Gov. Cuomo’s budget trickery is worrisome

The Post-Star

July 19

The sunshine may be bright right now, but we are wondering if New York state has its raincoat ready.

The current economic expansion is the longest in history, the number of private sector jobs in New York is at an all-time high, the unemployment rate is near an all-time low and the state has been on the receiving end of some $12 billion in civil penalties from financial institutions.

It’s probably not going to get any better than this.

The Empire Center, the fiscally conservative think tank that keeps its fingers on the pulse of New York’s spending, filed a couple of disturbing economic reports about the state of New York’s budget over the past two weeks that should worry us.

One was titled, “How Cuomo is cooking New York’s books” while another was titled “NY’s dimming budget outlook.”

Remember, this is from a governor who has pledged to hold New York spending to 2 percent, just like other municipal governments and our local schools. Considering past history and the reputation of Democrats, many might find it surprising that Gov. Cuomo continues to provide a moderate degree of fiscal restraint regarding state spending, especially in trying to hold the spending to 2 percent – at least on paper.

But increasingly, that does not seem to be the case.

The governor has recently had to resort to a variety of budget trickery to achieve his goal.

For instance, the governor quietly postponed $1.7 billion in Medicaid payments in March — the last month of the fiscal year — to April. By holding back the $1.7 billion payment and rolling it into this year’s budget, Gov. Cuomo was able to hold the line on the 2 percent spending pledge for last year, when it actually was over 4 percent.

This little bit of smoke and mirrors is just kicking the can further down the road.

It also leaves the new budget out of whack for the coming year. After adjusting for the latest finagling by the Cuomo administration, a state comptroller’s report estimates that state spending will increase 5.7 percent in the coming year, not 2 percent.

According to The Empire Center, Gov. Cuomo could address the problem by reducing Medicaid provider fees, or implementing Medicaid “savings actions and offsets” that were cited in his most recent plan update, but that could reduce revenues for local hospitals around the state.

The governor could also just delay payments a few days next spring, just as he did this year.

Ultimately, it means hitting the 2 percent spending number will be even be more challenging in coming years, unless there are real spending reductions, and there seems little will to do that.

This comes at a time when it appears unlikely the economy will get much better.

The comptroller’s reports says state spending is projected to increase at an average of 4.1 percent a year from 2021 to 2023, while revenues are projected to increase at 3 percent. You don’t have to be an expert to know that is a problem.

Budget shortfalls of $3.9 billion in 2021, growing to $4.7 billion for 2023 are predicted, and that is only if the state personal income tax continues to grow at a 5.2 percent rate, which could be problematic because of the political winds, and an economic downturn could be devastating.

The Empire Center worries that at the first hint of a financial downtown, the Democrats in the Legislature will turn immediately toward raising taxes on New York’s highest earners.

That could lead to reductions in personal income tax revenues and further flight from the state. That would also be bad, but it is certainly not a sure thing.

The Empire Center also says the governor plans to borrow more, and the state debt is expected to increase 26 percent to $14 billion over the next five years.

We found that startling.

Budgets like New York’s are complicated and bigger than many countries, and it is great to have organizations like The Empire Center scrutinize the accounting for us. If The Empire Center is right, stormy weather is coming, and the trickle-down reductions regarding local aid could also be coming.

We’d love to believe these good times will continued unabated for the near future, but that is not realistic.

It would be better to know what the rainy-day plan is from the governor or see him take some steps now to explain how the state will make its Medicaid payments this year while still holding spending to 2 percent.

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