Budget

New York’s Budget

At more than four months late, this year’s budget process once again has proven that, when it comes to spending taxpayer’s money, Albany is a joke. On top of that, the state faces budget gaps of $30 billion over the next three fiscal years, even after closing the budget gap of approximately $9 billion for the fiscal year beginning April 1, 2010.

When it comes to New York’s budget, we therefore face two problems: 1) meeting our needs in a fiscally responsible way, and 2) ensuring that the budget process is reformed.

Fiscal Responsibility

At $135 billion, this year’s budget grew at nearly 8% from last year – more than four times the rate of inflation and during a time of steep economic decline. While we must meet the needs of our citizens in a responsible way, we also must spend our money wisely and get the most out of government for it. For example, there are now more than 1,000 state agencies, comprised of a dizzying array of boards, and commissions, offices and public authorities. Each year the state spends over $20 billion on operations and more than $15 billion on salaries and non-personnel services. We can wring out much of the fraud and waste in government by restructuring our state operations – and either passing those savings on to the taxpayers or reallocating them to places they are most needed. We must:

• Save billions annually by consolidating and/or eliminating all unnecessary state agencies and authorities, which account for 93% of all public indebtedness in the state and 85% of its infrastructure.
• Restructure how we approach providing government services by putting into place a strong system of performance management which will measure and improve the quality and efficiency of providing services.
• Mandate an overhaul of the executive branch and look for ways to rein in its size – now at nearly 200,000 workers.
• Save billions in control costs by making Medicaid more efficient. New York currently spends over $50 billion a year on Medicaid, 69% more per beneficiary than the national average. One way to do this is to take advantage of the enormous buying power of New York State to reduce costs of pharmaceuticals. We must combine the purchases of the State, local governments, school districts that would reduce costs and share savings.
• Save up to $350 million annually in the education budget per year by encouraging regional collaboration and consolidation of services.
• Save up to $200 million a year through a more efficient administration of the New York State Health Insurance Program (NYSHIP).
• Enact pension reform – the fastest growing area of the budget outside of Medicaid.
• Encourage savings in local health care costs by eliminating barriers to municipal health cooperatives across counties and regions.
• Encourage savings by overhauling New York’s system of local government – an outdated system of over 10,500 government entities.

The Budget Process

I support the findings of Staff Report to the New York State Senate Select Committee on Budget and Tax Reform. We need to do several things in order to move the budgeting process to sound footing:

Forecasting

• A later start date for the fiscal year could provide forecasters with more accurate revenue information.
• A legislative budget office or an independent budget office could play a role in establishing a more accurate and less politicized revenue forecast.
• A new budget office, the Office of the Comptroller or an arbitration panel could also assist in establishing a binding official state revenue forecast.

Transparency

We must use the legislature to create more transparency in the budgeting process. Conference committees need to be given more of a say in the process. For conference committees to be viewed as more than mere “window dressing,” larger sums of funding need to be authorized to them by leadership as they work out difference between Senate and Assembly budget bills.

Flexibility

New York’s practice of budgeting on a cash basis has created the impression that it has a flexible planning process. But it is one that does not accurately represent the income earned in a fiscal year or the liabilities incurred during the same period. This non-accrual budgeting blurs the State’s actual fiscal reality and lures it deeper into debt, resulting in more rigid legislative actions.

• Lawmakers need a truer presentation of the State’s financial condition, which can be provided through the adoption of Generally Accepted Accounting Principle (GAAP) standards.
• While GAAP standards are a remedy for New York’s dangerous habit of budgeting primarily for the short-term, they alone do not guarantee long-term financial stability. A multi-year budgeting process paired with GAAP standards would shift lawmakers’ focus to the long-term and afford them the time to anticipate, prepare for and respond to changes in the state’s fiscal picture.
• New York’s lack of performance measurements for state-funded programs leads to irregular appropriation practices and rigid across-the-board cuts. A performance budgeting system that ties funding to results would provide lawmakers with more flexibility in making budget decisions.