Text of letter sent to Governor George E. Pataki from Daniel B. Walsh, President of The Business Council, dated June 29, 2004.

Honorable George E. Pataki
Executive Chamber
The Capitol
Albany, New York 12224

Dear Governor Pataki:

RE: Preserving New York’s Executive Budget process

The recent history of the New York State budget process leaves a lot to be desired. The Constitutional structure of that process, however, is not the cause of our problems.

Quite the contrary. The Executive Budget system created by Governor Al Smith, with strong support from Charles Evans Hughes and others, protects New York taxpayers from the potential of even greater fiscal irresponsibility. Now the Legislature is moving to weaken those protections, under the guise of budget “reform.” We urge you to veto S.7615/A.11702, and to use the bully pulpit of your office to oppose enactment of the associated Constitutional amendment.

We share with the Senate and Assembly a desire to seek creative solutions to budget problems that sometimes appear intractable. After 20 years of late budgets, there is an argument to be made for the concept of a contingency budget that would provide automatic spending limitations in case of gridlock at the negotiating table. There are specific elements of S. 7615/A.11702 we applaud. For instance, the bill moves Health Care Reform Act spending into the budget, as should have been done when HCRA was created several years ago.

But we believe the Legislature’s “reform” proposals fail to solve the fundamental problem with the New York State budget: irresponsible spending. They could, in fact, make that problem worse.

Virtually every year, the Budget Division projects significant budget gaps in the “out years. ” These gaps exist because the Legislature, by its very nature, is under constant pressure to spend every available dollar each year. Most newly available dollars go toward formula-driven programs such as Medicaid and education assistance. Funding formulas for those programs automatically drive inflation-plus spending increases in succeeding years, so that those future budgets can only be balanced with unusual growth in tax revenue, new revenue sources, or legislated reductions in the rate of spending increase.

S.7615/A.11702 reflects its sponsors’ recognition of this reality. The legislation provides that, if no new budget is in place at the start of a new fiscal year, aggregate disbursements in the contingency budget may not exceed those in the prior fiscal year. It then requires “uniform reductions” in most disbursement categories to bring spending into line with available revenues. Why would spending cuts be needed to make sure that disbursements do not rise from one year to the next? Because New York’s budget is designed so that state spending follows our state motto – “Ever Upward.”

While the specifics of the proposed contingency budget have been subject to debate and amendment, those details are unlikely to matter in practice. With the Legislature assuming major new powers in the budget process, it is likely there never will be a contingency budget, nor automatic spending reductions, that last more than a few weeks.

The proposed Constitutional amendment would increase the pressure for ever-higher spending. By giving the Legislature power to initiate a budget once a new fiscal year has begun, it would effectively place in the legislative branch much of the budgetary authority invested in the Governor under the Executive Budget system created in the 1920s.

As you know, the Legislature has sought to add substantial spending to each of your proposed budgets. The same was true with most of your predecessors’ proposals. The genius of the Executive Budget system developed by reformers such as Governors Smith and Hughes is that it creates clear accountability in the office of the chief executive. Only the Governor, Smith reasoned, will ever be held accountable for the overall financial condition of the state. (Governor Smith’s analysis is even more valid today, given the rarity of competitive legislative races.)

No insult to the Senate and Assembly was intended. Smith himself served with distinction as chairman of the Ways and Means Committee, and recognized the reality of the political demands placed on legislators. Individual Senators and Assembly members must be responsive to funding requests from multiple interests in their home districts. We believe the Legislature, reflecting the varied interests of New Yorkers, has the right and the responsibility to examine and amend any Executive Budget. It already has the power to do so by negotiating with the governor or, as happened just one year ago, by overriding gubernatorial vetoes. But this “reform” package would let the Legislature’s own inaction on the budget trigger a situation in which it acquired vastly greater power to design the spending plan.

New York State’s lack of spending restraint is the cause of our high taxes, heavy debt burden and repeated budget crises. We believe the proposed Constitutional amendment and legislation will lead to even greater spending increases than we have seen in recent years. For those reasons, we urge you to veto S.7615/A.11702, and to campaign against enactment of the proposed Constitutional amendment.


Daniel B. Walsh