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Spending growth has slowed in state; Ranks in lower 25 for 2 budget years

In a clear break from tradition, New York State has ranked in the lower half of the 50 states in spending growth during the last two budget years -- although the Empire State's welfare recipients and public employees have gotten off easy compared with their peers in many parts of the country.

Those are the key conclusions about New York in the most recent version of the Fiscal Survey of the States, a twice-yearly look at how states spend and tax, which was released last week.

New York ranked 37th in spending growth in fiscal 2012 and will rank 29th in fiscal 2013, according to the report, which is published by the National Governors Association and the National Association of State Budget Officers.

To Gov. Andrew M. Cuomo, the report was sweet vindication for budget battles fought and -- unlike past administrations -- won.

"Last year, in his first budget, the governor changed the fiscal trajectory of the state," said Morris Peters, a spokesman for the state Division of the Budget.

In response to the fiscal survey, the Cuomo administration also touted a separate U.S. Chamber of Commerce study that showed New York moving into the top 10 nationwide in terms of growth, productivity and livability.

Noting that cuts in taxes on small businesses and middle-class families were part of his budget plans, Cuomo said in a statement: "For too long, state government stood in the way of business development. Those days are ending."

Despite tighter budgets, New York's spending has continued to grow in large part because of the end of federal stimulus funds and the fact that the biggest line item in the budget -- Medicaid -- depends in large part on the course of the economy.

The loss of that stimulus money was the biggest single factor behind the $10 billion deficit Cuomo faced when he entered office in January 2011.

Cuomo filled that hole in large part by shrinking state government.

"There were a lot of real cuts," said E.J. McMahon, a senior fellow at the Empire Center for New York State Policy, a conservative-leaning think tank.

New York's fiscal 2012 budget included a 10 percent across-the-board cut in most state programs and a 6.1 percent cut in aid to local school districts.

The state boosted aid to school districts by 4 percent for 2013 but that doesn't come close to making up for last year's reduction, said Frank Mauro, executive director of the left-leaning Fiscal Policy Institute.

What's more, the state has essentially programmed in cost controls for future years through measures aimed at containing the growth in Medicaid, the state-federal health care program for the poor.

New York enacted seven efforts to control Medicaid costs in 2012, more than all but three other states. And it enacted six such measures for fiscal 2013, more than all but five other states.

Other states "don't show quite as much as New York" in terms of Medicaid reform, said Dan Crippen, executive director of the National Association of State Budget Officers.

Those Medicaid savings measures were focused largely on health care providers rather than recipients.

In contrast, California, Indiana and five other states eliminated some Medicaid benefits in 2012, and seven states plan to do so in 2013.

"Gov. Cuomo brought together stakeholders and experts from throughout the state to work cooperatively to reform the Medicaid system and reduce costs," Morris said. "It was not about arbitrary cuts just to bring down spending, but redesigning a program that was inefficient and unsustainable to benefit both taxpayers and patients."

The state's effort to protect Medicaid recipients echoes its comparative generosity with welfare recipients and public employees.

After nearly two decades with no increases, New York boosted its basic public-assistance payments by 33 percent over three years starting in fiscal 2010.

Meanwhile, Maine, Missouri and Washington state cut welfare benefits in 2012 and 14 states plan to do so in 2013.

A similar pattern holds for state workers.

Nationwide, 15 states laid off employees in 2012 and 11 have layoffs planned for 2013. Six cut employee salaries this year and four plan to do so next year.

But New York's public employees -- despite their run-ins with Cuomo -- have encountered none of the above, although the state has cut its payroll through attrition.

Most New York employees will have to live with a pay freeze under labor deals brokered by Cuomo, but that comes after a 14 percent, four-year pay hike before the new governor took office.

"New York State employees have made out very well," McMahon said. "They have had a very nonstressful recession."

Many taxpayers caught a break, too, because of the state's reductions in middle-class tax rates and business taxes passed last December.

"What's interesting about New York that makes a big difference compared to a lot of states is fairly significant reform in terms of taxes," said Scott Pattison, executive director of the National Governors Association.

Otherwise, in terms of budget cutting in tough times, "New York, Massachusetts, some of the others -- they're relatively close to what we're seeing in the trends for the other states," Pattison added.