: Optimistic State Budget Passes Despite Economic Warnings

Gov. David A Paterson announced the passage of a $121.7 billion budget in Albany on April 9, a 4.9 percent increase that sidestepped calls for fiscal restraint on the prospect of an economic downturn.

The governor lauded the budget’s $1.75 billion increase in education spending, including a $634 million increase in New York City; a health care initiative that will provide coverage to nearly 400,000 uninsured children and the creation of a $1.6 billion economic development fund.
Gov. Paterson also announced plans to limit Medicaid growth and generate new revenue, including a $1.25 increase on the cigarette tax.

The five boroughs will account for more than $11.5 billion in budget funds, excluding Medicaid, according to Laura Rivera, spokeswoman for the city comptroller’s office. Nearly $8.3 billion of the City’s allocations will go to education, more than a third of the state’s total education spending.

Queens residents can expect their share too. The borough will receive $70 million in capital assistance to Queens College; $15 million in capital assistance to the Queens Museum of Art; $6 million in capital assistance to the Queens Public Library; an expansion of the Child Health Plus insurance program from 250 to 400 percent of the federal poverty level; $200 million to nursing homes in improved reimbursement rates and workforce retention and training funds; $25 million to provide financial counseling and legal assistance to homeowners with subprime mortgages facing default or foreclosure; and $100 million in new capital funding to build affordable housing, according to Assemblyman Rory Lancman (D-Fresh Meadows).

“In the face of two crises – one in government and one in our economy – we came together to produce a responsible budget for the people of New York,” Gov. Paterson said. “This was by no means a perfect process, nor is it a perfect product. But we were able to achieve the programmatic reforms and cost controls needed to move forward and confront the challenges ahead.”

But Albany’s sunny disposition despite the gloomy economic forecast has left many experts scratching their heads.
“Most of us agree the revenue numbers were too optimistic,” Tammy Pels, a research associate with the Citizens Budget Commission, a New York based civic organization that monitors government finances, said. “It’s possible that the economy will rebound, but this isn’t what Albany should be preparing for. There’s a lot of uncertainty in the economy right now. It’s highly volatile.”

The state’s swelling budgets and the nation’s shrinking economy may prove to be a one-two punch. If the 2008 revenue forecast is sunk by the slouching national economy, New Yorkers can expect painful mid-year revisions and service cuts, Pels said.

“The updated Executive Budget counts on statewide personal income growing 4.3 percent in 2008; yet for the same period New York City budget officials are counting on local personal income growth of only 1.0 percent. The City is expecting its personal income tax collections to decline in each of the next two years, but the State’s updated Executive Budget expects personal income tax receipts to grow at least 5.3 percent in each of the next two years. Although the City’s estimates may prove too conservative, if the economy falls further into a downturn, the City will be prepared while the State will face dire consequences,” Elizabeth Lynam, Deputy Research Director for the CBC, said in a letter to the legislature.

Many were also disappointed with the lack of transparency in the budget process, Pels said. The budget was delivered nine days late and much of the details were worked out behind closed doors. Legislators and government watchdogs had little time to absorb the details when it arrived for voting at the last minute, she said.

“We hope this isn’t a sign of things to come,” she said.
Whether or not Albany has tightened its belt enough for the fiscal year 2008-2009 is still unclear, but if last year’s results are an indication, we can expect big changes.
“It was a volatile year,” State Comptroller Thomas P. DiNapoli said in a report on the 2007 fiscal year. “Spending and revenue projections were a moving target all year and significantly deviated from what was estimated. The economy is in rough shape, and the worst may still be around the corner. The Division of the Budget is going to have to track spending and revenues very carefully. And Albany should keep an eraser handy.”

Queens Senator John Sabini speaks from the Senate floor during the debate prior to the final vote.

Queens Senator Toby Ann Stavisky observes the Senate debate prior to the final vote on the State Budget for Fiscal Year 2008-09.