Outlines Plan To Cut Debt & Costs
Gov. Andrew M. Cuomo came to Queens College in Flushing last Thursday, Jan. 19, to outline his 2012-13 Executive Budget and Reform Plan, which expands on the reforms enacted last year to continue building a stronger state.
As a result of tough decisions and bipartisan cooperation of the past year, Cuomo said, the state is able to close the current deficit without broad cuts, new taxes, fees or gimmicks. In addition, the governor’s Executive Budget proposes major reforms to reduce the cost of government for taxpayers, implements accountability in our schools to put students first, and puts the state in a position to leverage billions of dollars in private sector investment to grow the economy and create jobs.
“The historic steps we took last year have allowed us to put forward an honest and straightforward budget that calls for real reforms to right size government and puts the people first,” Cuomo said. “This budget holds the line on spending while protecting the taxpayer dollar, and ensures that New York’s education system is transformed to make students the top priority. We have made our state a model for getting things done, and we must continue to work together in a bipartisan manner to rebuild our economy, create jobs, and build a new New York.”
The Executive Budget closes the current $2 billion budget deficit with no new taxes or new fees. It also proposes mandate relief and pension reform that aim to save taxpayers and local governments billions of dollars and launches education reform to put students ahead of the education bureaucracy.
Additionally, the Executive Budget lays the groundwork for an $25 billion economic development agenda, funded largely by leveraging billions in private sector investment rather than by taxpayer dollars.
The state operating budget increases by less than two percent while honoring the two-year commitment made in 2011-12 to increase School Aid and Medicaid funding at approximately four percent, Cuomo said.
Highlights of the plan include:
– closing the current budget gap with no new taxes, fees or gimmicks, and including zero growth in State agency spending;
– eliminating automatic spending inflators and implementing reforms throughout the budget to ensure that spending increases for service providers reflect performance and actual cost;
– allocating $1.3 billion in state investment designed to spur a total of $25 billion from other sources to launch and accelerate major infrastructure projects and create thousands of jobs;
– creating a plan for the state to take over 100 percent of the costs of Medicaid growth that will be phased in over three years, saving local governments $1.2 billion over the next five years;
– creating a pension reform plan that will save state taxpayers and local governments outside New York City $83 billion, and will save New York City $30 billion over the next 30 years; and
– increasing school aid by $805 million, including $250 million linked to improved academic performance and management efficiency, and implementation of an enhanced teacher evaluation process.
Due to structural reforms enacted in last year’s budget as well as the reforms proposed in this budget, the budget gap in 2013-14 is projected at $715 million. That is the lowest “first out-year” budget gap in two decades, Cuomo noted. The Executive Budget recommendations cut the projected four-year deficit by more than half, from $16.4 billion to $7.4 billion.
The Executive Budget includes:
– All Funds spending of $132.5 billion in the fiscal year that begins Apr. 1, a decrease of $225 million from 2011-12. The back-to-back decline in All Funds spending represents the first time in decades that this has occurred.
– State Operating Funds spending of $88.7 billion, an increase of $1.7 billion, or 1.9 percent. State Operating Funds exclude federal funds and long-term capital spending.
Financial plan
The financial plan outlined by the Governor is based on the principles of fiscal discipline and reality-based budgeting that do not include using new taxes, fees, or one-shot gimmicks. State agency operations growth is held flat, while local assistance programs grow by 2.6 percent.
The $3.5 billion budget gap identified in December is closed through $2 billion in spending reductions in the Executive Budget proposed by the Governor, and $1.5 billion in revenues from the middle-class tax reforms enacted last year that made the tax code more fair and equitable. Even with four percent increases in education and Medicaid spending, and a 2.6 percent increase in Aid to Localities, there will be a net reduction in All Funds spending.
Zero growth in state agency spending is achieved by redesigning state agency operations to reduce duplication, redundancy and waste.
Last year, the governor eliminated certain automatic inflators and pegging increases in education and Medicaid spending to rational and affordable measures of growth.These actions saved New York billions of dollars and helped to stabilize the state’s finances.
The 2012-13 financial plan works to further control automatic cost growth and tie growth to rational measures.
For 2012-13, inflators like cost of living adjustments will be kept flat and reforms will be introduced to ensure that spending increases in future years reflect performance and actual cost.
Economic development
The 2012-13 Executive Budget funds a comprehensive and coordinated blueprint for economic development. The plan is designed to create jobs in New York State through public-private partnerships that leverage state resources to generate billions of dollars in economic growth, improve the state’s infrastructure and support regionallybased economic strategies.
The Executive Budget lays the groundwork for an innovative $25 billion economic development agenda, funded largely by leveraging billions in private sector investment rather than taxpayer dollars. The New York Works Fund and Task Force will coordinate $1.3 billion in state funding to spur up to $25 billion in investment from other sources, including private companies, the federal government, and authorities, to allow major projects to move forward that will create jobs and improve the state’s infrastructure.
To accelerate select infrastructure projects with maximum economic impact, the governor’s plan will use provisions from the Design Build legislation, which was passed in the December 2011 extraordinary session, that will allow projects to begin now and reduce costs by hundreds of millions of dollars.
The budget includes a new round of $200 million in competitive resources for the Governor’s Regional Economic Development Councils. Of this total amount, $130 million is capital funding included in the New York Works program and $70 million comes from Excelsior Tax Credits.
The Executive Budget builds on efforts to reinvent state government to perform more efficiently and better protect taxpayer money. The Executive Budget provides additional funding for the work of the Regional Economic Development Councils, and advances SAGE commission proposals to reverse decades of bureaucratic growth and refocus agencies’ operations in ways that benefit service recipients and taxpayers alike.
The governor is also proposing structural reforms to relieve local governments of state mandates that drive up local costs.
These reforms, which address the largest cost-drivers for local governments, will help municipal leaders meet the pressures of the prolonged economic downturn, and will help local governments meet the goals of the property tax cap.
The Executive Budget calls for continued reforms to make the state’s health system perform better and cost less. By enacting the Health Exchange, one million uninsured New Yorkers will gain coverage. It will reduce costs to individuals who purchase coverage directly by 66 percent and small businesses by 22 percent, all financed by the federal government at no cost to New York.
Medicaid growth is a major cost driver for counties. In 2006, the state capped the amount of Medicaid cost growth that counties have to pay. Currently, the cap is three percent of growth; all growth over three percent is paid by the state. To provide fiscal relief to counties and to New York City, the state will phase in a 100 percent takeover of the costs of Medicaid growth.
In the 2013 fiscal year, the county cap will fall to two percent of Medicaid growth; in county fiscal year 2014, the county share will be reduced to one percent. Starting in county fiscal year 2015, the state will pay 100 percent of the costs of Medicaid growth.
The takeover by the state of a greater share of local Medicaid expenses will save counties and New York City $1.2 billion over the next five years.
Next to Medicaid, pension costs are the most significant burden on local governments, according to Cuomo. The governor called for a new tier in the state pension system that will save the state and local governments outside of New York City $83 billion and New York City $30 billion over the next 30 years.
The new pension plan would have progressive contribution rates between four and six percent with shared risk/reward for employees and employers to account for market volatility. It includes a voluntary option for Defined Contribution following the TIAA-CREF model. Employees taking this Defined Contribution will vest in this system after one year. This option will be portable. No current employees will be affected by the governor’s pension reform plan.
In addition to these reforms, the Executive Budget provides $715 million to local governments in unrestricted operating aid, and an additional $79 million in grants to promote greater efficiency.
The budget also reforms the Early Intervention program to reduce counties’ administrative burdens and cut their costs by $99 million over five years, and reforms the Preschool special education program to reduce costs for counties outside of New York City by $150 million over five years. The Executive Budget does not include any cuts to Early Intervention or Preschool special education services.
The Executive Budget includes major reforms to the state’s public education system that are aimed at bolstering student achievement and improving efficiency for the taxpayer.
The budget includes a total increase of $805 million in school aid, including $250 million for performance grants linked to improved academic performance and management efficiency.
High need school districts will receive 76 percent of the 2012-13 allocated increase and 69 percent of total school aid.
The additional aid is linked to implementation of an enhanced teacher evaluation process.
The governor announced that the state Education Department and school employee unions will have 30 days to agree on a new effective teacher evaluation system or the Governor will propose an evaluation system in the 30 day budget amendments.
Schools will be given one year to implement the system or risk forfeiting an increase in education aid in the 2012-13 and 2013-14 school budgets.
