Even if the Legislature doesn’t add to Governor George Pataki’s budget proposal, the state spending increase during his final term will be the largest since Mario Cuomo’s second term in the late 1980s, according to the Empire Center’s overview of the 2006-07 Executive Budget.

After adjusting for a shift of aid payments between the current fiscal year and the coming year, the Empire Center report estimates the governor’s proposed state funds spending increase for fiscal 2006-07 comes to just over 7 percent, or two and a half times the projected inflation rate. Assuming this figure holds, the total State Funds budget increase since fiscal 2002-03 will be 28 percent, or double the inflation rate, the report says.

The report — Taxing and Spending in the Empire State: An Overview of the 2006-07 Executive Budget — was written by E.J. McMahon, director of the Empire Center and a senior fellow for tax and budget studies at the Manhattan Institute for Policy Research. Designed to serve as a brief taxpayer’s guide to Pataki’s budget proposal, it includes a summary of recent spending trends and tax changes sought by the governor. It also features a special statistical section highlighting key aspects of Pataki’s 12-year fiscal record.

The report shows that state-subsidized health care costs have exploded in the past 12 years, including a near-doubling of Medicaid costs and a 412 percent increase in “on-budget” public health expenses. Other fast-rising areas of the budget have included aid to public schools, including STAR property tax exemptions (up 119 percent); employee health benefits and pension contributions (up 124 percent); the court system (up 94 percent); and debt service (up 87 percent). At the same time, there has been a sharp drop in the relative share of spending devoted to other state operations, largely because Pataki reduced the size of the payroll, the report says. With the success of welfare reform, state-funded welfare costs have shrunk from 5 percent to just 1 percent of total State Funds spending since 1995.

“Thanks to fiscal restraint earlier in his tenure, state tax reduction will be Pataki’s strongest fiscal legacy even if his lame-duck tax initiatives are rejected by the Legislature,” the report concludes. “But he leaves behind a state budget that is growing so fast that this achievement could be jeopardized within just a few years.”

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