In April, the New York State Legislature approved and Gov. Andrew Cuomo signed into law a record-breaking $212 billion spending plan for the 2021-2022 fiscal year.
To fund the budget the state is dispersing the federal COVID relief windfall of $12.2 billion and has increased taxes to the tune of $4 billion.
Despite this huge influx of revenues, it appears that it is not enough to satisfy Albany’s ravenous spending appetite.
Hence, Albany utilized fiscal gimmicks to bury various expenses that are spelled out in state Comptroller Tom DiNapoli’s “Annual Review of the Enacted Budget.”
Here are his findings: First and foremost, the state, once again, deferred $3.5 billion in Medicaid payments owed to providers into the next fiscal year. That’s like skipping your credit card payment due in December. Your checkbook may have been balanced at year-end, but you are still in debt come January.
Instead of using one-shot Federal money judiciously to clean up the state’s financial ledgers, Albany is squandering the money on lard-laden projects like $300 million for farmlands, botanical gardens and zoos.
The state has also failed to make additional deposits into its “rainy day” funds.
“Although current law,” DiNapoli notes, “authorizes a balance of more than $6 billion, the state has just under $2.5 billion in rainy-day reserves. While the Department of Budget sets aside additional funds in the General Fund for various needs, including economic uncertainties for debt management, the sum of these resources is not high enough to ensure sufficient reserves for future economic downturns.”
Even though the state is flush with cash, the budget authorizes the governor to borrow up to $3 billion in short-term notes and up to $2 billion in letters of credit. “Although less than the $11 billion in short-term borrowing, enacted in SFY 2020-2021,” the authorizations are “unnecessary given the strength of the state’s cash position and revenue outlook,” the report concludes.
To permit even more spending, the budget excludes new borrowings from the provisions of the Debt Reform Act of 2000 that put a cap on debt. “Combined new debt to be excluded from debt caps and capital requirements could exceed $19 billion.”
Also, the budget includes questionable terms to circumvent accounting standards. If left unchecked those changes “could also artificially reduce the appearance of true liabilities and reported receipts and disbursements of the state.” In other words, “blue smoke and mirror” accounting practices.
Segments of the budget are far from transparent.
For example, there is a $25 billion appropriation whose description is so nebulous that the spending of those dollars will be at the sole discretion of the governor.
About $8 billion in emergency COVID spending is exempt from “the state comptroller’s oversight and waives competitive bidding procedures.”
Other oversight exceptions: The new Excluded Worker Fund, which will provide $2.1 billion in relief to undocumented workers without jobs, $130 million for the Office of Addiction Services and Supports, and over $100 million for various capital projects.
Evading “high standards of transparency, accountability and oversight,” the comptroller rightly concludes, “undermine[s] the state’s responsibility to promote an accurate understanding of how public resources are generated and spent.”
It also opens the door to cronyism and corruption.
Finally, there is the issue of state spending sustainability.
A boatload of one-shot revenues from Washington finance existing programs for education and Medicaid.
When that money runs out next year, where will the revenue come from to maintain those programs? More taxes?
The radicals who control the Legislature will probably say “Sure! Why not?”
But what about the residents who are now paying the highest state and local taxes in the nation. Will they say “Why not?”
I doubt it.
About 40 percent of the personal income taxes are paid by the top 1 percent of earners.
“With the prospect of a high tax burden,” the cmptroller concedes, “high-income taxpayers may consider relocating … Since the financial plan will be even more dependent on high earning taxpayers, it will only require an additional small number of these taxpayers to relocate to adversely impact revenue projections.”
And since there has been a net migration of taxpayers for the past five years, it is unlikely that trend will change.
New York’s tax-and-spend ideology will not only drive out people from all walks of life seeking economic opportunities and lower taxes, it will drive the state into the fiscal abyss.