The Cuomo administration has admitted there is a “structural imbalance” in its massive Medicaid budget, which means the Empire State’s biggest single government program is spending beyond its means.

So, what does Gov. Andrew Cuomo plan to do about it? Some hint of the answer might be forthcoming in a midyear financial update — whenever, that is, Cuomo gets around to issuing one as required by law.

That report is now two weeks overdue.

Meanwhile, the Medicaid cost overrun points to a broader budget problem: With the economy and tax receipts still growing in line with projections, for the first time in nearly three decades, New York has an operating deficit not caused by an economic downturn.

The problem started to simmer (with little notice) at least a year ago, when Medicaid expenditures began to consistently run ahead of budget projections. It boiled over in the spring, when the governor balanced his budget by rolling over more than $1.7 billion in Medicaid payments from late March to early April — a maneuver not revealed until after the current budget had been passed by the Legislature in Albany.

In a disclosure document slipped out last month, the governor’s Budget Division asserted that the state might realize “savings” of up to $2 billion on Medicaid this year, while still “leaving an imbalance in the range of $1.5 billion.”

In other words, Cuomo might just kick the can farther down the road.

The last time New York ran this deeply in the red without a recessionary excuse was during the 1970s and ’80s. In those days, the state got in the habit of issuing short-term revenue notes every April to cover billions in local-aid payments routinely rolled over from one year into the next.

The annual “spring borrowing” was finally eliminated by the creation in 1990 of the Local Government Assistance Corp., or LGAC, authorized to issue $4.7 billion in long-term bonds to help the budget catch up with local aid.

All these years later, the state budget still includes $372 million in debt service payments on the last of the LGAC bonds, which won’t be retired until four years from now.

It isn’t as if the governor’s ­options are limited. His first-term Medicaid reforms gave him more authority to impose cost controls and reduce provider rates. This year’s budget bills handed him unprecedented authority to cut local aid if needed to close a deficit.For any government — as for any business or household — delaying bill payments isn’t a positive financial sign. In New York’s case, however, the reason for the Medicaid rollover wasn’t so much a lack of cash as the governor’s need to keep claiming he has held annual spending growth to 2%, per his longtime pledge, when it was closer to 4% last year.

In fact, Cuomo is armed with more budget-control power than any of his predecessors were. The question is how, when and whether he intends to use it.

Cuomo’s intentions might be less of a mystery at this point if he hadn’t, for a ninth consecutive year, simply blown off the Oct. 30 statutory deadline for filing a mid-fiscal year financial update. Since 2011, he has consistently been at least a week late; In 2012, he didn’t put it out until Nov. 29.

The mandated report was intended to give the Legislature and the public a clearer fiscal outlook at the start of New York’s annual budget preparation process — but legislative leaders don’t seem to care about the governor’s flouting of the law. The Senate and Assembly fiscal committees also have ­ignored a Nov. 5 deadline for ­issuing their own spending and revenue projections, as required under a 2007 law that was supposed to ensure a “quick start” to the budget process.

That leaves Comptroller Thomas DiNapoli as the only state official to consistently meet his reporting deadlines. Last week, in his latest report, DiNapoli warned that Cuomo’s deferral of Medicaid payments — and the possibility of yet another Medicaid rollover this year — “raise troubling questions as to whether the State may return to historical practices of allowing operating deficits to recur, and potentially increase, from year to year.”

Cuomo “should provide details on the specific causes of the imbalance and clarify the state’s expected response as soon as possible,” the comptroller added.

He might have added: Don’t hold your breath.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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