Although legislators and special interest groups will complain of spending “cuts,” especially in New York’s Medicaid program, the baseline in Governor George Pataki’s 2005-06 Executive Budget tells a different story.

Under Pataki’s plan, state funds spending (excluding federal grants) would rise next year by 5.4 percent—fully twice the projected inflation rate.[1] This is one of the largest spending hikes Pataki has proposed in 10 years as governor, as shown the chart below.

Pataki’s Proposed State Funds Spending Hikes
Annual Rate of Increase, Fiscal Years Ending 1996-2006
fwm2005-01graph1-2150106
Note: Proposed spending hikes for 2005 and 2006 are adjusted to reflect onetime accounting changes and loss of temporary federal funds (shown as black line atop 2006 column).
Source: New York State Executive Budget, Manhattan Institute adjusted estimates

The spending figure for fiscal 2006 is inflated by several features that don’t reflect an actual expansion of programmatic expenses. It includes, for example, $220 million to cover the loss of a temporary increase in federal Medicaid assistance, enacted in 2003, which is now being phased out. Not counting this figure, the state funds spending increase would be in the neighborhood of 5 percent. Another $190 million reflects the Legislature’s past decision to roll forward a Medicaid billing cycle by a few days, moving this obligation from fiscal 2005 into fiscal 2006.

Even after adjusting for these anomalies, however, the portion of the governor’s proposed budget financed by the state’s own taxes, fees and borrowing clearly would grow considerably faster than the projected 2.7 percent increase in the composite Consumer Price Index for New York for 2005.

Medicaid Leads the Parade

The largest single growth item in the Executive Budget is Medicaid. The governor has proposed about $786 million in Medicaid spending reductions and “cost containment” actions, which are supposed to help finance the beginning of a partial state takeover of Medicaid costs borne by county and New York City taxpayers. Yet even after deducting these savings, the state funded portion of Medicaid is growing at an annual rate of nearly 13 percent.[2]

In descending order of magnitude, the following five categories account for nearly 90 percent of the state funds increase:[3]

Increase over 2004-05 adjusted total
Medicaid $1.278 billion
Other health-related spending: $468 million
School aid: $458 million
Various state operations: $356 million
Pensions and other benefits: $298 million
Capital projects: $259 million

The principal cause of the increase in state operations costs is the second phase of a new collective bargaining agreement between the state and its public employee unions, which was ratified last year. When fully implemented in 2007, it will provide for salary increases worth about 11 percent at total additional payroll costs exceeding $1 billion a year.[4]

Pataki-era spending

If the latest Executive Budget is adopted as proposed, state funds spending will have grown from just under $43 billion when Pataki took office in 1995 to $69 billion at the end of the coming fiscal year. Including Health Care Reform Act (HCRA) programs previously carried off-budget, state funds spending during Pataki’s first 11 years in office will have risen by 62 percent, an average of 4.5 percent a year.[5] A good portion of the increases—amounting to roughly half in recent years—was the result of legislative additions to the Governor’s original proposals.

Including federal aid, the total all-funds budget has grown from just under $62 billion when Pataki took office to a proposed $105.5 billion for fiscal 2005-06. The path of spending during the Pataki administration, including estimated and proposed totals for fiscal years ending in 2005 and 2006, is shown in the following chart.

Excelsior: The State Budget Under Governor Pataki
Annual Rate of Increase, Fiscal Years Ending 1996-2006
fwm2005-01graph2-6367051
Source: State of New York, Executive Budget

The Executive Budget as opening bid

As noted in previous FiscalWatch memos concerning the annual Executive Budget,[6] the spending figures in the Governor’s Executive Budget traditionally are viewed as the floor for further negotiations with the Legislature, which invariably wants to spend more on nearly everything.

The table below shows Pataki’s proposed state funds spending increases to the actual change in spending, reflecting legislative changes.

Pataki Budget Cycles From Start to Finish:
Proposed and Actual Changes in State Funds Spending
Fiscal year ending Proposed Change Actual Change
Total ($ million) Percent Total ($ million) Percent
1996 -105 -0.2 435 1.0
1997 -1,546 -4.2 -251 -0.6
1998 536 1.2 1,472 3.4
1999 3,822 8.5 3,705 8.4
2000 867 1.8 1,902 4.0
2001 2,546 5.1 4,333 8.7
2002 2,684 4.9 2,795 5.2
2003 929 1.6 672 1.2
2004 -73 -0.1 1,782 3.1
2005* 2,500 4.2 4,705 7.9
Average 1,216 2.3 2,155 4.25
 * Preliminary estimate as “adjusted” in 2004-05 Executive Budget; prior year figures are actual
Source: State of New York, Executive Budget

Past as prologue

Since he took office as governor in 1995, Pataki’s recommended changes in state funds spending ranged from a cut of 4.2 percent in fiscal 1996-97, his second year in office, to a high of 8.5 percent in 1998-99, the budget introduced before his first re-election campaign. Across 10 years, including estimated final figures for fiscal 2005, his average proposed spending increase was about $1.2 billion, or 2.3 percent. But when the Legislature got through with it, the state funds budget ended up growing nearly twice as much—by an average of $2.16 billion, or 4.25 percent.

Same old problem

Without even counting the large temporary tax hikes approved by the Legislature in 2003, the state’s tax receipts as of 2006 have rebounded to a level 22 percent above the post-recession trough of 2003. If all the Governor’s cost-containment actions are approved, the state will still face general fund budget gaps of over $2.7 billion in both the 2007 and 2008 fiscal years.

It’s still the same old story: New York doesn’t have a revenue problem—it has a spending problem. If enacted, Pataki’s plan would significantly reduce the magnitude of that problem in the “out years” of fiscal 2007 and 2008—but only if the Legislature’s spending proclivities can somehow be tamed in the next budget.

Originally Published: FISCALWATCH MEMO

Notes

  1. Adjusted figure from “Total Disbursements” table on page 6 of the Exexutive Budget Financial Plan.
  2. This is clearly shown in the tables on pages 7 and 20 of the Executive Budget Financial Plan.
  3. Based on figures presented on page 7 of the Executive Budget Financial Plan.
  4. See the FiscalWatch Memo of March 10, 2004, posted athttps://www.empirecenter.org/publications/csea-contract-will-cost-taxpayers-plenty.
  5. See table on page 66 of the Executive Budget Financial Plan.
  6. See, for example, the FiscalWatch Memo of January 22, 2004, athttps://www.empirecenter.org/publications/proposed-spending-hike-one-of-patakis-biggest.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

In Pandemic Recovery, New York’s Tax Base Is More Fragile Than Ever

New York's exceptionally wealthy state tax base is also exceptionally fragile, due to its heavy dependence on the highly volatile (and portable) investment-driven incomes of Wall Street workers and fund managers. Read More

New York’s Private Jobs Rebound Still Trails Most of U.S.

In the seventh month of the coronavirus pandemic, private-sector employment in New York was still recovering more slowly than in other states from the after-effects of the broad spring shutdowns of normal business and social life, according to federal Bureau of Labor Statistics data. Read More

Mixed September for NY: Job Recovery Sluggish, Tax Receipts Up

Continuing a trend from mid-summer, New York's private jobs recovery slowed a little more in September—but state tax receipts came in a bit stronger than expected, according to two monthly reports released by the state late today. Read More

De Blasio’s (Apparent) Good Move Dissolves Into Phony “Savings”

Late Thursday, as hailed in this space, Mayor de Blasio finally made a decisive move—or at least seemed to make a move—in the direction of actually saving some money on labor costs by getting tough with a powerful (and powerfully self-entitled) municipal union. Read More

‘Clusters’ Drive a Widespread Surge in New York’s Coronavirus Infection Rates

New York's coronavirus infection rates have surged to their highest levels since May, pushing 10 counties – including Brooklyn, Rockland and Orange – above a threshold that the Cuomo administration uses to justify travel restrictions on other states. Read More

Not a Moment Too Soon, Bill de Blasio Is Setting a Good Fiscal Example

After months of flailing, floundering and stalling on desperately needed cuts to New York City's pandemic-ravaged budget, Mayor de Blasio just made a smart and appropriate move to save money—in the process defying one of New York's most powerful government employee unions. Read More

Cahill Charges Are An Indictment Of Cuomo’s Policies

Yesterday’s indictment of the state’s top construction union official on federal corruption charges raises a big question: if private companies are paying bribes to avoid having to work with certain construction unions, why is Governor Cuomo insisting that the state keep doing it? Read More

It’s Official: New York State’s Second Quarter Economic Crash Was the Worst on Record

Further evidence of the massive damage done to New York’s economy by the coronavirus pandemic shutdown has emerged in the latest gross domestic product (GDP) data from the federal Commerce Department's Bureau of Economic Affairs. Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.