Now that a whole herd of horses has galloped out of New York’s budgetary barn, Governor David Paterson has proposed shutting the door with an inflation-level cap on state spending.

The proposed cap is actually not a bad start, linking the category of “state operating funds” spending to the average rate of spending inflation growth over three prior years, which would currently come to 3.3 percent, according to the governor.   Inflation is a tighter measure than personal income growth, which would have been the spending limit under caps proposed in the 1980s by then-Governor Mario Cuomo.  But the timing of this new proposal — a full month after the Legislature enacted a new budget adding billions to Paterson’s proposal — is odd.

Paterson said the 2009-10 budget was “consistent” with the cap because state operating funds spending will be up only 0.7 percent this year.   While this is technically correct, the increase is more like 4.2 percent when the total is adjusted to include school aid and other recurring expenses normally paid for with state revenues but temporarily financed by stimulus funds that are scheduled to disappear after next year.  Paterson said the proposed limit would force a $2.2 billion reduction in spending next year, when baseline expenditures are projected to rise 5 percent.  That figure happens to match the amount by which Paterson will have to reduce expenditures anyway, based on his latest budget gap projections.

The cap could be overriden by a two-thirds majority vote of the Legislature under the Paterson proposal.  But if the governor’s cap is only statutory (he hasn’t released a bill, and his press release isn’t clear on this point), it could also be repealed by simple majority votes.

In fact, the governor already has a constitutional right to cap spending at any level he chooses.  It’s called the line-item veto, which can be overriden only by a two-thirds majority of both houses of the Legislature.  True, George Pataki was repeatedly overriden by the Legislature (including then-Sen. David Paterson) when he tried to curb spending during his last few years in office.  But Governor Paterson has a more narrowly divided Senate, in which more than two-thirds of the votes are controlled by a chastened Republican minority caucus whose members want New Yorkers to believe they are fiscally conservative — and who have proposed a broader cap of their own.*

Speaking of caps, what about Paterson’s proposal to cap school property taxes, which was actually passed last summer by a majority of the current Republican and Democratic members of the Senate?   Instead of renewing his push for the tax cap this year, Paterson had all but dropped the subject until last week, when he ordered state agencies to more carefully evaluate the impact of local mandates on local property tax levels.

By the way, if the governor considers inflation alone an appropriate limit for state spending, why isn’t it also applied to school property taxes, which under Paterson’s proposal would be limited to 120 percent of inflation?

* UPDATE: The last spending cap formally introduced by Senate Republicans was S.7134 of 2008, which would have limited growth in “State Funds” spending–which, unlike State Operating Funds, includes capital spending–to 120 percent of the the most recent annual inflation rate, or a maximum of 4 percent.   So the GOP favored a cap that was both broader and looser than the one Paterson has proposed.

** FURTHER UPDATE: The Senate bill (no longer posted on an open webpage) was a constitutional amendment, and thus was stronger than Paterson’s in that respect.

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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