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DiNapoli: Gov. Cuomo's proposed budget continues fiscal progress

by jmaloni

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Mon, Feb 24th 2014 02:00 pm

Gov. Andrew Cuomo's executive budget continues efforts to control costs while tackling tough issues, according to a report released Monday by State Comptroller Thomas P. DiNapoli. The report also points out details are lacking on spending changes required for balance in the coming years.

"New York state is in its strongest fiscal position in years, and Gov. Cuomo and the Legislature deserve credit for putting us on the right path. The executive budget holds the promise that New York can achieve ongoing balance after decades of structural gaps," DiNapoli said. "Still, without specific proposals on how spending will be limited to 2 percent in the coming years, it remains to be seen how the state will stay on track and how future surpluses can be achieved, especially if the pace of economic recovery slows. The state needs a long-term plan to close future budget gaps, as I have called for, or we could get sidetracked and fall back on short-term solutions."

As chief fiscal officer for the state, the state comptroller annually examines the executive budget proposal and the enacted budget. He also issues monthly reports on the state's cash position. The report released today examines the executive budget as revised by 21-day and 30-day amendments.

Based on Division of the Budget projections, including all proposed budget changes, the state faces the risk of general fund out-year gaps totaling $1.5 billion in 2015-16, $2.2 billion in 2016-17, and $3.4 billion in 2017-18, if unspecified savings from the 2 percent spending limit are excluded. Such gaps would, however, be smaller than those projected in other recent budgets, according to the report.

DiNapoli noted several risks to the proposed state financial plan, including the pace of the economic recovery and its impact on tax receipt projections. For example, in state fiscal year 2014-15, personal income tax withholding collections are projected to rise 5.7 percent, a noticeable increase from the 3.8 percent estimated for the current fiscal year.

Other risks include uncertainty over revenues from public authority transfers, fund sweeps, and abandoned property transfers, reliance on federal assistance, and the gap risk associated with the assumed 2 percent out-year spending limit. The budget relies on approximately $4.6 billion in temporary funds, not including an additional $2.7 billion in temporary federal disaster assistance.

The DOB estimates the state will end the current fiscal year with a $310 million surplus, and plans to use these resources for budget-balancing purposes in state fiscal year 2014-15. DiNapoli released a state cash report Friday showing year-to-date tax collections of $58.3 billion were $2.4 billion higher than last year, but continued growth in the remaining two months of the fiscal year will be needed to produce the expected surplus.

DOB projects the state will realize small surpluses annually beginning in state fiscal year 2015-16 if spending from state operating funds is held to 2 percent growth. However, meeting the spending target may be a challenge because programs that account for more than half of state operating funds spending may be difficult to adjust and are projected to increase faster than 2 percent.

While the executive budget details how spending from state operating funds is held to 1.7 percent in the upcoming fiscal year, it does not provide such detail for out years. DiNapoli has proposed reforms to New York's budget process that would require the executive to identify how out-year gaps would be closed as part of the state's financial plan.

DiNapoli reported the executive budget:

•Projects all funds tax receipts will rise 2 percent in SFY 2014-15. Personal income tax withholding, projected at $35 billion, is the largest single element of overall tax receipts and is expected to grow by 5.7 percent;

•Increases all funds disbursements by 0.9 percent to $142.1 billion, including federally funded spending associated with "Superstorm" Sandy and the Affordable Care Act. State operating funds spending would increase by 1.7 percent to $92 billion;

•Projects state-share Medicaid spending from all agencies will rise by 15 percent from SFY 2013-14 to 2017-18, reaching $24.6 billion in the latter year;

•Includes an increase in aid to public schools of $807 million to $21.9 billion on a school year basis, for the first time reaching and surpassing the previous historical high of $21.7 billion in 2009-10. On a state fiscal year basis, school aid would increase $1.1 billion, or 5.1 percent. Even with the increase, aid has remained relatively flat or decreased for many schools in recent years;

•Proposes reforms to preschool special education funding. Such reforms are intended to address serious issues identified in a series of audits by the office of the state comptroller over the past three years and in legislation enacted in 2013;

•Includes $6.9 billion in increased bonding authorizations including a new proposed bond act for voter approval. It also projects the issuance of $25.9 billion in new state-supported debt over the life of the capital plan through 2018-19;

•Makes significant amendments to the brownfield cleanup program, including incorporating some recommendations from a report by the office of the state comptroller, and includes a $100 million authorization to refinance the superfund;

•Holds the state workforce essentially flat at 180,766 in SFY 2014-15; and

•Establishes a public campaign finance system modeled after the New York City system. Public financing of state legislative elections would start in 2016, and statewide elections in 2018.

DiNapoli's report noted the budget makes positive steps toward improved accountability by giving voters a say in the state's debt burden through the $2 billion proposed Smart Schools bond act that would fund projects such as school technology and prekindergarten building costs, and by bringing nearly half a billion dollars in local assistance transportation infrastructure spending back on budget.

For a copy of the complete executive budget report, visit: http://www.osc.state.ny.us/reports/budget/2014/executivebudget2014.pdf.

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