A half-baked effort at budget reform
April 2, 2004
By E.J. McMahon
Seeking to divert attention from their failure to adopt a budget on time for the 20th consecutive year, state legislative leaders have unveiled a budget reform package that will do little to fix New York's dysfunctional budget process. In many respects, it could actually make things much worse.
The most significant change would be a constitutional amendment providing for an automatic contingency budget if a new spending plan is not adopted by the start of the fiscal year. Once a contingency budget took effect, it would be considered "final action," which could also effectively repeal the 1998 state law impounding legislators' salaries during periods when the budget is late. Neat, huh?
The contingency budget could be supplemented by at least two multiple appropriation bills. This would provide the Legislature with a new avenue for passing a budget without ever voting on the governor's bills. Depending on how it is written, the contingency budget provision could significantly expand legislative budgeting power, without giving the Senate and Assembly any new incentive to close a deal on time. Quite the contrary, in fact -- especially if the "final action" clause ends up protecting their paychecks as well.
While some form of contingency budget was the lead item on Senate Republicans' budget reform agenda, Assembly Democrats scored a couple of big wins in this package.
School aid would be funded two years at a time, carving out a huge preference for what is already the single largest piece of the budget funded by state tax money. This raises another question: Would school aid be shielded from automatic contingency budget cuts in years when revenues are declining? If so, in recession years, the pressure will be that much greater to more deeply cut every other area of state spending (Danny Donohue and Roger Benson, call your offices!).
The governor and the Division of the Budget would be subjected to voluminous new reporting requirements, including submission of a what's known as a current services budget. This accounting gimmick is designed to treat expense growth in all government programs as inevitable, automatic and essential. Once current services numbers are part of the budget, any gubernatorial proposal to spend less -- even a slightly smaller increase -- can more easily be portrayed as a cut in services. It's no coincidence that this change has long been a priority of labor unions and other Assembly-allied interest groups on the receiving end of state funds.
Some of the other proposed changes range from harmless to pointless.
For example, the deal apparently calls for an independent budget office, which would contribute yet another non-binding revenue estimate to the -- count 'em -- six official numbers already on the table for consideration every spring. At best, the new budget office will serve as an expensive farm team for DOB and the legislative fiscal staffs; at worst, it will simply be another legislative patronage mill.
There are some good arguments for changing New York's exceptionally early fiscal year start of April 1, but the Legislature's agreement to push it back no further than May 1 isn't worth the effort.
Why bother with such a minimal change? Two possible explanations: First, May 1 has been the earliest the Legislature has actually managed to get a budget done in all but one of the past 11 years. Second, because the state already needs to spend most of its April income tax receipts on payments to school districts in May, making the fiscal year start a month later will conveniently force creation of a huge new reserve fund to guarantee two-year appropriations for school aid.
Even the few clearly worthwhile changes in the legislative package are potentially double-edged. Putting the gigantic Health Care Reform Act fully into the budget is a welcome move to shine a little more light on one of the murkier areas of state finance. But it also will give the Legislature a clearer shot at looting HCRA's reserve funds -- and to be lobbied for larger targeted subsidies by the state's powerful health care industry.
On balance, the Legislature's reform package is a prescription for accelerated spending and higher taxes. It requires the executive branch to generate more information, some of it useful and some of it superfluous, while apparently doing little or nothing to address the Legislature's own woeful lack of fiscal accountability.
It's time for Governor Pataki to step out of the shadows and show some initiative on this issue. He needs to make clear he will veto the statutory portion of the Legislature's half-baked, self-serving package.
Pataki should be willing to bargain with legislators on issues such as legislative pay impoundment, contingency planning and the format of budget bills -- but only in exchange for reforms that truly service the interests of greater spending control, timeliness and transparency.
E.J. McMahon is a senior fellow at the Manhattan Institute for Policy Research. His e-mail address is firstname.lastname@example.org.
©2004 Times Union
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