ALBANY – If Gov. Andrew M. Cuomo’s recent State of the State address had him pivot to the liberal faction of his Democratic Party, today’s unveiling of his 2013 state budget plan gives him the opportunity to, as he likes to say, show his “fiscally responsible” side.
It won’t be easy to fit some of his State of the State ideas – from longer school days to early voting to aiding business and job seekers – into a tight budget. It may well take some creative financing to make it all work.
But since Cuomo already is vowing not to raise taxes, and the state is facing a $1 billion deficit, some entities, notably state agencies that provide an array of services, are bracing for cutbacks to help the governor fund some of his ideas.
The economy is still not healthy enough for Cuomo to rely on new income and sales tax receipts to pay for his spending ideas. Instead, he will likely turn to others for help in raising funds – from the federal government, localities and the private sector.
With a limited pot of money for the more than $130 billion budget, Cuomo, if he is follows the lead of his predecessors, will turn to a hodgepodge of funding solutions.
In addition to getting others besides Albany to pay, there is the “spread out” option, such as his plan to spend $150 million on solar energy over the next 10 years or $1 billion on new low-income housing over five years.
Then there are the “off-budget” ideas, such as his plan for various major improvements to the state’s energy infrastructure – such as the aging power transmission lines throughout the state. That improvement, which experts say is needed, potentially could cost utility companies billions of dollars over the years – money that will be passed on in some form to ratepayers.
Another “off-budget” approach will be his plan for public financing of political campaigns, an idea that could cost $100 million to $400 million. Cuomo’s plan, in his written message to lawmakers, calls for “sources beyond general revenue from taxpayers” to pay for it. That would mean some sort of special revenue fund beyond the state’s general fund, but how Cuomo will fill that pot is a question that could be answered today.
Then there is the “limit approach.” Governors for years have proposed headline-grabbing ideas. Cuomo’s example this year is his plan for longer school years or school days to improve student achievement. In addition to needing to renegotiate union contracts for teachers, principals, janitors and others in the state’s 700 school districts, the plan could cost billions of dollars in added personnel expenses.
To get around that, Cuomo will seek to make the program voluntary and to limit costs through a competitive grant process.
The same is true for his idea to expand prekindergarten offerings, which now amount to about 2.5 hours a day on average. Cuomo wants to make it an all-day program, or at least offer it five hours a day. To limit the cost to both the state and local school districts, his proposal for this year limits the offering to districts in the poorest communities.
Western New York will be looking for further evidence of how he will fulfill his promise to provide $1 billion in special aid over five years for job-creation efforts. Additionally, developers want to see if he proposes his own tax credit program for historic property rehabilitations – a measure he vetoed last month but said he supports if done in the budget.
Fiscal watchdogs say they want to hear from Cuomo about how he will help localities cut the cost of state-mandated services and laws that drive up the cost of everything from local health budgets to public works projects.
“We want to hear about some of the unfinished business,” said Elizabeth Lynam of the Citizens Budget Commission, a business-funded group that monitors state spending. She said she hopes Cuomo will restrain spending for education and Medicaid and other big cost drivers, especially in the face of Superstorm Sandy expenses and a sour economy.
“Economically, we continue to face challenges. It’s a very slow recovery, and we know the financial plan initially projected [last year] is barely holding together,” she said.
While the administration was not publicly discussing fiscal matters Monday, the governor said last week on an Albany radio station to expect no real surprises in his budget.
Other groups worry Cuomo is going to again embark on a new tax-break program for business modeled on programs that have not worked. Ronald Deutsch, executive director of New Yorkers for Fiscal Fairness, a group heavily funded by labor interests, said the governor’s call for “innovation hot spots” includes tax-free zones; he noted it is uncertain whether localities will have to swallow the cost of lost property taxes.
“Obviously, localities are stretched completely thin right now to the point of breaking, so you can’t be asking them to do more,” he said.
Deutsch said he worries about cuts by a governor with an eye on a $1 billion deficit, new spending initiatives he wants and the unknown economic impact of Sandy. “The fiscal conservative in Cuomo has already cut to the bone billions in services and programs, so how is he going to close this gap and still maintain his progressive chops, if you will?” he said.
Cuomo has said he would not count on money from casino companies in the upcoming fiscal year that begins April 1; to do so would be a risky venture, since lawmakers have not given final approval to his gambling expansion plan, and voters won’t consider the issue until November at the e arliest.
It would also be risky for the governor to assume the Seneca Nation will make more than $500 million in back payments for revenue-sharing funds the tribe halted several years ago in a dispute over casino proceeds. That issue is in arbitration, and there is no guarantee the state will win what could be a major infusion of cash.
The spending increase plans are extensive, Cuomo said in his State of the State speech. There is a $50 million venture capital fund for startup companies and a $1 billion “green bank” to encourage clean-technology projects, part of which he proposes to fund by taking money away from existing energy-efficiency programs.
He wants to spend $50 million over five years to build 2,500 charging stations for electric cars and trucks. There are various relatively low-cost marketing programs to help upstate businesses and a $1 billion housing program that will be partly paid for “by reallocating and making better use of state funds.”
Another cost for someone – possibly localities – to bear is his plan to permit early voting in the state. He wants to let people vote for one week before Election Day, including the weekend before the normal Tuesday Election Day. Who will pay for those thousands of additional hours of polling place work across the state is unknown; local officials are worried the costs will fall on them.
Other costs will be associated with the aftermath of Superstorm Sandy and programs that the federal government will not pick up. No one knows how much the state will have to pay for some of Cuomo’s ideas, including coastal protections; creation of a massive stockpile system of food, water, generators and other emergency situation items; and improvement of such infrastructure as tunnels and rail lines.
The governor also wants to sell the state-owned Long Island Power Authority, which came under criticism after the storm. But Crain’s New York Business said this week that all New York taxpayers could be on the hook for $1 billion in early bond termination fees through any sale to a private company and that taxpayers may have to take on $4 billion of the authority’s $7 billion debt.
Then there is borrowing, which every governor eventually turns to for funds. In the past decade or two, governors have borrowed to pay state operating expenses. That’s a no-no in the world of bonds, which really should only be used for capital expenses, such as building new roads.
The borrowing situation has become so bad that State Comptroller Thomas DiNapoli recently warned the state is approaching its legal limit for borrowing and that New York, with the second-highest level of debt in the nation, is paying nearly $7 billion a year just to service its debt level of $63.3 billion.
That debt is up 62 percent since 2003 – nearly double the increase in rates for education and Medicaid spending.
If the annual budget being unveiled today proves anything, it is that what gets said in Albany in January is nonbinding. As Cuomo today will make a no-tax-hike pledge, it was only a little over a year ago – December 2011 – when the governor broke his own campaign pledge by imposing a $2 billion income tax hike on wealthy New Yorkers.