So much for the school aid cap?

by E.J. McMahon |  | NY Torch

When Gov. Cuomo won passage of what he described as a “historic” and “transformational” budget early in his tenure, one of the key details he touted was the enactment of a permanent state law capping annual increases in school aid to the rate of growth in personal income.

“This action will help reduce the state’s large out-year gap between spending and revenues,” the governor’s March 2011 press release explained.

Now, after agreeing to boost state school aid above the cap in this year’s budget, the governor is all but promising to do the same in 2014-15.

From today’s Capital New York report:

Cuomo said at a cabinet meeting last Monday that while he is planning for tax cuts, priority areas like education “will go up close to five percent” in next fiscal year’s budget, “like they did” for the current fiscal year.

Under a cap he enacted in 2011, spending should only grow 3.4 percent.

Measured on a school-year basis, the difference between a 3.4 percent and 5 percent is $340 million.

As also noted in the Capital New York article, the Board of Regents has requested a 5 percent aid increase plus $300 million more for pre-K education.  The chairman of the Senate Education is quoted as saying he expects state aid to be higher than the budget cap. An an advocacy group allied with teachers’ unions says nothing less than a 9 percent school aid increase ($1.9 billion more) will do.

Meanwhile, speaking of gaps between out-year gap betweens pending and revenues, the latest state financial plan projected a $1.7 billion shortfall in fiscal 2015, growing to $2.6 billion by 2017.  Cuomo has been saying recently that he intends to erase that red ink by holding state spending growth to 2 percent, which would turn the projected gaps into a surplus of $2.6 billion within the next three years. However, the latest state financial plan still assumes only 3.4 percent growth in school aid, which is the largest single spending category in the state-funded side of the budget. The next largest slice of the budget pie is the state-funded share of Medicaid, also legally capped, which is slated to grow by about 5 percent when expenditures on the institutional population are included. What’s left includes state employee benefits, debt service, and other categories not easily squeezed for large short-term savings.

Meanwhile, the governor is promising to propose at least $2 billion a year in tax cuts. As it happens, those tax cuts were another subject of the meeting last week at which Cuomo made his offhand comment about exceeding the school aid cap.

None of this adds up unless you assume Cuomo has some new fiscal gimmicks up his sleeve — or perhaps one very large ace in the hole, possibly involving some expectation of much higher federal Medicaid reimbursements than projected in the last financial plan.

- E.J. McMahon is the President at the Empire Center for Public Policy.