Economic Change and Fiscal Planning: The Origins of the Fiscal Crisis in New York State

What can policy makers learn from the fiscal experience of New York during the 1980s? By most measures, the state wentfrom a position offiscal strength in the early 1980s to fiscal crisis by the end of the decade. In their analysis of demographic, social, economic, andfiscalpatterns, Roy Bahl and William Duncombe show that the lack of long-term fiscal planning and short-term discipline were the root causes of the turnabout. They callfor greater use of both, as well as tax reforms that will better reflect the changing reality of local and state economies. Total income in New York State in 1990 was $395.3 billion, almost the same size as that of Canada. Based on its per capita income, New York would rank as one the richest nations in the world.' The state is home to some of the largest corporations and leading universities; it is blessed with good seaports and has developed a strong transportation infrastructure; its politicians are and always have been national leaders, and New York's rich melting-pot history has made the economy a center of economic development energy. Metropolitan New York City is one of the world's largest urban agglomerations and the most important financial center.