DRP Fails To Plan For New York’s Fiscal Future

A Legislative Column from Assemblyman Dave McDonough (R,C,I – Merrick)

In recent months, Governor Paterson and Comptroller DiNapoli hit the alarm notifying New York residents that the state was facing a budget deficit for the current fiscal year of between $3.2 billion and $4 billion, depending on who you asked. To solve this crisis, a deficit reduction plan (DRP) was needed to pay off the bills New York owes in December as well as to keep the state afloat through the end of the fiscal year in March. Such a plan was supposedly passed in the early hours of December 2; yet, when one looks at the DRP passed by the legislature, it is clear that it contains very few solutions and no plan for the future.

To gain perspective on the $2.7 billion DRP passed by the legislature, it is important to note that the budget passed in April for Fiscal Year 2009-10 was $132.8 billion, an increase of $10 billion over Fiscal Year 2008-09. Much of that increase was due to federal economic stimulus money which was used to not only prevent school aid cuts, but also increase the amount of aid many school districts received. These stimulus funds were given to New York with the expectation that they be used over a two-year period, half being used in 2009-10 and the remainder in 2010-11. It is also worth noting that despite the increase in education funds Long Island schools still receive far less per pupil than New York City schools or Upstate schools.

In addition to overspending by legislative leaders and the governor, the economic downturn in the United States adversely affected New York more so than other states. Wall Street revenues and, more importantly, the income taxes on salaries of those who work in the financial sector count for a large percentage of the revenue which comes into New York’s treasury. With the economy still failing to make a recovery and Wall Street not yet seeing the returns investors have become accustomed to, state revenue has continued to decline contributing to the current deficit.

Overspending and reduced revenues added up to a multi-billion dollar deficit, which necessitated the passage of a DRP. This past March, I voted against the Fiscal Year 2009-10 budget because it spent beyond our means, did not save for the future and would force mid-year budget cuts for the second year in a row as we now are seeing. This week, I voted against the DRP for many of the same reasons.

First and foremost, I did not see any real savings in the DRP. Governor Paterson initially said we needed to close a budget gap of $3.2 billion, yet, the just passed DRP only totaled $2.7 billion; of that number only $700 million are spending cuts and very few of the cuts go beyond next year. In the grand budgetary scheme, New York is still $2.5 billion in the hole.

The other $2 billion in the DRP was paid for with one-time measures and “spin-ups” from Fiscal Year 2010-11. For example, a $250 million tax amnesty proposal was passed. That might work for one year if, and only if, those individuals who owe money actually pay that money. Otherwise, New York will have to spend more money going after individuals who have failed to pay their taxes. Also, the legislature used $391 million of federal economic stimulus money set aside for next year to pay for this year, also known as a “spin-up.” Unless spending in other areas of the budget is cut next year, we will then have to close another $391 million hole in the budget because of this plan.

Ultimately, this DRP failed to provide the necessary blueprint for fiscal stability for years to come. We in the Assembly Minority Conference, over one month ago, had presented our version of a DRP plan to the governor which included agency consolidation, a reduction in contract balances, SUNY and CUNY tuition increases for out-of-state students and numerous other items. Each of these ideas would provide yearly savings or yearly revenue increases to New York State as opposed to the one-shot and non-recurring measures included in the enacted DRP. Unfortunately, our plan was ignored by the three men who negotiated the final version of the poorly planned DRP.

New York State is heading toward financial ruin; it is only a matter of time before we will have to take an axe to the budget instead of a scalpel. We already will start 2010-11 in a financial hole; just imagine what Fiscal Year 2011-12 will look like when federal economic stimulus money is gone. However, it is never too late to turn the state around. I look forward to working with Governor Paterson in the coming months to find long-term solutions to problems that have never been tackled head on because of a lack of courage from those who pretend to lead this state.