New York’s murky budget numbers

| NY Torch

How big is the spending increase in the newly adopted New York State budget?   How does it compare to previous spending trends?  One of the many glaring shortcomings of the state budget process is that it is not possible to answer such questions with much certainty until the Division of the Budget (DOB) finally issues an Enacted Budget Report, up to 30 days after budget bills are passed.  This year, thanks to an extraordinary injection of billions of dollars in “use it or lose it” federal stimulus aid, the exercise of pinning down and comparing annual spending figures is even more difficult.

We do, however, know this much: following congressional dictates, the Legislature is pumping $1.2 billion of stimulus money directly into its K-12 school aid formula, restoring a cut proposed by Governor Paterson and resulting in a net school year aid increase of about 2 percent (nearly double the projected inflation rate).  Another $5 billion in stimulus aid is available for almost any general government purpose in the 2009-10 budget.

As previously announced by Paterson and legislative leaders, the budget is using $1.3 billion out of this unrestricted stimulus pot to prevent some of the tax increases originally proposed in the Executive Budget, including a sales tax hike on clothing and the controversial “obesity tax” on sugared sodas.  The remaining $3.7 billion has been spent in other ways not yet detailed in any public statements or documents issued by the governor and legislative leaders.  But by definition, the spending it supports would normally fall in the budget’s State Funds category.

Adding the school aid restoration to that fungible $3.7 billion,  it possible to make the following general observation:  Temporary stimulus aid will finance at least $4.9 billion, or 5.5 percent, of what normally would be classified as State Funds spending next year.  This will expand the base of state spending (and spending expectations) for the future.

Meanwhile, the budget also calls for more than $6 billion in tax and fee increases.  So, we also know this much for sure: in the end, most of the discretionary stimulus was used to sustain and increase state spending in 2009-10, and not to minimize tax increases.  Of course, this became apparent at least three weeks ago.

But again, the stimulus is temporary.  The hole created when the money dries up in two years will only add to a 2011-12 state budget gap whose size, at this point, is anyone’s guess.  At the same time, the expiration of billions in other stimulus aid now technically flowing through Albany to school districts, counties and New York City will further compound the intense fiscal pressure that the governor and Legislature will face two years from now.  Meanwhile, the tax hikes in the budget will further hamper New York’s dim prospects for economic recovery.

As state Comptroller Thomas DiNapoli said in a statement issued today:

This is essentially a buy-time budget, based on a hope that the economy recovers quickly … Instead of using the Federal stimulus to restructure the financial plan and match projected revenues to long term growth in spending, the budget uses stimulus funds as a short-term fix.

The danger is that New York could end up right back where we started, with huge budget gaps and an unsustainable level of spending.

Connecting the dots

The governor and legislative leaders first announced their budget deal in a Sunday, March 29 news release that included this passage:

Based on preliminary estimates, General Fund spending is expected to increase no more than 1 percent and total approximately $54 billion. All Funds spending is expected total approximately $131.8 billion, an increase of $10.5 billion or 8.7 percent. The vast majority of that increase ($7.2 billion) represents American Reinvestment and Recovery Act (ARRA) aid that must, according to federal guidelines, be spent in the current fiscal year. The remainder reflects negotiated State funds spending restorations ($2.0 billion) and previously committed capital and debt service spending ($1.3 billion).

Someone has still got a lot more explaining to do.  The governor’s last official estimate of 2008-09 All Funds spending, issued in mid-January, came to $119.7 billion.  Compared to that figure, $131.8 billion would be an increase of 10 percent.  Also, according to the DOB’s last official financial plan update, the level of 2009-10 General Fund spending proposed in the governor’s original budget was estimated $53.39 billion, virtually unchanged from 2008-09 — and $1.3 billion higher than the figure cited in the news release on the budget deal.

The Senate Democrats’ 2009-10 Budget Report, issued before members began debating budget bills yesterday, has only compounded the confusion.  Its financial plan summary boiled down to this:

The preliminary All Funds amount of $131.8 billion reflects a net spending increase of $10.5 billion from the Executive Budget proposal as amended … The vast majority of the increase ($7.2 billion) is directly linked to the inclusion of federal stimulus funding.  The remainder represents certain General Fund restorations and miscellaneous actions.

If the “increase” cited in this statement refers to the original Executive Budget proposal for 2009-10, which was last estimated at $121.1 billion, then the math is a little off: $131.8 billion is actually an increase of $10.7 billion.  Then there’s that $7.2 billion figure for the stimulus (aka “ARRA”), cited both in the news release and the Senate report.   That figure might be interpreted as including stimulus money that is flowing through Albany to school districts, counties and New York City, but not really being spent at the state level.  In that case, it becomes more difficult to fairly compare the 2009-10 All Funds total to the 2008-09 total, or to increases in previous years.

There’s another possibility, which might explain the otherwise confusing and contradictory figures in the Senate report.  Perhaps DOB is already re-estimating All Funds expenditures upwards for 2008-09, including some stimulus money that could actually be attributable to last year, as well as unanticipated expenditures in other areas, such as Medicaid.   It wouldn’t be the first time something like this has happened.