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Budget Hoax


Budget Hoax

March 30, 2005
Urban PolicyNYC

WITH or without Gov. Pataki's cooperation, state legislators are expected to finish passing a series of budget bills before the new fiscal year begins Thursday.

The budget votes may even be completed "in daylight," as Majority Leader Joseph Bruno promised on the Senate floor yesterday. But no amount of sunshine can whitewash what's really going on here.

In a desperate rush to shed its reputation for dysfunction, the Legislature is essentially producing the same lousy product as usual — except, this time, it's "on time."

By most estimates, legislative leaders would like to raise the core state-funds-spending figure by 7 to 8 percent in fiscal 2005-06, atop a similarly large rise in the soon-to-close 2004-05 fiscal year. (The plan the lawmakers are putting on the table doesn't call for such growth, but only because — as a negotiating tactic —they've eliminated $1.4 billion in proposed spending on voting machines, environmental projects and anti-poverty programs.)

In other words, this portion of the budget would be on track to rise by nearly three times the inflation rate over the next three years.

To prop up a heavily leveraged transportation capital program (swollen by ambitious transit-expansion projects), they'd raise taxes and fees by $480 million — roughly what Pataki had proposed, but from somewhat different sources. And hundreds of millions more would be wasted on legislative pork barrel spending.

Reform? There's even less than meets the eye in what the Legislature claims to be in the process of accomplishing. Take, for example, the widely ballyhooed agreement to cap skyrocketing local Medicaid costs.

Fully implemented, this change would save county governments and New York City nearly $400 million in 2006 and nearly $600 million in 2007 — by shifting those costs to state taxpayers. Yet the Senate and Assembly both rejected most of Pataki's proposals for offsetting Medicaid savings and health-care taxes to finance the partial takeover.

What comes next could get complicated. The Court of Appeals last year affirmed Pataki's constitutional power to shape the budget — so the Legislature, in signing onto a Medicaid cap, had to accept his original language.

And that language stipulated that no local costs will be assumed by the state unless the adopted budget includes the governor's original cost-containment plan.

Lawmakers have added more money that's intended to make Pataki's language moot, but the governor he can veto that addition. If that veto sticks, then either 1) we get a cap on Medicaid costs and cost containment, 2) we get neither, or 3) Pataki caves to a cap with little or no savings.

This raises two questions:

Do legislators really want to limit local Medicaid costs badly enough to defy their friends in the health-care industry, who have the most to lose?

And does Pataki want significant, far-reaching Medicaid reform badly enough to forgo the cap he originally proposed?

The answer to the first question is probably "no." In a political off year, the Legislature could be content to take credit for approving a cap on local Medicaid costs, while blaming the governor for not actually implementing it.

As for the second question, even in the event the Legislature cares enough to negotiate, it's unclear whether Pataki will demand sufficient savings to fully pay for the cap.

He might end up simply blocking the measure and retreating tactically on Medicaid with the intention of fighting again another day. But, assuming that he has decided not to seek a fourth term in 2006 (though he denies those reports), his days in office are dwindling. How likely is it that the lamest of lame-duck governors will push major Medicaid reforms through the Legislature in an election year? The question answers itself.

For the past couple of weeks, the governor has been warning the Legislature against adding too much spending to his budget. But with each passing day, he has seemed more vague in describing exactly how much would constitute too much.

The governor has only himself to blame for part of this problem. After all, it was Pataki who proposed a decidedly non-austere 5.5 percent state spending hike in the first place.

A scorched-earth veto strategy would risk the kind of overrides he suffered in 2003. But if he doesn't do vetoes, or if he resorts to the more limited and symbolic veto approach he took last year, he will have a lot of explaining to do.