Here’s the really bad news: the full impact of the financial crisis in New York has yet to be felt.
The dirty secret of Empire State budgeting is that New York City depends disproportionately on Wall Street for its budget and New York State depends on New York City.
In the last four months, the financial landscape has changed dramatically. Investment banks that have been the engine of the city’s tax revenue for decades have disappeared entirely or morphed into restricted new entities. According to E.J. McMahon, my colleague at the Manhattan Institute, between 1980 and 2007 the securities industry’s share of wages in the state rocketed from 3 percent to 18 percent, with the average Wall Street salary and bonus rising to $379,000. Wall Street revenues made up 20 percent of the state’s budget. So the 40,000 local jobs lost in the financial sector are only the beginning. We’re not facing a cyclical downturn; we’re facing a fundamental alteration of the facts of financial life in New York. And the 20 percent unemployment in some upstate counties will not help ease the squeeze.
This author puts most of the blame on the Public Unions. And to be sure, they deserve their share of the blame. But a large part of New York’s problems are demographic. New York has a rapidly aging population upstate. Few young people stick around. This problem was always going to kill the state regardless of public pensions. They just make the problem worse.