Report Recommends Structural Reforms To State Budget

March 01, 2010

Performance budgeting, fiscal year change, non-political Legislative Budget Office examined to control spending & waste, reduce scope of government

The New York State Senate Select Committee on Budget and Tax Reform released today  recommendations based on expert testimony for how the state can restructure how budgets are considered and enacted in order to streamline government, reduce waste, and control spending.
The full report can be found online:
 Following decades of spending more than the state was taking in, the report explores multi-year budgeting, reforms to the current model of forecasting and consensus between the Governor and Legislature, and other means of implementing transparency and accountability over every dollar spent.
“New York’s fiscal planning process is inefficient, short-sighted and anything but transparent,” said Senator Liz Krueger (D-Manhattan), Chairwoman of the committee and Vice Chair of the Finance Committee. “We are the only state with a budget enacted prior to knowing actual revenue on April 15th and are in constant political battle over different forecasts all of which are guesstimates. The Majority Conference pledged to review every budget practice and explore sensible and fiscally responsible alternatives to the budget process, and our report will now open that very important discussion to the public.”
Performance Budgeting
In a performance-based budgeting model, metrics are developed to gauge whether programs are meeting a defined set of goals – the indicators and statistics then establish a more rational and responsible method for appropriating funds.
When there is a need to reduce spending mid-year, as was the case in the Fall of 2009, the Executive will often propose across-the-board cuts. While such actions demonstrate a reaction to revenue realities, this is a rigid model of budgeting which stems from the state’s lack of way for measuring the effectiveness of state-funded programs and services.
Independent or Legislative Budget Office
The lack of a binding estimate between the Executive and Legislature continues to produce problems which reverberate later in the fiscal planning process. The tendency for a forecast agreement to unwind pushes revenue estimate negotiations well into the regular budget process consuming time better spent debating and determining expenditures.
Krueger explained, “The current fiscal planning process encourages budgets New York State cannot afford. All too often, politics — more than fiscal realities — determine the bottom line.”
An Independent or Legislative Budget Office could play a role in establishing a more accurate and less politicized revenue forecast. Additionally, a new budget office or the Office of the Comptroller could be charged with establishing a binding official state revenue forecast.
Changing the Fiscal Year
New York has the earliest fiscal year start in the nation, and is one of only four states not operating on a July 1 – June 30 timeline.  As a result, instead of determining expenditures based on reliable revenues, all parties present forecast projections in order to enact a budget long before our federal tax deadline, April 15th.
The start of New York’s fiscal year was October 1 until 1916 when it was moved to July 1. In the early 1940s, the Republican controlled-Senate, Assembly, and Governorship changed the date partly because they collectively wrapped up the budget months in advance of that deadline at that time, prompting our current April 1 date.
E.J. McMahon, Director of the Empire Center of New York State Policy told the committee at a recent public hearing, “The current fiscal calendar is poorly aligned to revenue collection and spending patterns.”
In the end, New York’s current budget process is undermined by shortcuts, short-term views, and the lack of a designated process that is fiscally responsible given the size and scope of the state budget. Fiscal crisis after late budget, followed by fiscal crisis all point to the need for budget reform which promotes greater accountability, forecasting, and transparency in the process.