Bloomberg News

Cuomo $136 Billion N.Y. Budget Cuts Programs, Holds Taxes

January 22, 2013

Cuomo’s $136 Billion N.Y. Budget Closes Gap With No New Tax

New York Gov. Andrew Cuomo presents his 2013-14 Executive Budget proposal on on Jan. 22, 2013, in Albany, New York. The $137 billion state budget that Cuomo proposed would increase spending about 2 percent without tax increases, but New Yorkers would feel some fee hikes. Photographer: Mike Groll/AP Photo

New York Governor Andrew Cuomo proposed a $136.5 billion budget that would close a $1.35 billion gap in part by shuttering two prisons for female inmates and lowering spending for some local-assistance programs.

Cuomo, a 55-year-old Democrat, released the fiscal 2014 budget today in Albany. The spending plan, $2.5 billion larger than last year’s, includes no new taxes, an increase in the minimum wage to $8.75 an hour from $7.25 and a plan giving local governments a new option to finance annual pension payments.

Cuts to agency spending and eliminating cost-of-living increases for some local-assistance programs became necessary as the projected deficit grew from about $900 million in April after Hurricane Sandy struck Oct. 29. The gap is less than the $2 billion Cuomo closed last year and the $10 billion deficit he confronted in his first year.

“The good news is the last two years we’ve shown the ability to do what others said we can’t do,” Cuomo said today in an address to lawmakers. “It’s very simple: It’s about leaving our children a state, a home, that is safer and richer than the home we have.”

For the first time since he took office in January 2011, Cuomo is heading into a budget cycle with a legislature that has Democratic majorities in both houses. In the Senate, Republicans hold power thanks to a group of five breakaway Democrats, though it’s Democrats who have the most votes. Unlike most states, New York’s fiscal year begins April 1 instead of July 1.

Closing Prisons

Cuomo wants to eliminate the deficit in part by cutting $434 million from agency operations, including closing Beacon Correctional Facility in Dutchess County and Bayview Correctional Facility in Manhattan. Both are prisons for women. Bayview was flooded during Sandy. He also wants to consolidate administrative functions.

The budget proposes reducing local-assistance funding by $412 million by withholding cost-of-living adjustments for health and human-services providers and consolidating public health programs. Total local-assistance spending would still increase by about 2.3 percent.

Sandy Funds

The $136.5 billion in spending doesn’t include federal funding to help the state recover from Sandy. The House appropriated $60 billion to the states affected by the storm, and about half of that will go to New York, Cuomo said today. The Senate, which approved the measure last year, has to vote on it again in the new term.

When Sandy struck, it destroyed or damaged more than 300,000 homes, knocked out power to 2.1 million residents and caused the worst flooding in the more than 100-year history of the New York City subway system.

About $2 billion of the federal funding will be used to repair 2,000 miles (3,200 kilometers) of roadways damaged by the superstorm, and $125 million will go toward building dunes, reefs and other so-called soft barriers to better prevent flooding. Another $160 million help build fuel reserves and provide generators to gas stations to help insure against fuel disruption.

The budget also includes a measure expanding the Public Service Commission’s authority to initiate proceedings to recover more robust civil penalties, review utility company performance and emergency planning and modify or revoke operating certificates for any gas or electric company. It also moves forward with plans to sell the Long Island Power Authority, which was criticized for its slow and halting repairs of blackouts from Sandy, to a private company.

Negotiating Leverage

Last year, Cuomo used the budget process, where he has leverage to force lawmakers to choose between approving his measures or shutting down the government, to propose a pension overhaul that raised the retirement age for new workers to 63 from 62.

This year, he’s using that same method to push through a minimum-wage increase opposed by Republicans and a plan that will allow local governments to pay a lower pension bill now while committing to pay more in future. Cuomo says future payments will drop as new employees join under the revised pension plan.

The state and local governments already are planning to defer almost $1 billion in pension payments this fiscal year under a program Comptroller Thomas DiNapoli created in 2010 that lets public employers spread some retirement obligations over as a long as 10 years with interest.

Task Force

From fiscal 2010 to 2014, the average rate localities owed on every dollar that police and fire employees earn rose to 28.9 percent from 15.1 percent, and to 20.9 percent from 7.4 percent for other public workers.

To further help municipalities suffering fiscal stress, Cuomo said a measure in the budget will create a local government advisory task force with members from his budget division, and the comptroller’s and attorney general’s offices. The task force would “have all the tools,” Cuomo said, including recommending the creation of financial-control boards to seize control of a municipality’s spending and borrowing.

“The answer cannot be that every municipality in the state that has a financial program, they’re going to come to Albany and ask for a check,” Cuomo said. “We don’t have the money.”

Cuomo also is proposing in the fiscal 2014 budget an overhaul of workers compensation that he said will provide $900 million in savings to employers, and an $85 million bailout for the Thruway Authority.

Last month, the authority abandoned a plan to raise tolls for trucks on the longest U.S. toll road by 45 percent. Instead, it said it would eliminate jobs and shift the cost of police patrols on the 570-mile roadway to the state operating budget. Cuomo’s spending plan does that, and includes other funds to offset the scrapped toll increase.

Investors are buying New York municipal bonds with a smaller premium to AAA munis than the average of 0.42 percentage point since Cuomo took office. They demanded 0.36 percentage point of extra yield to hold general-obligation debt from New York and its localities last week, data compiled by Bloomberg show. In December, the penalty narrowed to 0.26 percentage point, the least since May 2011.

To contact the reporter on this story: Freeman Klopott in Albany, New York, at fklopott@bloomberg.net

To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net.


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