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May 10, 2007

DiNapoli Identifies $2.9 Billion in Additional Spending

The 2007-08 Enacted Budget restructured the State’s antiquated school aid formula and cut the cost of Medicaid, but still represents an overall spending increase of $9.4 billion according to a report on the budget released today by State Comptroller Thomas P. DiNapoli. The rise in spending represents an 8.2 percent increase over last year, more than three times the rate of inflation. DiNapoli’s analysis also found that spending in the budget is $2.9 billion higher than was initially reported when the budget was enacted.

“Thanks to Wall Street, there’s been a lot of economic vitality in New York State,” DiNapoli said. “But that doesn’t mean we should break the bank year after year. The out-year budget gaps are big and getting bigger. Spending is increased by three times the rate of inflation. Our debt service will soon surpass $5 billion a year. That’s $5 billion that we’re not spending on health care or education or property tax relief.”

DiNapoli’s budget report also notes that although there was a consensus agreement that forecast a $575 million increase in revenues over the proposed Executive Budget, the enacted budget actually increased General Fund spending by $1.1 billion.

“The consensus forecast needs to be more than just the first ante in the budget negotiating process,” DiNapoli said. “The purpose of the forecast is to establish a prudent level of spending. And prudence demands that additional revenues above the forecast be used to pay down debt, increase reserves and improve the long-term fiscal health of the state.”

The current budget is expected to generate out-year budget gaps that rise to $3.1 billion in 2008-09, $4.8 billion in 2009-10 and $6.6 billion in 2010-11, with no specific strategy outlined to address the gaps. These gap estimates, which total $14.5 billion over 3 years, have increased by $1.5 billion over what was projected in the Executive Budget in January.

More than a quarter of SFY 07-08 Capital Plan spending is off budget. The Financial Plan estimate for All Funds disbursements fails to include spending for some capital programs, including new school construction projects authorized in 2006-07, and projects at the State University of New York and City University of New York. Only 73 percent of the estimated total Capital Plan spending for 2007-08 of $10.1 billion is included in the Financial Plan, while the remaining 27 percent is labeled off budget.

Despite the significant surge in revenues experienced by the State, the final budget agreement also did not allocate any additional revenues to replenish reserves or to pay down any additional debt in order to reduce the state’s annual debt service burden. DiNapoli noted that New York has the second highest debt burden in the nation.

“The State is running up its credit cards even though we have cash in our pockets,” DiNapoli said. “It’s fiscally imprudent.

“It’s very hard for taxpayers to understand how their tax dollars are being spent. The work on school aid and Medicaid started a real discussion on how the state meets its priority needs. That discussion needs to continue. The Foundation Aid formula brings real reform to the State’s school aid programs and targets help to students who need it most.

“The next step toward budget reform has to focus on spending restraint and the implementation of a budget based on consistent and clear presentation of how the state raises money and how it spends money. It’s all about transparency and the willingness to make choices that recognize how much the state has to spend.”

Click here for a copy of the report.


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