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Is New York State on Track to Become Fiscally Conservative? Will Congress Follow Suit?

Posted By Kathryn Nix On February 3, 2011 @ 5:00 pm In Economics | Comments Disabled

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New York Governor Andrew Cuomo (D) promised during his campaign that he would balance the Empire State’s budget without increasing taxes or borrowing. Left untouched, the state’s $135 billion budget would otherwise result in $10 billion in deficit spending.

This week, Cuomo appears to have taken the first step to making good on his promise. He unveiled a budget proposal that would, on paper, reduce New York’s spending by $3.5 billion from what was spent last year. (This is, however, a deceptively high estimate based on accounting gimmicks. The actual reduction in spending would be lower.) The Wall Street Journal reports that [2] “the budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities.”

Cuomo’s plan is to go after an inflated baseline of future spending. Under current law in New York, spending for many programs is on autopilot, so increases go into effect without any action from the state legislature. Rather than making actual cuts to spending, Cuomo has proposed to reduce the rate of growth in spending by increasing the budget based on more reasonable criteria.

Governor Cuomo points out that both Medicaid and education funding would increase by 13 percent next year due to the spending formulas built into the law. According to The Wall Street Journal [2], his reform proposals would instead “deflate these baselines with more reasonable and affordable spending projections. For example, his budget would base a spending increase for Medicaid on the rate of medical inflation, which is less than half the 13 percent increase previously assumed in the budget. He would hold education funding to the rate of personal income growth, about half the growth built into the baseline for school budgets.”

Of course, Cuomo’s proposal is just a first step—more details will be needed to see if he is serious about reform [3]. Whether or not he will stay the course and deliver on the kinds of reform that would put New York on stable footing is yet to be determined. E. J. McMahon writes [4], “If you’re going to challenge the way the state does business, you need to propose a different way of doing business—which will have implications for aid-dependent entities downstream of Albany, including but not limited to school districts.” The next steps will be difficult, but they are vital to ensuring that New York’s fiscal future is a bright one.

Finally, Congress should take a cue from Governor Cuomo’s proposal as it seeks to reduce unsustainable levels of spending in Washington. Taking spending increases on federal programs off autopilot would require lawmakers to prioritize spending and make the necessary tradeoffs when they do wish to increase spending in a specific area.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/02/03/is-new-york-state-on-track-to-become-fiscally-conservative-will-congress-follow-suit/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/nycskyscraper100128.jpg

[2] The Wall Street Journal reports that: http://online.wsj.com/article/SB10001424052748703960804576120360648820674.html

[3] more details will be needed to see if he is serious about reform: http://www.nyfiscalwatch.com/?p=2980

[4] E. J. McMahon writes: http://www.nyfiscalwatch.com/?p=2943

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