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N.Y.’s balancing act


Andrew Cuomo has not moved into the governor’s office yet, but already skirmishing has broken out over fiscal reform. The most heated exchanges now are focused on Mr. Cuomo’s plan for a property tax cap, with organized labor and its allies pushing for a "circuit breaker" instead of a cap, and a coalition of business groups pushing back.

We have long supported a property tax cap and still think it is the right way to go. But a cap alone-or even a cap with mandate reform-will not solve New York’s fiscal mess. It runs much deeper and will require a sustained, multiyear effort to fix.

Anyone who doubts this should read "Hidden in Plain Sight: New York’s Unbalanced Budgets," written by Carol O’Cleireacain, senior fellow at the Rockefeller Institute of Government. "For decades," she writes, "regardless of the strength of the economy, recurring revenues have been insufficient to sustain ongoing spending. This is the definition of a structural imbalance."

Over and over, Albany’s response to this imbalance has been avoidance. Writes Ms. O’Cleireacain: "In any given year, rather than address the structural problem, New York lawmakers struggle to wrench the upcoming year’s budget into balance, temporarily and on a cash or checkbook basis, through heavy dependence on one-shot actions (about $25 billion in the past 10 years), making the next year’s balancing even harder."

Doesn’t New York law require a balanced budget? Well, sort of. Legally, only the budget’s General Fund must be balanced. And that portion’s significance has declined as the state has engaged in what Comptroller Thomas DiNapoli calls the "deficit shuffle"-moving dedicated funds here and there to cover shortfalls and artificially lower General Fund spending.

Asked by Gov. David Paterson to study this problem, Lt. Gov. Richard Ravitch this year proposed a number of sensible steps, including adopting a multi-year financial planning process and balancing the budget according to generally accepted accounting principles versus cash-basis accounting. As thanks, the governor and lawmakers ignored Mr. Ravitch’s recommendations.

Here’s hoping Mr. Cuomo heeds such sound advice.

12/23/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail rbj@rbj.net.


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