February 13, 2013
DiNapoli: Executive Budget Continues Spending Restraint in the Face of a Challenging Economy
The 2013-14 Executive Budget continues the state’s effort to move toward long-term structural balance and reduces projected out-year budget gaps while addressing infrastructure needs, including the recovery from Hurricane Sandy, according to a report released today by State Comptroller Thomas P. DiNapoli.
DiNapoli’s report notes several concerns with the proposal including: an increase in the state’s debt burden; reliance on new temporary revenues; federal aid that may not materialize; and economic projections that might prove too optimistic.
“New York’s fiscal challenges are significant for the foreseeable future. In the face of a challenging economy, this budget appropriately restrains spending. However, it includes risks on both the spending and revenue sides of the ledger,” DiNapoli said. “It increases our debt burden and relies on temporary actions that will get us through short-term problems but pushes off some hard choices for another day. Clearly the state is facing difficult issues, but provisions of this budget need to be openly discussed by the Legislature so taxpayers know how resources are being used.”
The report also identifies proposed measures to enhance Executive authority that would likely help balance the budget, but may reduce transparency and long-established checks and balances. Such measures include:
DiNapoli’s report notes that economic projections in the Executive Budget include growth of 4.6 percent in wages and salaries in the state during 2013, and total employment growth of 1.3 percent, more optimistic than some other economic forecasters. The Executive Budget also assumes personal income tax collections will rise 6.6 percent, though that level of growth has not been achieved in recent years. The plan includes other revenue assumptions that have not materialized in the past, such as $175 million in proceeds from a not-for-profit health insurance company conversion and $133 million from Native American casinos.
The state also faces the potential loss of federal aid associated with Medicaid funding of services for the developmentally disabled, which is not addressed in the proposed budget, although the Division of the Budget has stated that it is assembling a contingency plan. Further risks associated with federal aid include the results from the deficit-reduction negotiations currently under way in Washington, as well as the timing of federal disaster assistance reimbursements.
DiNapoli’s report finds the budget proposal would expand the issuance of debt through public authorities by creating a new bond financing program backed by sales tax revenues. The issuance of such bonds would increase the state’s dependence on so-called “backdoor borrowing,” rather than presenting bond act proposals to the voters for consideration. The budget also expands the use of bonds backed with personal income tax revenue. DiNapoli has put forth a number of reforms to rein in state debt and put voters back in control of when debt is issued.
“At a time when New York’s debt capacity is shrinking rapidly, this budget increases public authority borrowing authorizations by at least $3.3 billion,” DiNapoli said. “We need more effective debt reform that gives taxpayers a voice in balancing the costs and benefits of any new borrowing.”
The Executive Budget proposes to eliminate all state reporting requirements for local governments and school districts as of April 1, 2014, except those approved for continuation by the Executive’s Mandate Relief Council. This change could result in the elimination of currently required annual reports on the financial condition of local governments and school districts that are filed with the Comptroller. The information in these reports is essential for monitoring potential fiscal stress in more than 2,300 local governments and school districts across the state, DiNapoli said.
Additional noteworthy aspects of the Executive Budget include:
The Executive Budget also proposes to give the Comptroller and the Board of the New York State Teachers’ Retirement System the option to implement a new Stable Rate Employer Contribution Plan for counties, cities, towns, villages and school districts, which is currently under review by each system. DiNapoli has expressed concerns with this proposal and is reviewing its potential impact on the actuarial soundness of the New York State Common Retirement Fund, its effects on local governments and other issues.
For a copy of the budget report visit: http://www.osc.state.ny.us/reports/budget/2013/review_of_executive_budget.pdf