DINAPOLI: NEW YORK ON STRONGER FINANCIAL FOOTING

(The following is a reformatted version of a press release
issued by the Office of the New York State Comptroller
Thomas P. DiNapoli and received via electronic mail. The release
was confirmed by the sender.) 
Contact: Mark Johnson, 518-474-4015 
April 21, 2014 
New York state ended the 2013-14 fiscal year in the strongest
fiscal position in years and was able to deposit $175 million in
the Rainy Day Reserve Fund for the first time since 2008,
according to a report on the recently enacted state budget
released today by State Comptroller Thomas P. DiNapoli. Still,
the $143 billion budget continues to rely, in part, on temporary
funding streams to attain balance. 
“After a tough few years, New York state is in better fiscal
shape thanks to an improving economy and difficult fiscal
choices made by the Governor and the Legislature,” DiNapoli
said. “The on-time Enacted Budget seeks to keep spending growth
to less than 2 percent while providing increased aid for schools
and tax cuts. Past budget practices that had largely been
curtailed, such as distributing large sums of money outside of
the budget process, have once again appeared in this year’s
budget. My concern continues to be for New York to achieve long-term structural budget balance. When the Financial Plan is
updated I hope there will be more definition on how that goal
will be reached.” 
Based on the Division of the Budget’s (DOB) spending and receipt
estimates included in the final Executive Budget Financial Plan,
the Comptroller’s office estimated that projected cumulative
budget gaps would total $7.2 billion through SFY 2017-18 if the
growth in state operating funds spending was not held to 2
percent. Preliminary legislative estimates based on the Enacted
Budget show more favorable cumulative projections for the out-years than the most recent Executive projections. These
estimates will be revised after DOB releases the SFY 2014-15
Enacted Budget Financial Plan in the coming weeks. 
The General Fund’s year-end balance of more than $2.2 billion
was $432 million more than February Financial Plan projections.
The state prepaid more than $700 million in debt service and
Personal Income Tax refunds, according to the report. While
indicative of an improved cash position, the prepayments obscure
the overall picture of spending and revenue growth between the
two years. Adjusting for the debt service pre-payments results
in 2.8 percent projected spending growth from State Operating
Funds for SFY 2014-15 instead of the approximately 2 percent
currently presented. 
In some cases, actions in the budget make it harder to track
expenditures and determine actual spending growth. Spending of
$589.5 million from a settlement with JPMorgan will be paid out
of a new fund and not be counted towards total state spending.
Up to $439.5 million of this total will be allocated by the
Governor and the legislative leaders. Another $116 million in
SUNY and CUNY capital funds will be spent based on a plan to be
approved by DOB and the Senate. Following budget reform
legislation enacted in 2007, the state largely discontinued its
practice of allocating significant funds each year for
discretionary spending by the Executive and Legislative branches
outside the budget process. 
Other off-budget spending associated with the Enacted Budget
includes approximately $115 million transferred from the
Mortgage Insurance Fund for housing and homelessness programs
and grants to the cities of Yonkers and Rochester. The budget
also includes up to $90 million in transfers from the New York
Power Authority for state energy-related or economic development
purposes, all of which may be spent off-budget at the discretion
of the budget director. 
The budget relies on an estimated $4.9 billion in temporary
state resources and $2.7 billion in extraordinary federal aid
related to Superstorm Sandy recovery and the Affordable Care
Act. The total also includes $2.1 billion in revenues from
temporarily higher tax rates on upper income individuals and $1
billion from State Insurance Fund transfers. 
The budget includes $500 million in authorized unspecified fund
sweeps, which allow resources to be directed solely at the
discretion of the Executive branch. It also includes
authorization of up to $100 million in sweeps specifically for
consolidation of information technology services. 
The budget also authorizes approximately $7.6 billion in new
debt, most of which will be issued by public authorities without
voter approval, a practice commonly referred to as “backdoor
borrowing.” Included in this total is the proposed $2 billion
Smart Schools Bond Act, which will be on the ballot this fall.
The Bond Act will be the first borrowing proposal submitted to
voters since 2005, a positive development for state taxpayers. 
Tax reduction measures valued at an estimated $511 million this
year were included in the budget, with residential property tax
relief representing more than half that total. Other tax
changes, some of which will be phased in, include: merging the
Bank Tax into the Corporation Franchise Tax and reducing the top
corporate tax rate from 7.1 to 6.5 percent; increasing the
threshold value for New York’s estate tax to $5.25 million; and
providing a 20 percent property tax credit for manufacturing
companies. 
DiNapoli’s report notes the final budget: 
·        Increases school aid by 5.4 percent, or $1.1 billion,
on a school-year basis. It also provides $340 million for a
statewide, full-day pre-kindergarten program, of which $300
million is targeted to New York City. 
·        Provides no increase in general revenue sharing
assistance for local governments, but includes a $2 million
overall increase in per capita aid for villages and modified
versions of property tax relief proposals made in the Executive
Budget. 
·        Authorizes the State Comptroller to audit the financial
operations of charter schools located outside of New York City,
addressing a recent court decision that challenged the office’s
authority to audit charters. The New York City Comptroller is
authorized to perform audits of the financial operations of
charter schools within the City. 
·        Gives the Department of Health complete control over
federal Medicaid waiver funds anticipated to come to New York,
including $4 billion in the next two years. Budget language for
this and certain other health-related contracts removes reviews
by the Office of the State Comptroller and competitive bidding
provisions, diminishing oversight, transparency and
accountability in state procurement. 
·        Creates a one-year program of voluntary public
financing for candidates for State Comptroller, provides new
penalties for certain crimes by public servants and other
individuals that violate the public trust, and creates a
Division of Election Law Enforcement within the Board of
Elections to investigate violations of the elections law. 
As chief fiscal officer for the state, the Comptroller annually
examines the Executive Budget proposal and the Enacted Budget.
He also issues monthly reports on the state’s cash position. The
report released today examines the SFY 2014-15 Enacted Budget. 
For a copy of the report visit:
http://www.osc.state.ny.us/reports/budget/2014/2014-15_prelim_enacted_budget.pdf 
(bjh) NY 
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