Why the State Budget Was On Time

Lawmakers in Albany congratulated one another last week on passing a budget before the April 1 deadline for the first time since 1984. The budget process had become the most obvious symptom of a sickness at the highest levels in Albany, and the near loss of four Senate seats by Republicans in November suggested a voter revolt was building strength.By passing bills that reflect a compromise with Governor Pataki’s own budget proposal, legislators earned loud applause from colleagues and staff, reformist capital with constituents, and, because of a 1998 law aimed at spurring the very kind of reform that took place at the state Capitol last week, a paycheck. The good feeling was enough for Mr. Pataki to declare an end to the era of late budgets.The significance of a timely budget is debatable. The state Legislature omitted crucial parts of its spending plan that will be negotiated with Mr. Pataki in the days ahead. These include roughly $1.6 billion in welfare payments, tuition assistance, and environmental funds. The budget is finished because essential government functions are financed, but entitlements for many needy New Yorkers are still in question.Equally worrisome to fiscal hawks are the budget’s finished parts. According to the office of the New York State comptroller, Governor Pataki’s executive budget proposal was a dangerous financial gamble even before the Legislature decided to add more than $1 billion to the bottom line and largely neglect his proposals to contain Medicaid spending. As preening lawmakers lined up for a victory dance last week, financial analysts looked at the numbers they agreed to and gulped.A recent report on these concerns by Alan Hevesi, the state comptroller, reads something like a biblical prophecy. The report identifies $4.6 billion in spending that may never materialize and out-year gaps that could reach $11 billion a year, even without accounting for a mammoth court-mandated increase in school spending. It says the governor relies on $3.6 billion in non-recurring funds and adds $2.1 billion in debt to an already staggering debt load of $46.9 billion.“This year’s proposal once again manages rather than solves the basic problems that keep the state in a persistent structural imbalance,” Mr. Hevesi wrote. “Those problems, such as sizable out-year gaps and an over-reliance on non-recurring resources and borrowing require multi-year fiscal discipline.” Mr. Hevesi identified one area where Mr. Pataki attempted such discipline, Medicaid, one month before the Legislature gutted that plan.Still, some in Albany have suggested fiscal discipline is on its way. The principle is more than half the whole, they say, and passing a budget on time was the most difficult, if not the most immediately consequential, first step toward greater reform of state finances. “Budget reform is the mother of all reform,” Joseph Bruno, the Republican majority leader of the Senate, said. “I think there is a fundamental change here in Albany in the budget process, in governing.”The effects of this year’s early budget agreement will begin to rise to the surface in coming weeks, and not just in terms of policy. Some veteran lawmakers say the government actually benefited from passing budgets after the April 1 deadline by investing the difference between the previous year’s spending levels and proposed increases. Some also say the state should move the beginning of the fiscal year to May rather than April to capitalize on income tax payments that trickle in during the month.“There were all sorts of ways to make money,” Senator Dale Volker, a Republican from Erie County, said. “The finance people won’t give you these numbers, but I understand it was upwards of $1 billion. The idea that late budgets costs us money is fiction.”A spokesman for Mr. Hevesi, Jeffrey Gordon, said his office could not determine the exact amount of money generated from the short-term investment of surplus revenue last year. But Mr. Gordon doubted the figure was as high as Mr. Volker said. Frank Mauro, director of the Fiscal Policy Institute, a labor-backed group that analyzes the budget, also doubted the figure. “Based on my knowledge and experience, it is not substantial enough to be material,” Mr. Mauro said. “I think it’s a specious argument.”Still, the fact that lawmakers have shown a new willingness to pay their current bills at this year’s rates rather than to hold off for a few more months at 2004 levels suggests that they are either beginning to view their roles as money managers more seriously, or that state revenues have grown significantly enough over the past few months to allow timely payments on expanded programs. Income tax receipts for the first 11 months of the last fiscal year ending March 31 were up 18% from a year earlier, and business tax receipts over the same period were up 20%.Another possible explanation is that lawmakers were so fearful of losing their jobs that they pushed the process through without thinking of the hangover. Faced with the prospect of tight spending this year and the real prospect of financial collapse in the out years, they chose the immediate satisfaction of a clear reform. At least one other top lawmaker may have put his political capital behind the push because he has no expectation of sticking around to clean up after the party.

Why the State Budget Was On Time

Why the State Budget Was On Time

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