ALBANY – Gov. Andrew M. Cuomo counts on $1.2 billion in "fiscal gimmicks" to keep spending growth below 2 percent in his proposed 2017 state budget, a government watchdog agency said Monday.
The financial maneuverings mask the true nature of the budget’s growth, said the Citizens Budget Commission.
The true level of state spending would rise by 3.2 percent without four moves that shift funds, delay costs or assume unspecified savings, the nonpartisan fiscal monitoring group said.
Cuomo has touted keeping state spending growth below 2 percent for the past seven years.
To keep spending below 2 percent, “the Executive budget proposal includes four fiscal gimmicks totaling $1.2 billion," the commission said in a report to be publicly released Tuesday.
In the $162.2 billion budget plan Cuomo released in January, he said that keeping the portion of the budget paid for by state taxpayers – as opposed to federally funded programs – within the cap “has changed the nature of the state budget process.’’
The commission's new report said a cap by Albany on annual spending growth in the state-funded portion of the budget – proposed this year to rise to $96.2 billion -- makes sense. But it terms as “questionable” the four maneuvers that would help keep the state to its spending cap.
“In its intent, the cap is financially prudent, but it has fostered the use of fiscal gimmicks that make the state’s budget more complicated to understand and undermine transparency,’’ according to the commission's report.
A Cuomo administration spokesman dismissed the group’s claims. “This is the seventh budget to hold spending growth to 2 percent – a record of restraint that is unmatched. One might think a self-appointed fiscal watchdog group would recognize and celebrate such fiscal responsibility, but their relevancy is based on their critiques,’’ said Morris Peters, a spokesman for Cuomo’s budget office.
The Manhattan-based fiscal watchdog group said state spending on two major programs – public education and Medicaid – is due to rise more than double the overall 2 percent government spending increase cap. As a result, savings well below 2 percent are needed in the Cuomo plan if the overall spending cap is to be achieved again this year.
Just over $225 million of the $1.2 billion in what the CBC calls “gimmicks” would come from shifting the means by which more than 3,000 state workers are paid for their jobs, according to the commission's report, which was obtained by The Buffalo News.
Currently, those workers’ salaries count against an agency’s operating funds, which are part of the state’s budget that goes into the calculation of the spending cap. Cuomo’s new budget plan shifts those costs onto agencies’ “capital project funds,’’ which shows up on paper as a savings of $227 million for the coming fiscal year.
The commission said a second pot of “savings” would come from a provision shifting exemptions received under the STAR property tax savings program to tax credits. That shift began last year affecting new homebuyers. The new budget, CBC said, seeks to apply the credit approach to be applied to New York City personal income tax rate reductions that have been a part of the STAR program.
There would be no actual benefit to taxpayers. But the STAR plan would allow the state the “save” $277 million in disbursements, according to the commission report.
The group said Monday that Cuomo has also been able to keep below his 2 percent spending cap goal in his new budget plan by proposing $500 million in “unidentified” state agency savings.
“While this would represent very real savings of approximately 2.5 percent against agency operations, the specific measures that would generate the savings have yet to be identified,’’ the report said.
The report said the claims of agency savings would be difficult to achieve, given that government departments have held overall spending growth to 1.3 percent since the cap was begun seven years ago – including rising contractual costs for unionized workers’ salaries and health insurance.
Finally, the Citizens Budget Commission said the New York Power Authority, a favorite budget-balancing source for governors across party lines over the years, would again help Cuomo keep his state-funded portion of the budget below a 2 percent annual growth rate. The nation’s largest state-owned power corporation – which runs 16 generation facilities, including the Niagara Power Project, and owns more than 1,400 miles of transmission lines – is controlled by the Cuomo administration.
In his budget, Cuomo seeks to lower scheduled loan repayments NYPA has made in the past to the state government, the commission said. On paper for this year, the action would save money for the state’s general fund in the coming year, but would boost the state’s repayment levels in coming years. The move also could put stress on NYPA’s own finances, the commission said.
The administration pushed back against the commission's claims. It called changing state loan repayments to the Power Authority a routine move to balance the state’s budget.
On shifting state workers onto capital expense lines, the administration said the change is meant to more accurately depict the funding source to the work performed by the state employees. Moreover, the change affects only those workers who are responsible for maintaining and operating state facilities.
The administration said the changes in accounting for the STAR program would rectify an “accident of history” in which the STAR credits are the only state tax credits recorded as expenditures in the annual budget.
As for unspecified state agency savings targets, the administration said the proposed budget calls for agencies to begin new cost-control measures in amounts to cover increases from collective bargaining agreements with public employee unions. The projected $500 million in savings must come without affecting “mission critical efforts and strategic initiatives” at the agencies.
The commission was founded in 1932 to examine New York City fiscal matters. It expanded its interests to state government budgets in 1984, and it has been critical of Democratic and Republican governors and their fiscal plans each year. It has targeted everything from the way New York state structures economic development and education funding to how state officials balance the state’s books.