The coronavirus pandemic has just claimed its first big institutional victim: the New York State Legislature, which handed Governor Cuomo broad and unprecedented leeway to “adjust or reduce” state spending in the fiscal year that began today.
Subject to the governor’s control of budget bill language and his ability to veto added spending, the Legislature’s ultimate say on appropriations is its most cherished power.
This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.
In this situation, however, the Assembly and Senate had little choice.
Lawmakers in both parties know they lack the stomach for cutting—actually cutting—spending, much less approving historically large budget reductions. No one seriously argues with Cuomo’s estimate that state tax receipts have dropped a previously unthinkable $10 billion to $15 billion from previous forecasts due to the social-distancing lockdown of entire swaths of the economy.
And the broader economic situation is in greater flux than ever seen at the start of a fiscal year. With the pandemic lockdown expected to last for another month or more, and the stock market still crashing, the state tax drop may not have found its bottom. No one can be sure, at this point, how much of a general budget bailout states and local governments might get from an expected fourth federal stimulus bill. It’s highly unlikely to be nearly large enough to fill the entire gaping hole in New York’s budget.
So what are the governor’s new powers? How and when can he exercise them? Four of the first five pages of the Aid to Localities budget bill are devoted to answering those questions. The basics:
- Cuomo’s budget director will determine whether the budget is balanced during three “measurement periods”: April 1 to April 30, May 1 to June 30, and July 1 to Dec. 31.
- If “a General Fund imbalance has occurred during any Measurement Period,” the budget director will be empowered to “adjust or reduce any general fund and/or state special revenue fund appropriation … and related cash disbursement by any amount needed to maintain a balanced budget,” and “such adjustments or reductions shall be done uniformly across the board to the extent practicably or by specific appropriations as needed.”
- Prior to making any adjustments or reduction, the budget director must notify the chairs of the legislative fiscal committees in writing—and the Legislature has 10 days following receipt of that notice to prepare and approve its own plan.
- If the Legislature fails to approve its own plan, the budget director can go ahead and implement his own cuts.
This is not quite the dictatorial overreach portrayed, both in private and on social media, by some lawmakers, especially Republicans.
First, it is temporary. It won’t continue beyond this year.
Second, as noted above, if legislators don’t like Cuomo’s cuts, they can enact their own alternative plan “by concurrent resolution,” via a combined vote of both houses—a crucial distinction, because such resolutions cannot be vetoed by the governor.
In the meantime, even now, Cuomo and the Legislature aren’t actually cutting spending yet. School aid, the largest piece of the budget, is essentially held flat in the final local assistance bill. Even assuming the as-yet (at 3:30 pm) unintroduced Health Department budget incorporates all of the “savings” recommended by Cuomo’s Medicaid redesign team, Medicaid spending won’t fall below this year’s levels, either.
If Cuomo wants to stay ahead of the problem, Budget Director Robert Mujica will make his first cuts in the April measurement period—starting with school aid, which can’t simply be frozen but must be significantly reduced.
Discussing the budget challenge at his Sunday briefing, Cuomo stressed the need to take tough action sooner rather than later
“I believe postponing the problem in government, in life, you just make it worse,” he said. “Let’s not deceive ourselves.”
However, while winning positive reviews for his response to the public health crisis, he has actually spent much of the last month playing for time on the fiscal front.
Recall that the pandemic began to emerge in the final week of February, when stocks initially fell by a shocking 10 percent. Yet on March 1, Budget Director Robert Mujica signed onto a “consensus” memo with legislative staff projecting the state would have $700 million more revenue to spend in the coming year.
As the economic meltdown accelerated, Cuomo continued to avoid talking about the worsening budget picture until March 10, when he announced he had asked State Comptroller Thomas DiNapoli to estimate the impact on revenues—although the comptroller has little role in the budget process and Cuomo’s own budget staff already knew the answer.
On March 17, DiNapoli came up with an initial estimate that revenues would be down $4 billion to $7 billion—which, Cuomo said at his daily briefing, “means our budget as we prepared it is possibly over-optimistic.”
Mujica, seated beside his boss, said at the same briefing the next budget would need to include “flexibility… to be able to make changes as you go.” Cuomo himself said the budget should include “a built-in mechanism to adjust the expenditures … so you don’t have to come back every 24 hours.”
And that, nearly two weeks later, is pretty much where things have ended up.
The economic and fiscal outlook for New York is darker than at any time since the Great Depression. This much is clear: now more than ever, the buck stops with the governor.