screen-shot-2015-02-11-at-4-56-02-pm-150x150-9099504Governor Andrew Cuomo’s projection of future “surpluses” rests on the expectation that he “will propose, and negotiate with the Legislature to enact, Budgets that hold State Operating Funds spending growth to 2 percent.”

But is the governor really living under his own cap? A budget analysis by state Comptroller Thomas DiNapoli’s office calls this claim into question. (See UPDATE below.)

The Financial Plan and assorted briefing documents issued with Cuomo’s latest Executive Budget estimate that State Operating Funds spending will increase 2 percent for fiscal 2015 and 1.7 percent in fiscal 2016.

Strictly speaking, these figures aren’t inaccurate — but they are a bit misleading.

The lower growth levels have been achieved in part by using excess cash to “pre-pay,” a year ahead of time, $688 million, $566 million and $100 million in debt service actually due in fiscal years 2015, 2016 and 2017, respectively.  The 2015 budget also will pre-pay $66 million in Mental Hygiene payments due in fiscal 2016, according to DiNapoli’s report.  Finally, the governor is proposing a change to the School Tax Relief (STAR) program that effectively will convert $100 million in STAR program costs, now counted as spending, into a deduction on the revenue side.

Making the earlier year’s number larger and the later year’s number smaller has the effect of reducing the difference between the two. Adjusting for such changes by attributing spending to the year in which it belongs, the comptroller’s report estimates the actual State Operating Funds spending hike will be 3.1 percent in both fiscal 2015 and fiscal 2016 under Cuomo’s Executive Budget proposal.

UPDATE: However, if the comptroller’s recalculation of the spending total net of pre-payments for 2015 (as shown on bottom of page 7 of his report) is carried through to 2016 (as shown on bottom of page 10), the spending increase can’t be 3.1 percent for both years.  Accepting the comptroller’s fiscal 2015 bottom line of $92.62 billion, the governor’s adjusted proposed spending of $94.61 billion for 2016 works out to an increase of 2.15 percent. Which, of course, is still not 1.7 percent. Adjusting this way, the increase across the two years, from fiscal 2014 to fiscal 2016, would come to 5.3 percent.

UPDATE II: The comptroller’s report (on p. 30) sums up the issue this way:

In addition, the Financial Plan has come to depend on the use of timing-related adjustments, shifts and categorizations of spending, within the Budget and off-budget, to present a lower rate of growth in spending than would otherwise be the case, clouding the actual change in State spending. Other actions, such as program restructurings, can also have the effect of changing the spending growth picture. An overall measure of such changes is difficult, in part because several of these actions are not clearly delineated, and leave sole discretion to DOB to make such spending determinations and adjustments, as well as the final presentation of budget projections. Given such changes, spending growth figures included in the Executive Budget are not as straightforward as they may appear.

For a second consecutive year, Cuomo also is relying on his 2 percent growth assumption — as expressed in the magic footnote at the bottom of the financial plan — to obscure the existence of future budget gaps. Calculated using traditional methods, the difference between projected revenues and current-law spending looks like this:


Splitting decimal hairs?

The difference between the comptroller’s calculation and those in the governor’s budget boils down to more than just an accounting dispute.  Among other things, Cuomo is asking the Legislature approve a new property tax credit credit that will distribute $1.7 billion to individual homeowners and apartment-dwellers when fully implemented in four years.  Last year’s business tax and estate tax reform also put hundreds of millions of dollars worth of additional tax cuts into the fiscal pipeline for the next few years. But the “surplus” money to pay for them won’t be there if spending isn’t held down.  If Cuomo can’t currently produce a 2 percent spending increase without a little smoke now, it won’t get any easier to do it without mirrors in the back end of his second term.

During his first term, Cuomo produced smaller inflation-adjusted state spending increases than New York has seen in any four-year period since Hugh Carey’s first term in the mid-1970s. (George Pataki’s first term, in the mid-1990s, isn’t far behind.) Ironically Cuomo’s attempt to hype and spin a record of fiscal restraint into much more–as reflected in his boast of producing a non-existent $2 billion “surplus”– is actually fueling calls for higher spending than he wants to tolerate. For example, the Education Conference Board has misinterpreted the governor’s financial plan to mean that  “state budget surpluses are projected through 2018.”

On a school year basis, Cuomo has proposed a school aid increase of $1.1 billion.  The Board of Regents thinks it should be almost twice as large. In fact, on a fiscal year basis, added school aid represents 90 percent of the net spending increase in the proposed State Operating Funds Budget (as calculated by the governor).  Absent a tax increase, there isn’t much maneuvering room within this figure — because, in fact, there aren’t any multi-billion dollar “surpluses” in store.*

* Unless of course, you count the unprecedented $5.4 billion budget windfall, a product of unusual, one-shot bank penalty payments. This money is not a “surplus” in the normal sense; Cuomo has programmed it for “capital” purposes, although DiNapoli’s report makes some troubling points about the appropriations language, about which more in this space tomorrow. Friday.

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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