Spotlight on the States: New York

This week, our Spotlight on the States series takes us to New York.

New York faces an estimated budget deficit of $10 billion. Due to slower-than-expected economic growth, actions taken over the last year have failed to meaningfully improve the state's fiscal situation.

In last year's budget, a series of measures meant to increase revenue fell short of projections, bringing the state $529 million less than expected and leaving the General Fund with a $315 million deficit for that fiscal year.

Then-Governor David Paterson (D) announced in October his plans to lay off 898 state workers by December 31, expected to save around $250 million. Additionally, Gov. Paterson called a special legislative session in late November to address the state's budget deficit, but despite warnings from the state comptroller that failure to act would worsen New York's already critical fiscal situation, lawmakers failed to address the issue.

In response to New York's deficit, newly elected Governor Andrew Cuomo (D) recently proposed a budget meant to close much of that gap. His budget proposal – $132.9 billion in total – eliminates the 2011-2012 $10 billion deficit and reduces the 4 year budget gap from $64.6 billion to $9.2 billion. 

Year Projected Budget Gap Budget Gap under Governor's Proposal
2011 $10 billion eliminated
2012 $15.3 billion $2.3 billion
2013 $17.9 billion $2.5 billion
2014 $21.4 billion $4.4 billion
Total: $64.6 billion $9.2 billion

True to his campaign pledge, Gov. Cuomo’s budget does not raise taxes (although he does increase revenue through economic projections and increase in fees); 89% of the “gap-closing plan” is from spending cuts, the most severe being to education and Medicaid funding. The budget reduces K-12 education spending by $1.5 billion (a 7.3% reduction from last year) and Medicaid funding by $982 million (a 2% reduction from last year). Other highlights of the proposal include:

  • Laying off up to 9,800 state workers.
  • Reducing the number of state agencies, authorities, and commissions by 20% over the long-term.
  • $72 million in savings in the next fiscal year in prison reforms.
  • $79 million for an incentive program that encourages local governments to save money and improve performance and efficiency.
  • Cutting funding to local town and cities (excluding NYC) by $14.6 million.
  • Cutting funding to the State University of New York and the City University of New York by $185.5 million.
  • Raising an additional $41.5 million in revenue through two minor fee increases and improving collection of existing taxes.

In an op-ed published shortly before he revealed his proposed budget, Gov. Cuomo states:

In the past 30 days, as I have prepared the state's budget, I was shocked to learn that the state's budget process is a sham that mirrors the deceptive practices I fought to change in the private sector. The budget process is a metaphor of Albany dysfunction: special interests dominate the process with little transparency; programs continue with no accountability and the taxpayers get the exorbitant bills. The greatest challenge and opportunity in this year's difficult budget is to expose this chronic problem and reform it once and for all.

In particular, Gov. Cuomo targets the funding in the state budget that is controlled by "formulas that have been built into the law over decades, without regard to fiscal realities, performance, or accountability." Gov. Cuomo notes that if these formulas had once again been able to dictate spending, funding for Medicaid and education would have increased this year by 13% each – an increase he calls "wholly unrealistic" in this economic climate.

The response to Gov. Cuomo's proposal has been mixed. A New York Times editorial praised Gov. Cuomo's ability to embrace necessary "painful cuts", but added that "Mr. Cuomo’s refusal to consider any new taxes, or even extend a surcharge on the state’s highest earners, means that his budget – his first – is harsher than it needs to be with the heaviest burden borne by some of the most vulnerable citizens." New York City Mayor Mike Bloomberg also praised Gov. Cuomo for taking on the challenge "to cut spending and to review and replace laws that are no longer necessary or effective", but criticized the proposal for its sole focus on cutting state spending rather than going after more structural budget reforms. Timothy Kremer, executive director of the New York State School Boards Association, said in a released statement that "It will require a Herculean effort by school boards to absorb Governor Andrew Cuomo's whopping 7.3 percent funding cut to schools without impacting student achievement."

It will be interesting to follow the upcoming developments as New York lawmakers take up the governor's proposal. The state legislature has a very poor track record of approving budgets before the fiscal year begins on April 1; the budget deadline has been met only 6 times since 1975, and the FY2011 budget was passed 125 days late. Hopefully lawmakers will be able to agree on a budget in a timely manner and commit to the kinds of measures that will result in meaningful improvement to New York's fiscal imbalances.