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New York Post

 

Out of the Tunnel?

August 16, 2011

By E. J. McMahon

NY state finances remain iffy

The cover of New York state's latest budget update features a photo taken from within a Central Park tunnel, looking out toward a path curving up a gentle incline through a verdant landscape. Just ahead, a lamp (redundantly) glows in the light of day.

A light is indeed visible at the end of the proverbial tunnel for New York, thanks to Gov. Cuomo's first-year budget management. However, despite his promising start, Albany's progress could easily stall before the state fully emerges from the shadows of the fiscal crisis that began three years ago.

While Cuomo has pointed fiscal policy in a better direction, his vaunted “transformation” of government is barely under way. School aid, Medicaid and local property taxes have all been capped -- but most of the state laws, regulations and mandates that drive up costs remain in place.

Meanwhile, the economic outlook is weaker than the governor had forecast when his budget was adopted, just before the April 1 start of the fiscal year. And even if the economy improves, stubborn challenges remain.

Cuomo had a bit of good news last night, when the largest state-employee union, the Civil Service Employees Association, announced that its members had ratified the tentative contract its leaders negotiated with Cuomo a few months ago.

In exchange for a no-layoff promise, CSEA agreed to freeze base salaries (but not longevity-based “step” increments) for three years, to be followed by a pair of 2 percent pay hikes in the final two years of the five-year deal. CSEA members will also take nine unpaid furlough days in the next two years, and contribute more to their health insurance.

A virtually identical tentative contract is still pending with higher-paid workers in the state's second-largest union, the Public Employees Federation, which will count votes in September.

While awaiting ratification votes and watching the economy get shakier, Cuomo's Division of the Budget has been lying low. The DOB's first-quarter update for 2011-12 was an unusually skimpy document by recent standards, essentially updating nothing. Projected revenues and spending remained unchanged, although actual April-June spending was lower than expected and tax receipts were a surprising $800 million above the original forecast period.

The DOB cautioned that these positive trends are “timing-related and do not provide a basis for revising the annual estimates of receipts or disbursements at this time.” So the financial-plan update didn't alter the governor's April projection of a $2.4 billion budget gap for fiscal 2012-13, now just over seven months away.

On the heels of the $10 billion gap that Cuomo needed to close this year, $2.4 billion may not sound like much. But this governor also has changed a key rule of the budgeting game, eliminating the DOB's traditional assumption of a current-law “baseline” spending trend that also inflated the gap estimates.

Measured from Cuomo's more realistic baseline, next year's gap includes relatively modest increases totaling nearly $900 million for school aid and Medicaid, as required by the two-year appropriations that reflect Cuomo's new spending caps. Debt-service spending and pension costs, essentially untouchable, account for another $450 million.

Assuming these areas are off-limits to cuts, that means the governor will need to fill over half the projected gap from savings in other areas of the budget. (True, he'll be able to book more savings on employee benefits over the next several years, assuming the PEF and other unions fall into line with the CSEA pattern deal.)

Beyond that, each additional million of spending in excess of revenues next year will translate into another tough fight that tests Cuomo's determination to stay the course of fiscal responsibility. Even assuming the economy snaps back to the steady growth path the governor originally projected for the balance of his first term, he's got a multiyear struggle on his hands before the budget emerges into daylight for the long haul.

Meanwhile, local officials across the state are waiting for a sign the governor intends to provide some serious relief from state mandates, including collective-bargaining reforms, as a followup to his historic property-tax cap. Without that relief, more counties and other municipalities -- including New York City -- will soon find themselves stuck in deep, dark tunnels of their own.

Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/out_of_the_tunnel_tJLE3YWo4xti5RQFNUMNLM

 

 
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