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July 15, 2010

DiNapoli: Budget Assumptions Could Leave State Scrambling

Budget Process Badly Flawed

New York State Comptroller Thomas P. DiNapoli today warned that $4.8 billion in optimistic budgetary assumptions could result in a current year deficit unless state spending is tightly controlled. In a preliminary analysis of the enacted 2010-11 state budget bills, DiNapoli criticized the piecemeal, secretive budget process and urged lawmakers to enact budget reforms to address the state’s serious structural imbalance.

“This was a difficult budget,” DiNapoli said. “But the degree of difficulty was driven higher by the failure to act decisively. Three and a half months into the state fiscal year and the budget still isn’t fully done. Even with the Governor’s vetoes, budget balance is still tenuous. And this year’s budget does not adequately address out-year budget gaps.

“What we needed from Albany was leadership and reform. What we ended up with was a late budget with no real answers to New York’s chronic budget problems. I called last year’s budget a ‘buy-time’ budget because all it did was postpone the inevitable. This year, we have a wasted time budget. More than three months of the fiscal year have been wasted, and so has the opportunity for reform and repair. New Yorkers deserve better.”

DiNapoli has proposed a number of fiscal reforms to address long-standing deficiencies in the state’s budget process. DiNapoli would require the Governor to identify actions to close out-year gaps, require the Executive and Legislature to identify all revenues that are available for spending, restrict the use of one-shot revenues to pay for ongoing expenses, prohibit blanket sweeps, end back door borrowing, prohibit borrowing for operating purposes and increase transparency in budget documents.

DiNapoli’s preliminary review of the enacted state budget bills found:

  • Spending Growth: The enacted budget bills project All Governmental Funds spending of approximately $136.5 billion, including $2.1 billion in payment delays from SFY 2009-10. This is an increase of approximately $9.6 billion, or 7.6 percent, from SFY 2009-10. When adjusted for delayed payments from SFY 2009-10, projected spending will increase $5.4 billion, or 4.2 percent. This rate of spending growth is more than twice the rate of inflation.
  • High Risks: DiNapoli’s analysis identified risks of $4.8 billion that could either not materialize or come in lower than projected. Examples include $1.1 billion from the FMAP program, collection of taxes on cigarettes and other items on Indian Reservations and a temporary repeal of the tax exemption on clothing costing less than $110.
  • Over Reliance on Temporary Funds: The enacted budget bills rely on approximately $14.4 billion in non-recurring or temporary resources, which virtually guarantees that the state will face significant projected gaps between spending and revenue next year and beyond. The state has used federal stimulus funds to backfill budget shortfalls. There is no plan to align spending and revenues or address how the state will replace the temporary federal funding.
  • Out-Year Budget Gaps: Because the enacted budget bills rely on more non-recurring and temporary actions to close the projected budget gap, out-year gap projections are expected to be higher than in the Executive Budget by at least $1 billion, and will likely exceed $7 billion in SFY 2011-12. Out-year deficits will also be larger if the economic recovery stalls or if resources in the budget fail to materialize fully.

The Comptroller does not certify the budget. The Comptroller’s legal authority does not allow him to reject a budget. A law passed in 1998 requires the Comptroller to determine if the Legislature has acted on all parts of the budget and whether that final budget contains enough spending authority for ongoing state operations and local assistance. The purpose of the legislation was to hold legislators paychecks until the budget was passed. Because the Senate has not yet acted on the revenue bill and DiNapoli’s office has not finalized its review of the budget, legislators have not been paid.

Click here for a copy of the report.


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