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February 7, 2012

 

DiNapoli: Executive Budget Continues Positive Fiscal Path

Risks Remain with Uncertain Economy; Some Proposals Erode Oversight


The State Fiscal Year (SFY) 2012-13 Executive Budget continues progress made in the current enacted budget to close an immediate projected gap as well as narrow out-year shortfalls, according to an analysis released today by New York State Comptroller Thomas P. DiNapoli. The greatest threat to maintaining a balanced budget remains the sluggish economic recovery that could lead to lower-than-expected tax collections.

The proposed budget also includes proposals that would give the Executive greater powers that would reduce long-established checks and balances, and the Tier VI pension proposal does not provide for the costs of implementation.

"With the current year's budget, the Governor and Legislature made progress toward aligning state spending with revenue on a recurring basis," DiNapoli said. "This year's Executive Budget proposal continues that trend and substantially reduces out-year deficits. However, this progress should not be made at the expense of transparency, appropriate checks and balances, and the realistic and necessary safeguarding of public dollars."

As chief fiscal officer for the state, the Comptroller annually examines the Executive Budget proposal and the Enacted Budget. He also issues monthly reports on the state's cash position.

The $3.5 billion projected General Fund gap for SFY 2012-13 is closed, in part, with revenue from temporary personal income tax (PIT) changes, recurring savings, and minimal non-recurring actions. The projected deficit for SFY 2013-14 is estimated at $715 million if the Executive's proposal was enacted in full, less than the multi-billion dollar deficits projected a few budget seasons ago. Cumulative deficits through SFY 2015-16 are projected to decline by more than 50 percent from $16.4 billion to $7.4 billion.

DiNapoli's report identified several areas of risk in the proposed budget that could make achieving the expected level of revenue or savings challenging, including:

  • Slower Tax Growth: General Fund tax collections are projected to end the current year $702 million below original estimates when the additional PIT revenue from December actions is excluded. This reflects slower projected growth in tax revenue in the second half of the year.
  • Global Economic Problems Remain: Further economic slowdown could significantly depress revenue and necessitate higher spending. Unrealized revenue or savings assumptions could also translate into a mid-year budget challenge.
  • Questions on Federal Funding: The Executive Budget does not include potential reductions in federal funding resulting from the Budget Control Act of 2011. If automatic federal funding cuts scheduled to begin in January 2013 occur, New York State and local governments could lose $5 billion in federal funding over nine years. The Executive Budget also relies on new federal funding for the proposed New York Works infrastructure initiative at a time when federal support is uncertain.

Proposals that reduce oversight or do not indicate costs for implementation include:

  • Expanded Control for the Executive: The proposed budget includes language that would allow the Executive to move spending authority from one agency to another with minimal oversight, or legislative input, and without regard to the original intent of the funding in the Enacted Budget as approved by the Legislature. Also, public authorities would be authorized to transfer monies to any other public authority as long as the transfer is approved by their governing board. This raises the possibility that an authority could use monies generated for one program or purpose, such as tolls intended for highway or bridge maintenance, for an entirely unrelated purpose.
  • Reduced Oversight: The Executive Budget continues programmatic initiatives intended to improve government efficiency. However, the proposed budget includes provisions that also reduce transparency, accountability and oversight. For example, the Executive proposes to exempt agency contracts from the State Comptroller's review and approval. DiNapoli noted that the Comptroller's office ensures that contracts are awarded fairly and openly and are the best value for taxpayers. While the Comptroller's office has 90 days to review the contracts most contracts are approved within 13 days, and one-third are approved within five days.
  • No Costs Identified for Tier VI Implementation: The Executive Budget proposes a new Tier VI pension plan for the State and New York City public pension plans, which includes reductions in benefits and increases in employee contributions in comparison to the current State and New York City plans. There are no costs noted for the implementation of the new tier. According to actuaries in the State Comptroller's office, the proposal could cost New York state government from $7 million to $16 million to start and operate. The cost for implementation for local governments has not been calculated.

The temporary changes to the state's PIT brackets enacted in the December 2011 extraordinary session of the State Legislature are projected to raise an additional $385 million in the last quarter of the current fiscal year and $1.9 billion in new revenue in the upcoming fiscal year. These tax changes expire at the end of 2014. Other actions from December – including the partial repeal of the MTA payroll tax – added costs, resulting in a net benefit of $1.5 billion.

Go to http://www.osc.state.ny.us/reports/budget/2012/2012_Review_Executive_Budget.pdf to see Comptroller DiNapoli's complete analysis of the Executive Budget.


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