New York Gov. Andrew Cuomo's newly enacted tax-levy cap of 2 percent (give or take some allowances) will stop the situation from worsening, but it won't get better without far-reaching structural reform that the governor and legislature continue to resist.
California and New York have one important economic advantage in common: vast reserves of oil and gas. Trapped for eons in deep-underground shale deposits, they can now be freed by hydraulic fracturing.
It is in this area - energy development and exploration - that New York has proved it really deserves to stand alone on the bottom rung of state economic policy.
Just last week, California's famously liberal, green-friendly, Democrat-dominated assembly overwhelmingly rejected a bill that would have banned oil and gas hydrofracking. New York, by contrast, is now in the fourth year of a state-imposed moratorium that has prevented fracking of the gas-rich Marcellus Shale in its economically stagnant upstate region, even as neighboring rural Pennsylvania enjoys a boom.
Cuomo continues to hold up the issuance of gas-drilling regulations, a decision he may now delay until 2014.
Unleashing a cheap plentiful supply of gas wouldn't just create jobs in the drilling business; it could also be a boon to many manufacturers staggering under high costs in both states. California officials, at least, are hesitating to squander this opportunity.
New York's fracking ban - both in its immediate impact and the signal it sends to investors and entrepreneurs across the country - is a decisive mark against the state.
Fracking aside, New York looks worse than California even when graded on a curve that plays to the strengths of both states.
While some groups have been criticized for basing their economic report cards too heavily on taxes, the Boston-based Beacon Hill Institute produces a State Competitiveness Index that also weighs human resources, technology, business incubation and openness, in addition to taxes and environmental regulations.
On the 2013 index, California ranked a close-to-respectable 24th. New York could manage no better than 34.
In the final analysis, our precise positions on such scales don't matter. Obviously, California and New York both have a lot of work to do before they can compete more effectively with the U.S.'s growth hot spots.
In the meantime, we can at least console ourselves that we have a downwardly mobile rival.
Memo to Illinois: Keep it up!
McMahon is a senior fellow at the Manhattan Institute's Empire Center for New York State Policy. He may be reached by email at ...@empirecenter.org. (The center ranked West Virginia 48th of the 50 states for 2012.)