Some see gimmicks in plan to fix budget
Paterson critics cite health insurance shift
ALBANY — Unlike previous governors who struggled to close deficits, Gov. David A. Paterson isn’t offering to sell a prison, unload a highway or a canal system, or even privatize the lottery.
But, in his $2 billion deficit-closing plan last week, Paterson did resort to a slew of tried-and-true methods of wringing money out of all sorts of clever places that critics say have a familiar ring: gimmick.
Some are one-shots, the fiscally questionable practice of taking an action that has no recurring benefit years after. He also wants more borrowing. And he wants salary deferrals for state workers.
Another budget sleight of hand involves shifting $277 million in health insurance costs just this year from the state to the private sector.
“These are gimmicks because the governor made a very big stand when he said no taxes in our budget. These are taxes,” said Leslie Moran, senior vice president of the New York Health Plan Association.
He also proposes using one of the Capitol’s most reliable magical sources of newfound money known as “sweeps,” which allow the state to raid a public fund or authority to take money for its operations.
“It concerns me that we’re seeing some of the same old stuff here,” said E. J. McMahon, director of the Empire Center for New York State Policy, a conservative think tank.
Of the $2 billion in cuts that Paterson proposed for the current fiscal year, $879 million — or 44 percent — comes from “nonspending gap closers,” according to the Citizens Budget Commission, a business funded watchdog group.
These include a state university tuition increase, shifting state health care costs onto insurers and transferring money from state authorities to the general fund.
Budget watchdogs worry because the Legislature has yet to take its crack at righting the budget, whether by exhausting the state’s rainy day fund or, as one union proposed, selling off the state’s art collection.
“It’s about achieving some balance in the gap-closing plan so it’s not all gimmicks and one-shots,” Elizabeth Lynam, of the Citizens Budget Commission, said in urging Paterson to stick to his proposal for spending reductions and not add one-shots when the Legislature returns Tuesday for a special session to consider his ideas.
The Paterson administration said it had to consider “all responsible options” to balance the budget.
To do that, the plan relies on spending cuts, according to Jeffrey Gordon, a Paterson budget spokesman.
“We will continue to explore options for reducing spending, and the governor will release those proposals with his executive budget next month,” Gordon said.
But the non-cut actions are many. Paterson wants to defer the paychecks of all state workers by a week, paying them back when they leave service. That will save $121 million this year.
Container deposits
Unions already have said no to the pay plan, which they would have to approve under contract provisions.
“It’s not going to happen,” said Stephen Madarasz, a spokesman for the Civil Service Employees Association.
Paterson also wants to expand the beverage redemption law to include noncarbonated drinks and require bottlers to give the state $25 million this year and $118 million next year of the unclaimed deposits from consumers who don’t return their containers.
Fund sweeps and transfers to the general fund would account for 16 percent of the governor’s budget-balancing plan.
A total of $326 million would be transferred from entities not included in the budget, such as the State Power Authority, Environmental Protection Fund and Empire State Development Corp.
That would include $50 million for three downstate housing programs that were to be funded on a pay-as-you-go basis; now, Paterson wants to issue bonds, which, with interest expenses, would raise costs far beyond the $50 million.
Paterson also would shift responsibility for funding 21 health programs used mostly by non-insured people to health insurers, for an estimated savings of $100 million over two years. The services include treatments for infertility, diabetes, eating disorders, tick-borne diseases and sexually transmitted diseases, as well as school-based clinics, Latino health outreach efforts and migrant worker care.
Another $100 million for a year-old state mandate requiring expanded mental health coverage also would be eliminated. Recognizing the higher costs the mandate would place on small employers, the state had agreed to provide $100 million to offset higher premiums. By eliminating that, Paterson anticipates $88 million in savings for the rest of the year.
While Paterson said the plan would not raise taxes, it would increase revenue in other ways, such as the $94 million from boosting state university tuition by $300 in the spring system.
But a bigger “revenue action” involves the “covered lives assessment” — a levy on every health insurance policy, bringing the state more than $800 million. In the Buffalo area, the assessments currently are $28.54 for individual policies and $94.50 for family plans.
‘Trickle down’ effect
Paterson wants the levies boosted to raise another $120 million this year. That would increase the levy to $32 for individual policies and $106 for families, according to Moran, of the New York Health Plan Association, which represents managed care plans.
Total health care shifts would yield $277 million this year — at a time of sharply rising insurance costs.
“They eventually trickle down to higher health insurance costs for ratepayers,” Moran said, adding that even small businesses will be forced to drop employee health coverage. That, in turn, will push some into government-funded insurance programs.
“It’s a really weird, illogical Catch-22,” she said.
Senior Paterson aides say the cost shifts to insurers are part of a plan “to share the sacrifice” among all sectors in health care during a fiscal crisis.
Turning to imaginative ways to balance the books is nothing new.
Eliot L. Spitzer, Paterson’s predecessor, had proposed leasing the lottery. George E. Pataki, Spitzer’s predecessor, borrowed against future payments from the settlement of the tobacco industry lawsuit.
Mario M. Cuomo, Pataki’s predecessor, “sold” the Attica State Correctional Facility to an off-budget state entity, in effect borrowing $200 million. In 1991, Cuomo sifted responsibility for a downstate highway from the state Department of Transportation to the Thruway Authority; then followed up by transferring another interstate and the state canal system to the same authority.
Reserve untapped
So far, Paterson has rebuffed efforts to dip into the state’s $1.2 billion reserve fund. He said he wants real cuts and other savings before even considering such a move.
But with school districts complaining about the $840 million in midyear state aid cuts they face, Paterson has suggested they can dip into their rainy day funds.
“I find it ironic that the governor will refuse to touch the state’s rainy day fund but encourage all of us to tap into our rainy day funds,” said Timothy Kremer, executive director of the New York State School Boards Association.
