NYS Budget: On Time, but at a Cost

Posted by & filed under CGR Staff.

A couple months ago, I suggested that New York might be better off with a late budget than an on-time one. I wondered if our new governor, Eliot Spitzer, might conclude that winning concessions on the budget might be worth the political cost of breaking the two-year record of “timely” budgets.

But for the past week, Spitzer and legislators have scrambled to negotiate, print bills and pass the budget on time. The result is a relatively on-time budget (one day late) that raises spending 7 percent.

Spitzer and legislators added $1 billion to Spitzer’s proposed budget despite having agreed earlier that there was only $575 million in revenue to add to the budget. The budget total is still a moving target, even though the bills have been passed, but in the neighborhood of $121 billion.

Tax revenues will have to grow substantially to feed this budget and the ones that follow. The Citizens Budget Commission predicts the state will have a shortfall of $4.5 billion in just 18 months.

Spitzer said the budget spends more than he wanted to and that it will take him more time than he’s had in the three months since he took office to change the state’s spending habits. But he began the budget process by proposing a spending hike of 6.3%, one of the highest increases proposed by a governor in the last decade.

Heading into the final week before the deadline, Spitzer, a Democrat, and Senate Majority Leader Joseph Bruno, a Republican, were far apart on several key issues. The partisan roles were reversed, with Spitzer trying to hold the spending increase to the level he proposed and Bruno pushing for more funding for schools and health care.

Both sides were talking tough and seemed ready to miss the deadline rather than change their positions. But Spitzer evidently changed his mind. Although he said recently that getting the budget right was more important than getting it done on time, timeliness became a more prominent concern.

Spitzer compromised in several areas. Although he maintains that he won important reforms in how the state does business that will benefit us in the long run, he (we) had to pay for each one:

— The governor cut the growth of the Medicaid health insurance program by $1 billion, but he had to restore another $350 million in proposed health-care reductions.

— He won adoption of a new school funding formula aimed at sending more money to truly needy schools, but the formula won’t operate this year as it should because he agreed to send an extra $420 million to wealthier schools on Long Island and elsewhere.

— He changed how the School Tax Relief (STAR) program works to base the amount of a homeowner’s property-tax break in part on income. But he had to partially undo that too, sending more relief to wealthier homeowners.

Horse-trading is part of any budgetary deal-making, but Spitzer traded a lot to get the Senate Republicans on board by the April 1 deadline. Was it worth it? That depends on your political perspective, but a fiscal conservative might argue that the damage to the state’s long-term financial stability will outweigh the merits of being on time.

Not many people are directly affected by a late state budget. It most directly impacts school districts, which are working now to finalize their own budgets in time for public votes in May. That process is made much more difficult if they don’t know for sure how much state aid they’ll receive.

Nonprofit organizations that receive funding from the state can also be harmed by a late budget, if they are counting on money from the state and unsure whether it’s coming. They can’t plan in the dark, either. And of course, the later the budget gets, the more people are affected.

The timeliness of the budget isn’t irrelevant, but it isn’t life-or-death, either. The state can get along for at least a few weeks without a budget without major damage being done. But after 20 years of late budgets, the issue crystallized in the public mindset in 2004 as a symbol of all that’s wrong with Albany. Since then, timeliness has been a priority, and no one in Albany wants to be blamed for returning us to the “bad old days” of late budgets.

So we have a big, on-time (or close) budget. If the economy doesn’t ramp up to meet the increased demand for tax dollars, state leaders may well have to raise taxes in the future — unless they start making the painful decisions that they talked about, but then largely avoided, this year. Then we might wonder whether getting it done April 1 was so important after all.