and tolerated tax evasion. According to the 1997 Census of Governments New York's state income tax collections equaled 3.2 percent of the income of state residents. In Massachusetts, state income tax collections equaled 3.7 percent of income, a greater share overall, yet the Massachusetts income tax on wages is only 5.95 percent while even middle class New Yorkers pay 6.84 percent. New York State's state sales and gross receipts taxes equaled just 2.2 percent of the income its residents, while in North Carolina these taxes equaled 3.0 percent of income. Yet New York's state sales tax rate was 4.0 percent, just slightly lower than the 4.5 percent in North Carolina. New Yorkers also have to pay substantial local sales taxes.

If the state government were to fund a higher share of Medicaid and public education, as proposed above, then New York's local taxes would go down, but its state taxes would have to go up by (in the long run) a lesser amount. That isn't bad in the aggregate, since New York's total state tax collections, as a share of the income of state residents, are below average, while its local taxes are sky high. New York's income and sales tax rates, however, are already high. Rather than increase rates further, exemptions and special privileges should be eliminated, and the tax base expanded.

Since the 1960s, sales taxes have been criticized on egalitarian grounds. They are thought of as regressive, falling especially hard on poor and working people, since the poor spend all of their income while the wealthy save much of it. This idea, however, needs to be reconsidered. Housing is the number one item in the budget of low- and moderate-income households, and there is no sales tax on rent. There is, however, a property tax, one paid directly by less wealthy home owners, and passed on to low- and moderate-income renters in the form of higher rents or diminished maintenance on the low-income housing stock. Therefore, New York's narrow sales tax base, combined with its high local taxes, isn't "progressive." The poor are hurt, not helped.

Moreover, many of the goods and services that New York State exempts from taxation are associated with affluence, not poverty. The state exempts not only basic foodstuffs such as grains, beans, milk, unprocessed meat, and fresh and frozen vegetables, but also "food" products that may be better referred to as "convenience," or "snacks," or "lifestyle image" or "advertising," from pre-prepared meals to Twinkies to soda pop. Actual "food" typically accounts for a small fraction the cost of most items now sold in a supermarket. The state also exempts as "drugs" lifestyle enhancers like Viagra, and antibiotics that are causing a potential health crisis due to over-use. It exempts clothing in a country where donated clothes in excellent condition are shipped out to other nations, because new clothing is so cheap that even the "poor" feel that used clothing is not good enough for them. It exempts services that most working or even middle class people would not have purchased 50 years ago. While buyers can avoid sales taxes on goods through the internet, they cannot do so with services, so the state is in effect exempting the very taxes that are easiest to collect. These exemptions are actually special favors to particular industries, not the consumer, intended to increase sales of some products and services, even as high tax rates depress sales of others.

To raise revenues, almost everything should be taxed. Sales tax exemptions should be limited to rent, basic unprocessed, unprepared foodstuffs, vaccinations and preventive medical care, and used goods (other than motor vehicles and houses) that are sold for at least 50 percent less than the price of similar goods sold new, and for less than the average weekly wage in the state. Thus, a thrifty low- or moderate-income household, one that prepared meals at home from scratch, purchased quality used goods at thrift stores, and avoided services that are not absolutely necessary, would still be able to avoid paying most sales taxes. Thrift and home economics skills are one reason that immigrants and those living in rural areas do so well on moderate incomes, while those raised in our wasteful advertising-driven culture do so poorly. It is time to stop subsidizing obesity and a throw-away lifestyle.

In a progressive income tax system, deductions and exemptions benefit the well off, not those with low and moderate incomes. That's why it's so cynical for politically active "liberals," who tend to be in the upper middle class, to support them. For example, most Democrats oppose "vouchers," an equal amount of money per child that would allow the poor a greater choice of schools. But most endorse tax deductions that provide middle and upper-middle income families with back-door public subsidies for higher education at the college of their choice, whether public or private. Those deductions provide more money to those in higher tax brackets. Those who earn little, or who cannot afford college at all, get nothing.

Twenty years ago some elected officials, those with principles, understood this, and that is why Bill Bradley led a federal income tax simplification effort in the mid-1980s. After the 1986 tax reform, there were a few, generally lower federal income tax rates, and most deductions were eliminated. In the years since federal income tax rates have risen, but dozens of deductions and credits have been added, resulting in (once the capital gains boom of the 1990s was over) falling revenues. The greatest beneficiaries have been those in the upper middle class -- college-educated, two-income households. The greatest losers, given the shift in public spending priorities occurring at the same time, have been the poor and the working poor. The story has been the same in the State of New York, which not only carries forward deductions from the federal income tax code, but also adds a few little deals of its own.

Therefore, all deductions, exemptions and credits should be removed from the New York State tax code, aside from a single exemption per family member (New York doesn't even have one of those for children!) designed to prevent people from being taxed into poverty. Rates would remain the same, but revenues would be increased.

The recent arrest of 18 New York City tax assessors is something all New Yorkers should be thinking about, and not just because of the breathtaking scope and cost of this one act of corruption. The crime that these assessors are accused of - arranging special tax deals for insiders - is just over a barely visible gray line from activities that have become commonplace.

During the past 20 years, New York's Mayors and Governors have made dozens of tax incentive deals, allowing large, influential companies to pay lower taxes than other, less influential firms. Often, the benefiting companies promised to "create or retain" jobs in exchange for preferential tax treatment. While such promises are frequently not kept, the City and State are seldom refunded the money they would have collected. Apologists may contend that had the deals not been made, the State and their local governments would have lost even more tax revenues, because large, profitable companies would leave. How many would have done so, and how many were either bluffing or cashing in on campaign contributions and access to the Mayor or Governor, is debatable. What is not debatable, however, is that "jobs created and retained" accounting, fabricated by the Economic Development Corporations, the Empire State Development Corporation, and similar agencies, does not take into account the potential jobs lost in new businesses, and new types of businesses, that decide not to locate in New York State -- because they would be required to pay higher taxes to offset those lost in deals with more influential firms.

Businesses are always opening and closing, moving, growing and shrinking, due to conditions in particular industries, the relative success of individual firms, and technological and social change. According to New York State Department of Labor data, about one-third of the people working in New York's private-sector are employed by establishments that did not exist five years before. New York needs 60,000 new businesses every year just to break even. The effect of preferential tax deals, diminished revenues for services and higher taxes on others, is no different that the damage done by the allegedly corrupt bureaucrats. These assessors probably believe their actions were justified, since they are so similar to those undertaken by several former Mayors, the state legislature and Governor.

Preferential treatment, tax and otherwise, was clearly on the minds of New York State leaders at a more enlightened point in our state's history. Consider Article 3, Section 17 of the New York State Constitution, which prohibits "granting to any person, association, firm or corporation an exemption of real or personal property." It also forbids "granting any person, association or individual any exclusive privilege, immunity, or franchise whatever." Then there is Article 16, Section 4 which states "there shall be no discrimination in the rates and method of taxation between such corporations and other corporations exercising substantially similar functions and engaged in substantially similar businesses within the state." Similar provisions exist in all state constitutions, many having been enacted after the "robber baron" era of the 19th Century, when special deals and privileges were the norm. But here in New York, as elsewhere, state judges (appointed by the same politicians who cut the special deals to begin with) have interpreted them away.

There may be, in some cases, an argument for charging lower property taxes for new buildings and businesses in declining areas - those with fewer jobs than they once had in the past - where transportation and infrastructure are already in place, the land has already been developed, and both would be wasted otherwise. Such specific breaks could be legislated into the tax code. Otherwise, the state should simply repeal all existing state and local business tax breaks immediately. It may do so under Article 16, Section 1 of the New York State Constitution, which states that "the power of taxation shall never be surrendered, suspended, or contracted away...exemptions may be altered or repealed." Rather than raise taxes on new businesses, those that will provide our jobs in the future, even further, the beneficiaries of special deals should be forced to pay taxes like the rest of us.

Perhaps the greatest loss of tax revenues for state and local governments is the blanket exemption afforded to health, education and social service "non-profit" organizations. These organizations, the tax code assumes, are altruistic charities that perform community service rather than commercial functions. At one time this may have been the case. As a result of the lure of tax advantages and public funds, however, the non-profit sector has attracted a new breed of entrepreneur more interested in affluence for themselves than charity toward others. Some non-profits, such as Blue Cross Blue Shield, have faced up to their changed nature and converted to for-profit businesses. Others have kept the sanctimonious veil of charity while at the same time paying very, very high salaries to those that control them. During the latter phase of the 1990s boom, some non-profits were even talking about stock options for their executives - since non-profits don't have stock, options in other organizations would be issued. Some non-profits are actually "owned" by members of the New York state legislature, get all their funds from state and local government, and provide poor value in return. Rather than charities, these are better described as "non-profiteers."

For purposes of state and local taxes, state law determines whether or an organization qualifies as a tax-exempt "non-profit." Two changes to state law, in the unlikely event that the state legislature were willing to pass them, would reign in the non-profiteers. The first would limit non-profit status to those organizations that get at least 20 percent of their revenues from charitable donations, with no one donor accounting for more than one percent. This would limit tax exemption to those organizations that at least some people were willing to donate to voluntarily, while imposing taxes on those that are funded almost exclusively by government money and charges for services. The second would limit non-profit status to organizations with no employees or affiliated workers that earn more than the Governor. Non-profits are already limited to "reasonable" compensation, but given the power of these organizations in Albany that standard has been loosely applied. A sharper standard would ensure that people were not getting rich on tax subsidized "charity."

Over the past decade, street crimes committed by uneducated, low-income criminals have fallen substantially. Many credit the "broken windows" theory, which holds that allowing nasty people to get away with anti-social behavior emboldens them to even greater offenses. As the "broken windows" theory would have predicted, a crackdown on "quality of life" crimes did, in fact, lead not only to a higher quality of life but also to a lower rate of serious crime. Strange (or perhaps not), therefore, that with regard to white collar crime - consumer fraud, employer fraud, investor fraud, tax fraud - the opposite approach has been taken.

At the federal, state and local level, elected officials, primarily Republicans but also Democrats, have felt free to object to tax and regulatory enforcement against anyone other than drug dealers and tobacco smokers. Regulators and examiners have been underpaid, under appreciated, beaten down and treated like persecutors of the innocent rather than defenders of those who follow the rules. Payment of less than the minimum wage, failure to forward withheld taxes to the government, tax evasion of all kinds, and financial market manipulation have been tolerated, punished with a slap on the wrist, or washed away in a series of global "tax amnesties." Or even individual deals, with lawyers now advertising on radio that those who have cheated can negotiate "offers in compromise" and pay "pennies on the dollar" compared with the taxes others have paid. Given the climate, it is no wonder the Enrons of the world felt free to go over the invisible gray line between pervasive white collar "quality of life" crimes and very serious felonies.

It is past time for someone, anyone, to stand up to this. Rather than yet another liberal "amnesty," or additional "payments in compromise," New York State should beef up tax enforcement. One way to attract aggressive talent would be a bounty-hunter program, with tax enforcers and tipsters permitted to claim one third of the money collected from anyone convicted of a felony. A brief and limited amnesty - one that would require a public admission of guilt published on the internet, back payments with interest, and an audit fee added to the next decade of tax returns - followed by a big time bounty hunter program might begin to make honest people feel like something other than suckers.

During the late 1990s boom, most states followed U.S. Department of Labor guidelines and built up a large balance in their unemployment insurance trust accounts. The State of New York, however, rewarded influential business and labor groups with higher benefits and lower unemployment insurance taxes. As a result, the state's unemployment trust account went broke very early in the recession. It is already borrowing billions from the federal government, money that will have to be paid back with interest, and is increasing unemployment taxes on businesses to sky high rates at the worst possible time. The winners are businesses that benefited from the lower taxes in the 1990s, made their money, then shut down or left the state now that the bills are due. The losers, as always, are those foolish enough to try to start a business or locate a new branch in the state today.

This is economic suicide. It the long run, only new businesses and new types of businesses can ensure the state's economic future. Those who invest in a recession, in the face of poor business conditions, save the state money by reducing unemployment, yet they are taxed heavily under the state's unemployment insurance system as a result of being new and having a poor "experience rating." Instead, they should be temporarily exempted from unemployment insurance taxes altogether.

Those who leave a job to start a business in a recession prevent someone else from being unemployed, either by reducing layoffs at their former firm by one, or by having someone hired in their place. Paying them what they would have been due in unemployment compensation, therefore, is a wash. For image reasons alone, to counteract 30 years of discrimination against the future, the State of New York needs to do something to alert would-be entrepreneurs that the community and the state are now behind them. These changes in the unemployment insurance program should be implemented, and the borrowing from the federal government must stop, even if state general fund revenues must be used to prop up the fund.

Almost all of the proposed policies above, from the elimination of the mandatory local share of Medicaid, to covering an increasing share of public school expenditures, to widening the sales, property and income tax base, would add revenues to and reduce costs for New York's local governments, including that of New York City. Not only would their budget deficits be lifted, but in many cases their property taxes would be reduced, in some cases by a substantial amount, offsetting the rise in state tax collections. In two cases, the state should insist that some of this windfall be used for local tax reductions.

First, today the state imposes a four percent general sales tax rate, lower than in most states, while allowing counties and cities to impose a sales tax of up to an additional four percent. The state sales tax should be increased to five percent, and the maximum local tax reduced to three percent, as a part of an overall Medicaid financing reform package.

Second, the City of New York has gone even farther than the state in exempting large, influential, gradually shrinking and relocating companies from taxes while imposing high taxes on newer, growing firms. While other Americans don't have local personal income taxes at all, New York City's entrepreneurs are forced to pay two such taxes on the very same income, a personal income tax and an unincorporated business tax. The state repealed its version of the unincorporated business tax years ago; it should withdraw the city's permission to continue to collect it at the local level, also as part of the Medicaid reform package.

During the 2002 campaign, in the face of multi-billion dollar budget deficits, New York's posturing politicians of all political ideologies objected to any and all increases in charges for services. Liberals objected on the grounds that services should be free, to keep costs down for the poor and working people. This attitude needs to be reconsidered. Conservatives called payments for services "taxes," and said they were thus opposed. This is misleading political rhetoric. The objection to paying for services is stronger in Downstate New York, since many who live Upstate are used to paying for services such as garbage collection. As the prior discussion of higher education tuition shows, however, the objection is present at the state level as well.

From an economic perspective, charges for services are completely different from taxes. One is required to pay taxes regardless of whether one uses any of the services the tax revenue is used to pay for. Charges, in contrast, need only be paid if and when a particular service is used, and in proportion to the use of that service. Charges for public services are as much a "tax" as charges by private electric companies for electricity, and by private landlords for rent.

In the short run increases in charges may fall more heavily on the poor, since (unlike taxes) they pay as much in charges as the affluent. In the long run, however, experience shows that it is the poor who suffer when charges are kept low. The alternative to paying for services is often not getting them at all, or getting services of substantially diminished quality. Most public-sector charges are levied for infrastructure, always a low priority in a budget crunch compared with politically potent health, education, and taxpayer interests, especially since the negative effect of reductions in infrastructure funding don't show up for years. Low- and moderate-income households are more likely to rely on public transit rather than private automobiles, and public parks rather than private health clubs, so when the infrastructure is permitted to deteriorate they are the biggest losers.

Given past history, New York City residents in particular would be fools to believe politicians and advocates who object to raising fares, tolls, and other charges. Tolls were removed from the East River Bridges early in the 20th century, but the result was 40 years of deferred maintenance followed by 20 years of reconstruction funded by billions of dollars in debt. For 40 years the city's politicians "fought for the people" to "save the fare," but at the end of that period the transit system was on the verge of collapse. New York City residents, unlike those in the suburbs or upstate, were not required to pay fees to cover the cost of recreational facilities like pools. These facilities were not maintained, and many were eventually abandoned. New York's small parks and playgrounds are, in effect, abandoned every ten years, when recessions hit and maintenance stops. The state legislators who passed the law mandating that public restrooms be free are gone and forgotten. In New York City, so are public restrooms.

In addition to ensuring maintenance and quality of service, charges discourage the waste of scarce resources. When New York City's water system was funded by taxes, for example, no one had an economic incentive to fix leaks or use more efficient plumbing fixtures, so usage was high and the city's sewage treatment plants were overwhelmed. Once water metering was introduced, over the objections of advocates of different varieties, water waste, water use and water pollution all fell. Today, New Yorkers throw away more trash per person than most Americans, when the lower level of yard waste is taken into account, and Manhattan streets are overwhelmed with traffic congestion. "Free" trash collection and "free" bridges are part of the reason. Those who can afford to drive private automobiles rather than use cheaper mass transit, and to buy lots of stuff only to throw it away, should not be considered "poor" regardless of their income. Subsidizing those in poverty is one thing, but subsidizing resource intensive consumption is another. As in the case of sales taxes, the affluent and wasteful are hiding behind the actual poor and working people in objecting to increased charges.

Much of this discussion is about New York City, but the same principles would apply elsewhere.

New York City's bridges and highways were built with tolls, but elected officials pandered to the shortsighted by removing them. They were subsequently allowed to deteriorate, and now are being rebuilt. The City and State will be forced to pay hundreds of millions of dollars in debt service each year on the billions borrowed to pay for this. Absent a revenue flow, money used for debt service will take the place of maintenance, and the roads and bridges will be allowed to fall apart yet again. Reinstating tolls on the bridges, and on the parkways and highways at the borders of the city, would provide revenue for these and other major roads to be maintained. And they would allow those traveling at peak hours to be charged for the valuable space their vehicles occupy.

In 2000, the subway's operating cost was $1.25 per ride, just modestly more than the $1.07 the MTA now claims as its average fare. In 1997, prior to three years of cost inflation and with the same fare, the subway probably covered its operating costs. With a fare increase to $2.00, the subway would once again be covering its costs, and with the subway system separated from the bus system in a separate MTA subsidiary, as is now proposed, this would be clear for all to see. Some believe this would be a bad thing, and call a fare increase a "tax" on the poor. This is shortsighted. Having the subway break even, or make a little money, would transform its image and its future.

Covering costs would make the fantasy scenario - lower fares, higher wages for employees, and lower taxes to support transit, all at the same time - less politically potent. In the past that scenario has been achieved at the price of higher debts and deferred maintenance; in the end the fare went up anyway. Profitability would make resentment at "subsidizing" the subway politically unsupportable. Everyone has buses, and nowhere do they cover their costs, so the cost of bus transit relative to the fare is not a source of criticism for the MTA, the city and the region. On the other hand, the perception that the rest of the state, and the rest of the nation, are being taxed to fund the New York City subway provides an illegitimate justification to impose other fiscal disadvantages on the city and its people. It has been held over the head of New Yorkers for decades.

To drive home the message that the subway was not being subsidized to a greater extent than other transportation modes, "operating cost" should be replaced by "auto-equivalent cost" as a measure of cost-effectiveness. Drivers pay the cost of purchasing, maintaining, insuring and operating their automobiles, while the roads they drive on are typically provided by the government. True, auto-related taxes (such as those on motor vehicle fuels) and fees (such as tolls) cover a substantial share of direct spending on road construction and maintenance, but they in no way cover the indirect costs of driving, particularly the occupancy of scarce and valuable space for movement and parking. For ceding their share of this space transit riders are due "rent" from drivers, and since rail transit lines (subway and commuter) are the passenger carrying equivalent of major state highways, it is fair and reasonable that state taxes and toll surpluses cover the cost of maintaining and operating those rights of way. Transit stations are public amenities, like sidewalks and parks. It is also reasonable that their maintenance be paid for by taxes since they increase nearby property values while similar facilities for the automobile, such as parking lots and garages, reduce nearby property values.

That leaves the following rail transit costs as "auto-equivalent": subway car operation (i.e. the Rapid Transit Operations department), subway car maintenance (i.e. Car Equipment), fare collection (a share of Metrocard Operations), liability, third rail power, and subway car purchases. Based on the $1.46 million per car cost of the recent R160 order, a 6,700 60-foot unit fleet, a 40 year subway car life, and thus the need to replace 168 cars per year on an ongoing basis, the real cost of required subway car purchases today is $245 million per year. That is about 18 cents per ride. Increase the presumed car life to 50 years, and the cost falls to 14 cents per ride.

"Auto-equivalent" accounting is also a fair measure of cost effectiveness for the commuter railroads and the PATH system. Commuter railroads do poorly at covering their operating costs, since those costs are inflated by the need to maintain extensive track and many stations relative to their number of riders. Establishing track and stations as a taxpayer responsibility - like roads, parks, and sidewalks - would provide a financial goal relative to fare revenues that the PATH, the LIRR, Metro North and the future MTA Railroad could, and should, meet. They ought to be able to cover the cost of buying, maintaining and operating the trains themselves, raising both fares and productivity if necessary to do so.

A typical New York City side street has three lanes, one used by moving vehicles and two occupied by parked cars. Parked cars occupy more public land than any other use in New York City today, but this was not always true. When many of these streets were built parked cars were absent, and moving vehicles were few, so the streets were used as playgrounds for children and social space for adults. Today only during block parties are those other than drivers permitted to use the public space in front of their homes. And in most neighborhoods, even with all this space allocated to parking, there is not enough. Since parking is "free," households have two or three cars when they could get by with one. This makes it more difficult for others to find a place to park.

A $30 per month fee would be the equivalent of what many drivers pay in excise taxes on spaces in public parking garages, and other drivers pay in property taxes on their own garages. It could not be described as a burden on the "poor," since most of the truly poor are among the 50 percent of New York City households that do not have private automobiles. New York City has the nation's highest auto insurance rates, in part because those whose cars are registered and insured in the city are forced to subsidize city residents that fraudulently register and insure their cars elsewhere, or illegally do not insure them at all. Like other special deals in the special deal state, no one is doing anything to challenge this. Limiting the monthly permit to those the New York State Department of Motor Vehicles identifies as registered and insured in the city would smoke these miscreants out, providing insurance savings for the honest to offset the rise in parking costs.

The on-street parking fee, along with parking meter profits and NYC gasoline taxes, could be use to support street milling and replacement, sign, curb and signal maintenance on non-arterial streets. Dedicating these revenues would ensure that maintenance continues.

One reason that opposition to transportation charges is so great in New York is that New Yorkers already pay more tolls, higher transit fares as a share of cost, more dedicated transit taxes, more parking fees and fines, and higher airport fees than those elsewhere. Motor vehicle fuel taxes are also high. Net of all the transportation related charges and taxes paid, New York City's local government transportation spending - operating plus capital - is negative, and New York State's nearly so. Through a variety of fiscal maneuvers, most involving public debt issued for non-capital purposes, transportation revenues are being diverted to other more politically potent purposes.

This must end. Instead, current transportation revenues should be used not only to operate and maintain the transportation system, but also for "capital" expenditures in the normal replacement category. Every aspect of the state's infrastructure has a limited life prior to rehabilitation or replacement, even given preventive maintenance. To keep up with this, a given number of subway cars and buses must be purchased, highway miles must be resurfaced, and bridges must be replaced each and every year. This expense is ongoing, and should be funded by ongoing revenues, not by bonds. Financing normal replacement with charges would soak up the additional fee revenues described above, allowing lower debts and, therefore, lower taxes and more spending on other things, in the long run. It might also free up borrowing capacity for actual expansions of the state's capital plant, of which there have been very few in the past 30 years.

According the 1997 Census of Governments, 62 percent of the cost of all public garbage collection in the United States is funded by charges, rather than taxes. And many people live in places without public collection, and pay for private collection instead. Since there is no charge for garbage collection in New York City, on the other hand, the real cost of garbage disposal is hidden. As a result people generate more garbage, and oppose any and all proposals to bring the cost of getting rid of it down. This can only get worse. With the price of goods, particularly imported goods, falling we are approaching the point where it costs the city more to dispose of them than it costs people to buy them in the first place.

An accurate charge for solid waste collection requires measuring the trash, but this is too time-consuming and expensive to be feasible in the short run. Simply charging a fixed fee per housing unit, however, would be inequitable in New York City, where so many illegal second and third units have been created but not recorded, and so many families live doubled up. To start charging quickly, and provide some level of fairness, water use could be used as a proxy for solid waste generation. The total cost of residential solid waste collection would be divided by the total level of residential water usage, and then allocated to buildings based on the amount of water they use. This would allow the existing water billing system to be used to start charging for garbage pick up immediately, and provide even more incentive to save water.

Even in the short run, adjustments could be made to provide at least some incentive to produce less waste, and to compensate those burdened by the city's waste collection system. Residential buildings within 1,000 feet of a waste transfer facility could be exempted from the solid waste charge. And the pounds of solid waste per thousand gallons of water could be measured by sanitation district rather than citywide. This would permit lower charges relative to water use in areas where recycling and waste reduction were more prevalent, a community, if not personal, incentive to produce less solid waste.

One hundred years ago working people had much lower incomes, and worked much longer hours, compared with today. Even so, they benefited from a wide variety of privately provided social and recreational facilities. Private pools, sandlot playing fields, and social clubs were common even in the poorest neighborhoods. The work and money required to rent and maintain these facilities, and to operate social and recreational clubs, was obtained from dues, by the volunteer work of club members and, in poor neighborhoods, by donations from others.

As the recent debate over community gardens indicates, many people are prepared to accept the privatization of publicly owned space as long as those who occupy the space have some level of "community" legitimacy. As it happens, the many very small parks and playgrounds added during the Robert Moses era are very difficult and expensive for the city to maintain, since they cannot support a dedicated staff and those sent to maintain them on an episodic basis cannot be effectively supervised. Rather than pretending to maintain these parks as truly public facilities, the city should lease them for a nominal sum to a "community" group, which would then be permitted to limit access to those who pay dues, pay fees, or do maintenance work.

Given that the city is reducing social services to the poor, and provides inferior schools to poor children, how is it equitable that the city provides, in effect, social clubs for the elderly, with free meals, with public money? How is it reasonable that these services are not means tested, and that the elderly who benefit from them - even those who rely solely on social security or SSI - are often better off than the low wage workers hired to clean up after them? With commercial space scarce and expensive, it may be reasonable for the city to provide social centers available for rent for nominal sums. It is not reasonable for the city to pay for social events and meals. The elderly should form clubs, and pay dues, to benefit from these services.

None of the proposals above are likely to win me any popularity contests. Few people appreciate candor when being asked to pay more, or accept less, even if -- especially if -- they had been paying less or getting more than others. Those with special deals have those deals because they have been in a position to manipulate the political system, and after yet another election in which incumbent state officials were uniformly re-elected it is the rest of us who have to be afraid. Shared sacrifice really means that they have already shared, and now the rest of us will be sacrificed.

As the recent election showed, no one has more power than the health care industry in New York, so there is no possibility that Medicaid payments for a given service will be cut. In fact, the health care industry may even reduce the quality of service in retaliation for a freeze on increases in charges, even as other states cut reimbursement rates to save money. Rather than demanding a lower cost of care, New York State is likely to reduce the number of people that benefit from Medicaid. This will not be done through a change in policy. It will be done by throwing up bureaucratic obstacles to the non-elderly getting on the rolls. We'll pay double per person, to benefit fewer people.

In addition, the state may reduce its own budget deficit by imposing a higher local matching share for categories of recipients concentrated in New York City. It already does so now. For the elderly, who are spread throughout the state, the local matching share is 10 percent of expenditures, while for the homeless it is 25 percent or even 50 percent. Under federal law, the state could increase the local share to 30 percent for categories of recipients partially funded by the federal government. For non-federal Medicaid, the entire cost could be shifted to local governments.

"School aid" is likely to remain unchanged, but the other categories of school funding which are not being called "school aid" will be reduced, with New York City bearing the brunt of the reductions. The city's schools received an additional $400 million in aid this year in exchange for a $200 million cut in aid next year. With no further state actions, state funding for city schools will thus be $600 million lower. In addition, since New York City has low property taxes offset by a unique local income tax, the city receives STAR school funding as a partial reimbursement for the local income tax while other school districts do not. This income tax reimbursement is the only reason that New York City's share of state STAR aid, already far below its share of public school children, isn't even lower. Since it can be described as "special" money for New York City and not "school aid," expect this to be eliminated. State funding for public schools in New York City is likely to fall by $1.5 billion or more, over and above any reduction in "school aid" overall.

The state is unlikely to raise its own taxes. It is likely to increase the local share of Medicaid, however, and this will cause local property taxes to rise even further. In New York City, local officials are likely to agree not to criticize this, in exchange for state permission to increase the personal income tax and other income taxes. There may also be givebacks. For example, there is now an additional cigarette tax in New York City, and only in New York City, but half of it is given to the state and spent outside New York City. Similarly, the state may agree to impose a commuter tax, but with half of the revenue kicked back to the state to be spent elsewhere. Even part of a personal income tax increase on city residents alone is likely to be kicked back to the state.

After a huge increase in property taxes, large influential businesses will start claiming they will leave New York City. The city and state will reduce or eliminate their taxes on a case-by-case basis, leaving the entire additional burden on those without political access.

The state is likely to borrow several billion dollars to cover its operating budget, in defiance of the state constitution. It will do so by projecting higher revenues than those that will actually be received, and issuing "revenue anticipation notes." When the purportedly anticipated revenues do not arrive, these will simply be rolled over and over, with the state and many of its local government burdened by the interest, for years to come. Until "realism" and "pragmatism" lead to a higher debt limit and their replacement by long term debt.

There'll be a Tier 5, but not like the one I proposed. There will be no provision to pay higher wages to future new employees to make up for the less lucrative pensions. Instead, the public employee unions will insist, and the state legislature will agree, to even richer pensions for those with more seniority in exchange for passing a Tier 5 for new workers. Expect those with more than 20 years of service to be allowed to retire with full pensions. Expect the state and its local governments to be unable to hire qualified workers to replace them.

Officially, these will not be eliminated. On the ground, they will be hollowed out. Students at state colleges and universities will not have a tuition increase, but they will have to remain in school for additional years since courses required for graduation will not be available. The fare will be kept down, but maintenance will be cut. Street maintenance will also be cut - already the number of malfunctioning traffic lights is increasing. Libraries will be open three days per week. Every school will have sports, art and music on paper, but this might consist or one art or music lesson in a year, and two practices and three games in a season. Only the elderly will not experience service reductions.

No one will announce these priorities, just as the existing priorities have not been announced. No one ever tells the losers who they are. In the long run, however, the quality of public services will have been ratcheted down, and the cost ratcheted up, once again, to the benefit of those cashing in and moving out. Just remember: It doesn't have to happen. It is a choice.