Wednesday, December 31, 2008

Governor Paterson's Financial Request to Obama Administration Weak and Vague on Low Income, Energy and Telecom Proposals

In a December 29 Press Release, Governor Paterson announced he had sent a letter to President-elect Barack Obama asking for federal funding of a wide range of state programs and projects. See Governor Paterson Presents Economic Recovery Agenda to President-elect Obama: Joins Governors Asking Federal Government to Provide Direct Aid to States and Critical Funding for Infrastructure Projects – Paterson: "States and Working Families Need an Ambitious Economic Recovery Package as We Face This Uncertain Economic Climate

It makes good sense for the federal government, as part of its economic stimulus and anti deflation policies, to assist states so that they can contribute to solution of the nation's financial and economic problems. Without such aid, states will need to retrench by cutting jobs and services, or increase taxes, or both, worsening the national economic picture and diluting the effect of other federal stimulus efforts. The states run many programs and have on the boards many "shovel ready" infrastructure projects primed and ready to start promptly if federal funds are made available.

But when one looks at the details of Governor Paterson's proposals, they are weak and vague when it comes to issues affecting low income households and energy and telecom consumers.

Low-Income Weatherization Short-Changed in the Governor's Energy Requests
Governor Paterson lists a variety of energy programs he would fund with new federal aid:
* New York Power Authority (NYPA) Energy Services Program - $188 million
* N.Y.S. Energy Research and Development Authority (NYSERDA) - $168 million
* New York State Renewable Energy Programs - $650 million
* Advanced Metering Infrastructure Projects (AMI) - $286 million.
Except for the NYSERDA programs, some of which aid landlords of multiple dwellings in becoming more energy efficient, these programs do not reduce home energy costs and do not leave more discretionary income in the pockets of low income families who are most likely to spend it in the retail economy. The Governor asked for no specific amount for the low income weatherization program, basically saying the state could do more with more money:
Division of Housing and Community Renewal's Weatherization Assistance Program: DHCR is responsible for the supervision, maintenance, and development of affordable low- and moderate-income housing in New York. As part of this effort, DHCR administers the Weatherization Assistance Program (WAP), a federally-funded program that provides residential energy conservation services to lower-income households. In 2007, DHCR installed energy efficiency measures in 13,987 units. There are 1 million households eligible for this program in New York, and DHCR could significantly expand the reach of the program with additional federal funding.
A New York Times article written by energy reporter Matthew Wald recently underscored the importance and effectiveness of home energy efficiency through weatherization, and the inadequate level of support:
Government aid for weatherization has been modest.

Energy technology research competes for federal aid, said a spokeswoman for the Energy Department. Some states contribute their own money or divert federal money intended to help the poor pay their energy bills.

But utilities that furnish electricity, natural gas and home heating oil have lobbied strongly for programs that provide money to help pay bills.

Although Congress added $250 million to the original $227 million budget for weatherization in the current fiscal year, the number of people receiving weatherization aid is dwarfed by those receiving assistance in paying their energy bills.

"You have six million families a year getting energy assistance, possibly eight million this year, and 150,000 getting weatherization," said Mark Wolfe, executive director of the National Energy Assistance Directors' Association, an organization of state officials.
See Focus on Weatherization Is Shift on Energy Costs, N.Y Times December 29, 2008.

The Governor's energy proposals neglect to set any goal for weatherization in New York state, and instead look more like a wish list of government agencies, businesses, and utilities. How can the Governor not set a goal for weatherization, and not propose to raise welfare grants, yet ask for $286 million in federal aid, along with $25 million in state funds, for unproven AMI meters, which could actually harm low income consumers if used as some propose (to inflict unreasonable. gamed, and possibly manipulated NYISO spot market prices upon people too poor to afford service when they need it most)? See Not so Smart? High Tech Metering May Harm Low Income Electricity Customers.

No Proposal for Affordable Broadband
The Governor's request for federal aid includes a request for infrastructure funds to build out internet access in areas where the cable and telephone duopolies failed to make capital investments necessary to extend broadband service:
Broadband Infrastructure
In this information age, universal access to broadband is essential to our nation's ability to maintain its global competitiveness. In New York, we have 17 broadband projects, totaling $88.6 million, which will help New York reach its long-term goal of ensuring every New Yorker has access to affordable high-speed broadband. Of these projects, nine, totaling $8.5 million, can be completed in 180 days. These include projects to light up dark fiber across the State and county-level private/public partnership projects.
But apart from this "lemon socialism" proposal to do with public funds what is less profitable for the broadband providers, there is no meaningful proposal to address the problem that many households with low and fixed incomes cannot afford the monthly cost of broadband. Neither the Governor nor the Public Service Commission have called upon the federal government, through the FCC or otherwise, to make broadband service affordable to the poor. See Broadband Lifeline for Low Income Households: Why Is the New York PSC Silent?

No Welfare Increase in 2009
As we recently reported, Governor Paterson in his proposed budget provides for no increase in welfare grants in 2009. See Governor Paterson's 2009 Message to New York's Poorest: Let them Eat Pheasant. Increased costs, such as those due to higher utility rates allowed by the Public Service Commission without adequate low income rate assistance, are grinding the state's neediest households deeper into poverty and reducing their already diminished buying power in the state's retail economy. In his request for federal aid, the governor asks for generic federal "block grant" funding for public assistance programs. According to Governor Paterson's letter to President-elect Obama:
The Temporary Assistance for Needy Families (TANF) program provides valuable safety-net assistance by allowing families to meet their most basic needs. In the face of increased need, at least an additional $5 billion in block grant funding should be made available to those states that provide families with basic assistance. In addition, the TANF contingency fund should be increased by $2 billion to ensure that states have adequate ability to meet the emergency needs of families and children.
The Governor's "block grant" proposal makes no assurance that new federal aid would not be used simply to reduce the state share of existing program costs, and there is no promise to use any new federal funds to adjust upwards the TANF grant levels, which have not been changed for 18 years.

Vague on Education Aid
Governor Paterson asks for funds to support $966 million in school construction projects and a vague national boost to federal funding for education through a "flexible block grant":
Flexible Education Block Grants - $250 Billion. The current economic climate is forcing states to consider significant cuts to P-16 education funding. Substantial federal investment in education will be needed to stem this tide. A flexible education block grant of at least $250 billion would provide governors with much needed fiscal relief, and mitigate the need for cuts to vital education programs.
In contrast, Governor Corzine of New Jersey is specifically seeking funding to bolster special education and No Child Left Behind programs, both of which substantially affect low income children:
States need the federal government to begin fully funding its obligations for programs like No Child Left Behind and special education funding. For special education, the federal government only pays 17 percent of total costs, when it’s supposed to be covering 40 percent. Since the inception of NCLB, the federal government has underfunded the program by $1.2 billion in New Jersey alone.
Governor Paterson's generic proposal for more federal funding for school construction projects and for "block grant" funding lends no assurance that it would not simply displace state funding. As stated in a recent New York Times Op Ed:
Local control of schooling - which means local financing of schools - is an injustice, masked as a virtue, so deeply ingrained in the American mind that no politician in either party dare challenge it. But America's obsession with local finance, which made perfect sense in the 19th century, is now sinking us morally and economically.

**** Since World War II, however, we have segregated ourselves into a multitude of tiny tax enclaves. The last important official to look hard at the consequences was Richard Nixon. His commission on school finance, headed by the chairman of Procter & Gamble, issued a report in 1972 that urged states to equalize financing disparities, and proposed spending a little federal cash to help.
See Nixon's the One - to Imitate for Education. Governor Paterson's vague proposals for construction aid and for "block grant" funding lend no assurance that it will not perpetuate instead of alleviate education inequities that have arisen in New York's antiquated structure of local school financing, which has resulted in vast disparities among school districts. Indeed, Governor Paterson's proposed budget for 2009-10 would slash education funding, an agenda that has drawn the opposition of the New York State Board of Regents.

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In sum, the Governor is on the right track to seek federal aid for New York, but his proposals need to be refined so that any infusion of new federal economic stimulus aid will not "trickle down" to the poor, but, rather, "percolate up." This can be done by bolstering disposable incomes and jobs of low income consumers through weatherization, welfare increases, restoration of telephone Lifeline aid to reach the more than 600,000 eligible households not now receiving it, broadband assistance, and better targeting of increased education aid to low income communities.

Update 1/3/09 -- See Governors Seek $1 Trillion in Federal Aid Over 2 Years ("The money would finance schools, public works projects, social services and tax cuts for the middle class, according to an economic stimulus plan presented by the governors").

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