The State of the State begins with an honest analysis of the crisis that we face. In government, as in life, you can never solve a problem if you refuse to acknowledge it. We have the worst business tax climate in the nation, period. Our taxes are 66% higher than the national average. Upstate is truly an economic crisis. In real GDP, from 2001-2006, upstate New York grew about 1.7% per year while the average in the nation was 2.7%. The costs of pensions are exploding, 1.3 billion in 1998-1999, projected for 2013, 6.2 billion - a 476% increase and its only getting worse.
The State of New York spends too much money, it is that blunt and it is that simple. Our spending has far exceeded the rate of inflation. From 1994-2009, inflation was about 2.7% per year; medicaid when up over 5% per year and education went up over 6% per year. We just can’t afford those rates of increase.
And most damaging, our expenses in this state far exceed revenue. We’ve been focusing on this year and the deficit this year, which is a very large deficit about $10 billion, and that is a problem and it is a major problem. Next year, the problem goes to $14 billion. The year after, the deficit goes to $17 billion. This is not a one year problem my friends. This is a fundamental economic realignment for the State of New York.
Not only do we spend too much, but we get too little in return. We spend more money on education than any state in the nation and we are number 34 in terms of results. We spend more money on Medicaid than any other state in the nation and we are number 21 in results. We spend about $1.6 billion per year in economic development and we are number 50 in terms of results. We are spending more, and government is growing more.
And the large government we have is all too often responsive to the special interests, over the people of the State of New York. The proof is in the pudding. And New Yorkers are voting with their feet. Two million New Yorkers have left the State over the past decade. What does this say? It says we need radical reform, it says we need a new approach, we need a new perspective and we need it now. This is a fundamental realignment for the state. You can’t make up these kinds of savings over this long of period of time through a budget cutting or trimming exercise. We are going to have to reinvent government. We are going to redesign our approach because the old way wasn’t working anyway, let's be honest.
Because what made New York the Empire State was a not a large government complex, it was a vibrant private sector that was creating great jobs in the State of New York. That’s what made us the Empire State once and that’s what’s going to make us the Empire State again. At the heart of this State is business. And we have to relearn the lesson our founders knew and we have to put up a sign that says New York is open for business. We get it. And this is going to be a business friendly State.
Next, we are going to have to confront the tax situation in our State. The property taxes in New York are killing New Yorkers. Thirteen of the sixteen highest tax counties are in New York when assessed by home value. In absolute dollars, Westchester County has the highest property taxes in the United States of America. Nassau County has the second highest property taxes in the United State of America. It has to end, it has to end this year. We have to hold the line on taxes for now and reduce taxes in the future. New York has no future as the tax capital of the nation. Our young people will not stay. Our business will not come.
Put it simply, the people of this state simply cannot afford to pay any more taxes, period. We need to transform our budget. We need to hold the line on taxes, we need a state spending cap and we need to close this $10 billion gap without any borrowing.