Senate Passes Constitutional Spending Cap To Protect Taxpayers

Dean G. Skelos

August 20, 2008

The New York State Senate today passed legislation (S.8738) to enact a constitutional spending cap that would limit year-to-year State spending increases to no more than four percent and force both houses of the Legislature and Governor to live within its means. The spending cap is needed more than ever given concerns about the State’s economic climate and the spending cuts being made to close budget deficits.

This amendment would reduce state spending by $2.8 billion in the next fiscal year. In addition, had this constitutional amendment been in place the last five years, State taxpayers would have saved $13.1 billion, half of which would have been returned to taxpayers and the other half placed in a rainy day reserve fund.

“We are working with the Governor and Assembly to reduce state spending to help address our current budget problem without hurting our schools, hospitals and local governments,” Senate Majority Leader Dean G. Skelos. “If the Assembly were to join us and pass this spending cap, we could make a structural change to reduce state spending and increase accountability in future years and prevent the kind of fiscal challenges we are dealing with right now. New York has a spending problem, not a taxing problem and a spending cap is the right answer to solve it.”

Under the Senate proposal, year-to-year State spending increases would be limited to 120 percent of the Consumer Price Index (CPI) or 4 percent, whichever is less. In any given year, fifty percent of tax revenue that exceeded the cap would be placed in a reserve fund and fifty percent would be returned to taxpayers in the form of direct tax rebates.

In addition, the amendment would force the Executive to resubmit a balanced Budget to address any shortfalls in revenue that occur after the submission of the Executive Budget, and make any necessary spending revisions to reflect the declining revenue.

“This cap would slam the door on massive increases in State spending and hold a Governor accountable for maintaining a balanced budget,” said Senator Owen Johnson (R,C-Babylon), the Chairman of the Senate Finance Committee. “The family budget is more important than the State Budget, and we have to stand up to protect taxpayers from being taxed out of their homes.”

“The Senate has passed a tax cap for school property taxes. We must lead by example and do more at the State level to control state spending and taxes,” said Senator Skelos. “A constitutional amendment is the only guarantee against excessive and wasteful spending and higher taxes to pay for that spending.”

The constitutional spending cap proposal would give the Executive the authority to exceed the cap in the event of a fiscal emergency or other extraordinary circumstances, however, the Comptroller would be required to independently certify the financial crisis.

According to a 2007 report by the National Conference of State Legislatures, thirty states have put in place statutory or constitutional tax or spending limits. New York continues to rank at or near the top in combined state and local tax burden, further illustrating the need to enact a spending cap.

The bill was sent to the Assembly.