In 2012, New York State Budget Almost Set, But Deficit Remains

11:58 PM, Dec 30, 2011   |    comments
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Gannett Albany Bureau

ALBANY - There's not a lot of mystery in the state budget plan lawmakers and Gov. Andrew Cuomo will develop in the coming months.

They have already agreed to increase school aid and spending on the Medicaid health-care program for the poor by 4 percent each. Several weeks ago, they approved a plan to reduce the $3.5 billion budget deficit and fund other initiatives by continuing a higher income-tax surcharge on wealthy New Yorkers.

"We just did 50 percent of the budget," the governor said at the time. "When you agree on revenues, which we just did, when you agree on the education funding level and you agree on the Medicaid funding level and we have a spending cap, you basically agree to the parameters of the budget."

But that still leaves a gap of roughly $2 billion for the 2012-13 budget year, which begins April 1. The governor has said it would have to be closed by finding "efficiencies" and reducing waste in state government.

Some lawmakers favor closing the remaining deficit with cuts or further consolidation of state agencies and services. Others think that can be done by obtaining revenue from other sources and without additional reductions in services.

A possible agreement on conversion of EmblemHealth to a for-profit, publicly traded company could help fill the state's coffers. EmblemHealth provides heath-care coverage and administrative services to roughly 2.9 million people.

The Citizens Budget Commission is advising the governor and lawmakers to "resist the temptation to add new revenues" and stop using budget "gimmicks" to help close deficits, said Elizabeth Lynam, vice president and director of state studies for the business-backed group.

Instead, they should close the remaining deficit "with structural reform measures that slow down the fastest cost drivers - pensions, school aid and Medicaid," Tammy Gamerman, a senior research associate for CBC, wrote in a recent blog post.

Other measures that will be on the table next year include further consolidation of state agencies, funding for economic development, business tax credits, and a push by counties for the state to take over their share of Medicaid expenses.

Cuomo's Spending and Government Efficiency Commission recommended in December a number of mergers and consolidations. Consolidating the state Department of Transportation and the state Thruway and Bridge authorities could save between $50 million and $82 million annually, the panel found.

The governor will release his budget proposal in mid-January. Lawmakers have until March 31 to finalize a revenue-and-spending plan. The current budget is $132.5 billion.

While total education funding has been set, how to divide the new money among school districts is not. Education groups, upstate lawmakers who represent low-wealth rural schools, and the state Board of Regents are urging that a greater amount of the increase go to high-need districts.

Reductions in state aid take a harder toll on rural districts, which are less able to raise money locally, 15 upstate GOP senators wrote in a letter to the governor Thursday. They include Stephen Saland of Poughkeepsie and Thomas O'Mara of Big Flats, Chemung County.

Regents proposed in December that 73 percent of the $755 million in new money be targeted to low-wealth school districts. Another $50 million would be for competitive grants, for a total of $20.3 billion.

School aid was cut in the current budget and in the 2010-11 fiscal year, and it was frozen the year before that.

"School aid is going to be a tussle," Maziarz said. "I think upstate rural and suburban districts in general have to be addressed. The last couple years, the formula seems out of whack, and I think that needs to be addressed."

The $53 billion Medicaid program will get a 4 percent increase in state money - from about $15.3 billion to $15.9 billion.

But just because the funding is set, that doesn't mean there won't be other debates about the program.

"I think that there is definitely room, in my mind, to pare back on some optional services that we provide," said Senate Finance Committee Chairman John DeFrancisco, R-Syracuse.

Assembly Minority Leader Brian Kolb, R-Canandaigua, Ontario County, said Medicaid "needs to be revamped up, down and sideways" to cut down on waste, fraud and abuse among recipients and providers.

"I'm not talking about taking services from those who need them the most," he said.

Cuomo appointed a Medicaid Redesign Team in early 2011 to recommend how to reduce costs and improve quality and efficiency in the short and long terms. A number of changes have been implemented, including a cap on the state's share of Medicaid spending. The team's final report is being forwarded to the governor this week.

Curbing the growth of pensions should be a priority issue in budget talks, Lynam said. The governor has estimated a Tier 6 pension category would save $123 billion over thirty years.

The Citizens Budget Commission is advising against adding more economic-development spending. The state awarded $785 million in grants in December, and Cuomo has indicated he wants $200 million in the executive budget for another round of competition, Gamerman wrote.

DeFrancisco said he supports further consolidation of state agencies and a new, less-generous pension tier. There should be some kind of hybrid system that offers a traditional defined-pension benefit and a 401k-style defined-contribution benefit, he said.

"I think there's going to be a lot of debate on it," he said of the pension system.

Mark Dunlea, executive director of the state Hunger Action Network, said his group is most concerned about human-services funding. Education and Medicaid take up a large portion of the budget. With that funding already set and a deficit of about $2 billion, cuts would have to come from a small portion of the budget, he said.

In 2011, the governor delayed the last year of three years of 10 percent increases each in welfare grants. The group is expecting the money to be in the 2012-13 budget, Dunlea said. Hunger Action also would like to see restoration of jobs programs and better results in New York in helping people move from welfare to transitional and permanent jobs, he said.

The Fiscal Policy Institute is recommending the governor and Legislature undertake corporate-tax reform and close business-tax loopholes and "preferences," Mauro said. That could be done before a new commission that's being created to review the tax code completes its work, he said.

"I don't think you have to wait for a commission to close some of the most egregious loopholes and preferences," he said.

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