BILL NUMBER:A40017

TITLE OF BILL:

An act to authorize the director of the budget to reduce payment of
all or part of certain appropriations; and providing for the repeal of
such provisions upon expiration thereof

PURPOSE OF THE BILL:

This bill would make clear that the Director of the Budget may direct
reduction of payment of appropriated funds in an amount not to exceed
that which is necessary to ensure that expenditures do not exceed
anticipated receipts in fiscal year 2009-10.

SUMMARY OF PROVISIONS OF THE BILL:

Section 1 of the bill authorizes the Director of the Budget, in
addition to any authority otherwise provided by law and upon approval
of the Governor, to direct reduction of payment of all or part of any
appropriation for Fiscal Year 2009-10, provided that such reductions
are uniformly applied to the extent practicable and are in an amount
that does not exceed the amount necessary to reduce estimated annual
state disbursements to estimated annual receipts expected to be
available in such fiscal year. Such direction may be exercised
notwithstanding any other provision of law, except that it shall not
              

apply to any funds appropriated for the payment of debt service and
related expenses, funds appropriated pursuant to a collective
bargaining agreement, and any payment required by federal law or the
United States or New York Constitution. It is the intent of this
section that any direction to deny payment shall relieve the State of
any future liability for such payment.

Section 2 of the bill provides that it would be effective immediately,
and would expire and be deemed repealed on December 31, 2009.

EXISTING LAW:

The New York State Finance Law allows the Director of the Budget to
manage the State's cash flow and expenditures, including the following
provisions:

New York State Finance Law § 42 provides that amounts appropriated in
any act shall be deemed to be only for so much as necessary to fulfill
the purposes of such act.

New York State Finance Law § 49 provides that no lump sum
appropriations for personal service, or for maintenance and operation
or for non-personal service, or for maintenance undistributed
including personal service, other than appropriations for the
legislature or judiciary, and appropriations from proprietary or
fiduciary funds, shall be available for payments for personal service,
or maintenance and operation or for non-personal service, or
maintenance undistributed including personal service until approved by
the Director of the Budget.


STATEMENT IN SUPPORT:

In FY 2009-10, a mid-year deficit has developed in the State budget,
now reaching $3.2 billion. No legislation has been enacted, however,
that would address this gap. As a result of this shortfall, the State
faces the genuine threat that it will run out of money, and as a
result will not be able to pay its obligations. Moreover, traditional
mechanisms for securing the funds necessary to run the State may not
be available.

The State needs a formal process to address this eventuality. This
bill would set forth such a process, under which the Legislature would
specifically condition existing appropriations for the present fiscal
year on the Governor's ability to direct denial of payment thereon
solely to the extent necessary to ensure that disbursements do not
exceed anticipated receipts. This would allow the State to prepare for
and protect against the devastating impact of the State Treasury
running out of cash, with no available stream of funds to replace it.
This legislation will be in addition to the financial management tools
in existing law.

BUDGET IMPLICATIONS:

This bill would allow the State to reduce expenditures and liabilities
in the current fiscal year, so as to address the current year deficit
in an orderly fashion.

EFFECTIVE DATE:

This bill would be effective immediately, and would expire and be
deemed repealed December 31, 2009.