Governor Pataki announced he has vetoed a controversial "budget reform" bill passed by the Legislature, echoing Business Council concerns that the proposal and an associated amendment to the state Constitution would lead to even higher spending and taxes.

The Governor said the Legislature's proposed changes would return New York State to a 19th-century system of "too much spending, too much borrowing and too much taxation." The legislative plan would also encourage late budgets and could lead to temporary shutdowns of state government, he said.

In late June, when the bill was approved by the Legislature, Business Council President Daniel B. Walsh had urged Governor Pataki to veto the legislation and to oppose the proposed Constitutional amendment. Walsh applauded the Governor's veto decision.

"Instead of preventing late budgets, this proposal would actually reward them -- by turning over to the Legislature the entire budget-writing authority now vested in the Governor, once the Legislature misses the annual deadline," Walsh said.

"The real problem with New York State's budget is it spends too much," he said. "That's why even the nation's most punitive tax burden is not enough to prevent multi-billion-dollar budget gaps, year in and year out. Members of the Senate and Assembly face constant pressure from powerful unions, constituents and others to spend more than the state can afford. Thus, shifting budget power to the Legislature will only make our problems worse."

Walsh urged Governor Pataki and the Legislature to "pursue broader change" by calling a Constitutional Convention. Such a convention, he said, could give voters the opportunity to consider changes such as:

• A requirement that the Legislature publish a balanced financial plan and estimates of out-year fiscal balance before voting on the budget.
• A "taxpayer report card," similar to those required of school districts, in which the state would inform every state resident of the annual increase in spending compared to inflation.
• Assurance of timely budget adoption through a ban on any appropriations before the Legislature acts on the Executive Budget.
• Strict limits on New York State's out-of-control borrowing, including debt of public authorities.
• A spending cap that would keep the budget affordable, by linking increases to growth in the state's personal income.
  

"New York State government needs real reform," Walsh said. "We agree with Governor Pataki: The proposed legislation and constitutional amendment are not the changes we need."

In his veto message, Governor Pataki criticized the Legislature's proposal for failing to require adoption of a balanced budget or an explanation of multi-year fiscal impacts.

He said the Legislature's proposal for a contingency budget, when no budget has been adopted by the start of a fiscal year, "encourages late budgets by rewarding the Legislature with broad new budget powers for failing to act." He noted it would also effectively repeal the existing withholding of legislators' pay until the final budget is adopted.

The balance of powers between the governor and the Legislature is the subject of two lawsuits that will be heard by the Court of Appeals November 16. Decisions by the state's highest court are expected in early 2005.