New York State government must change its financial practices, a state budget task force said Tuesday.
While the state reports adoption of a balanced budget each year, the reality is that New York has relied on gimmicks and one-shot actions to achieve the apparent balance for years, task force members said. As long as expenditures are growing faster than revenues are, as has been the case in recent years, "we are on an unsustainable course," said Richard Ravitch, co-chair of the national State Budget Crisis Task Force.
Ravitch and co-chair Paul Volcker formed the group to examine states' fiscal health in the aftermath of the Great Recession. The task force issued a general report on states in July. It is now going on to release reports on six large states. On Tuesday it held a news conference for the release of the
Carol O'Cleireacain, the New York report's author, said the state faced three threats: its budgeting practices, its spending levels on certain programs, and potential federal actions dealing with the deficit.
"The [New York] constitution requires the governor to propose an executive budget in which general fund projections of receipts and disbursements are balanced or are expected to be balanced on a cash basis," the report notes. However, the general fund represented only 43% of the fiscal 2012 budget and the overall budget is not required to be balanced. Furthermore, the cash basis of balance for the general fund does not correspond to generally accepted accounting principles, the report notes.
Over the last 10 years the state has relied on one-shot actions to balance the general fund to the tune of $25 billion, O'Cleireacain said.
High levels of spending or needed spending are New York's second threat, O'Cleireacain said. The state has the most expensive Medicaid system in the country. In 2009 its spending per enrollee was 69% higher than the national average. Medical providers, unions and interest groups promote the institutionalization of patients and this can cost over $100,000 per patient.
The state has the highest per pupil cost for K-12 education in the nation, O'Cleireacain said. At $18,618 it is 75% more than average. Ravitch said the high cost are because education is a high priority in the state, the cost of living in New York is so high, and because there are powerful education unions here.
The state has immense infrastructure needs, particularly in transportation. The state is planning to replace the aging Tappan Zee bridge at the cost of more than $3 billion. The Metropolitan Transit Authority does not have stable adequate funding, the report said. Over the next 20 years the authority will need $129 billion to rebuild the existing system, the MTA estimates.
Excluding the MTA, the New York State Department of Transportation estimates needing $175.2 billion to maintain existing infrastructure over the next 20 years, the report notes.
The third threat to the state is the federal government's efforts to come to curb its deficit. Most of the federal government's potential actions would harm the state, the report said.
"New York is more vulnerable than most states to potential cuts in grants, particularly for social service programs, because it spends far more than the national average on such programs and receives much greater federal reimbursement," the report states.
New York has the second highest level of debt as percent of personal income and as a percent of gross domestic product of the 50 U.S. states. It has the highest level of debt per capita of any state and this debt has more than tripled in inflation-adjusted terms from 1969 to 2009.
O'Cleireacain noted that the report did highlight two positive state government developments. First, starting with the fiscal 2013 budget, the state instituted caps on the growth of Medicaid funding. Second, the state also recently capped the growth of education funding going forward.
"I think we'll be talking about this report for many years," said New York Comptroller Thomas DiNapoli at the news conference. "It's going to take time to get to perfect solutions."
