State Comptroller Thomas DiNapoli today issued a “Strategy for Fiscal Reform” that focuses on the budget process, but his most significant and potentially valuable recommendation deals with debt.

New York State’s Constitution flatly prohibits the issuance of general obligation bonds without voter approval, but DiNapoli notes that more than 94 percent of the state’s currently outstanding debt was issued without a voter OK, by public authorities acting at the statutory direction of the Legislature and Governor.

DiNapoli’s remedy: a constitutional amendment “banning backdoor borrowing by authorities, restoring voter control over debt and requiring that all State debt be issued by the Comptroller, imposing a binding cap on the amount of State debt and prohibiting the issuance of debt for noncapital purposes.”

That’s a great idea.

DiNapoli also recommends strengthening capital planning (a good idea, at least in principle) and requiring the governor’s Division of the Budget to issue more detailed information including three years of projected cash disbursements by agency.  The latter would be a goldmine for fiscal analysts in and out of the Legislature (more, please!), but it is difficult to see how this would realize DiNapoli’s goal of making the budget less “impenetrable” to the lay person.

The headline recommendations in the comptroller’s reform strategy include a three-year “gap-closing plan,” which the report says is modeled on New York City’s process–although the city does not, in fact, produced detailed plans for closing out-year gaps.   A better idea for promoting long-term budget planning on the state level would be a shift to biannual budgeting, as recommended in Section IV of our “Blueprint for a Better Budget.”

The comptroller also calls for banning one-shot revenues for recurring expenditures.  This, too, sounds good in principle, but could unduly restrict budgeting in actual practice.  For example, what if a governor has identified a one-shot revenue to finance an employee buyout program?   Under DiNapoli’s proposal, it wouldn’t be permitted.

A better approach would be to link the use of one-shots to budget initiatives that produce recurring savings.  Or, better yet, mandate nothing at all in this area.  Attempting to legislate fiscal prudence at this level of detail could be as futile and counterproductive as attempting to legislate good personal behavior.

Finally, DiNapoli has a way to settle disagreements on projected state revenues: give the comptroller the final say.  But handing this potentially dispositive power to an official who has no constitutional role in the budget-making process is not necessarily a good idea.

One revenue forecasting method that has proven effective at settling disagreements and holding down spending is used in New York City, where the executive (the mayor) has the final word.  Likewise, the governor should have the final word at the state level.  And, in effect, he already does–because he can veto added spending that exceeds the limit of what he deems affordable, and in current political circumstances, he can make that veto stick.

DiNapoli is absolutely right, of course, when he says the state is plagued by an “addiction” to “unaffordable borrowing and unsustainable spending.”  Unfortunately, while his debt reform proposal would be a huge step to address the borrowing problem,  he pointedly avoids calling for any direct limit on state spending growth — which even Governor Paterson supports in principle.   In the final analysis, the comptroller’s plan contains some useful ideas, but it does not live up to its billing as a comprehensive remedy for what ails New York’s finances.

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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