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May 20, 2011

 

DiNapoli: Enacted Budget Addresses Structural Imbalance

Progress Highlights Need for Permanent Fiscal Reform


The State Fiscal Year 2011-12 Enacted Budget makes significant progress in addressing the state's structural deficit primarily through spending reductions and without relying heavily on temporary revenue, one-shots and fiscal gimmicks, according to a report issued today by State Comptroller Thomas P. DiNapoli. The report points out that, while this year's effort involved significant budgetary discipline, continued vigilance is needed to ensure future budgets do not regress to fiscally irresponsible practices.

"The Governor and Legislature deserve credit for completing the budget process on time. In addition, the Enacted Budget provides recurring actions intended to address the $10 billion budget gap and reduce the state's structural imbalance," DiNapoli said. "While this budget sets New York on a more sustainable fiscal course, we cannot let this progress be undone in future budget years. Fiscal reforms must be set in law now to ensure the state doesn't fall back into its old, bad habits."

DiNapoli's report on the SFY 2011-12 Enacted Budget notes there is still substantial risk that the budget could fall out of balance. For example, how certain budget savings targets will be achieved has yet to be specified and could be difficult to attain. This includes $1.5 billion in savings from agency redesigns and workforce actions, at least $1 billion in Medicaid cuts and $100 million in facility closures. In fact, the Financial Plan acknowledges that in some cases, such as Medicaid, there are no assurances cost savings will be reached in this fiscal year, despite the fact that the budget contains administrative mechanisms to help reach savings targets.

DiNapoli's report said that while $10 billion in gap-closing actions in this current fiscal year minimized increases in state taxes and fees, the impact of spending reductions on local services and the economy remains uncertain. School budgets for the upcoming school year include layoffs and service reductions. Also, while the economic impact of Medicaid reductions and correctional facility closures are undetermined, they could be significant.

DiNapoli's report noted the Enacted Budget reduces the state's projected cumulative four-year structural deficit by $53.5 billion, from $63.3 billion to $9.8 billion through 2014-15. However, General Fund disbursements are still projected to grow by 22.7 percent while revenues are expected to increase by only 10.9 percent over the same period.

Comprehensive fiscal reform is needed to help the state address its persistent budget challenges and ensure balance is attained in each budget cycle. DiNapoli has proposed such reforms including requiring the Executive to identify actions to close out-year gaps in the Financial Plan; imposing a binding revenue forecast; and enacting real debt reform to ban backdoor borrowing by public authorities and restore voter control over debt.

To view DiNapoli's report on the SFY 2011-12 Enacted Budget, visit: http://www.osc.state.ny.us/reports/budget/2011/2011_enactedbudgetreport_0511.pdf.

DiNapoli also released the April Cash Report, which can be found here: http://www.osc.state.ny.us/finance/finreports/cash/monthly/april11.pdf.


 

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