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For Release — Tuesday, September 6, 2005

NEW YORK NEEDS 'REAL BUDGET REFORM,' NOT THIS YEAR'S PROPOSED CONSTITUTIONAL AMENDMENT, REPORT SAYS

ALBANY— The proposed Constitutional amendment on this year's New York State ballot would virtually guarantee late budgets every year, make big budget gaps more frequent, and lead to even higher taxes and debt, the Public Policy Institute of New York State warns in a new report.

"New York needs real budget reform," the Institute report says. "But the Constitutional amendment proposed on the November ballot isn't it."

Instead, the report suggests, New York's Constitution could be amended to include legal limits on growth in state spending and taxes, to end Albany's habit of spending more than it can afford. Such a provision, already in place in more than 20 other states, limits annual budget growth to an affordable level such as the inflation rate plus population.

Supporters of the proposed amendment, Proposal One on this year's state ballots, say it will force Albany to enact better and more timely budgets. The PPI report finds otherwise.

"In reality, the proposed amendment would do the opposite," says the Institute's report. "It would give the Legislature much more power over state spending whenever it fails to adopt a new budget by the start of a new fiscal year. Such a powerful incentive for delay would virtually guarantee late budgets every year. And history shows the Legislature’s stronger influence would lead to higher spending and taxes –– thus making it even harder for New York to compete for the jobs we need."

The report was written by the Institute's director of research, Robert B. Ward. He is also author of the leading text on New York State government, New York State Government: What It Does, How It Works, published by the Nelson A. Rockefeller Institute of Government.

New York's current Constitutional provisions date to an earlier reform movement that included Governors Al Smith, Charles Evans Hughes and Franklin Delano Roosevelt, the report says. Those reformers gave governors the power to shape the budget debate by initiating both appropriation bills, which provide amounts of spending on specific programs; and “language” bills that change state laws such as the education-aid or Medicaid formulas.

The report points out that Governor Pataki has called the proposed amendment “deeply flawed” because it gives the Legislature an incentive to delay budget adoption every year. Attorney General Spitzer has also criticized the plan, saying: “The history of the budget process in the state suggests there is greater fiscal prudency, fiscal discipline and greater accountability when you have an executive who is solely responsible for leading the budget process.”

Supporters of this year’s proposed amendment argue that Article VII, as interpreted by the courts, gives the governor too much authority. But the Constitution also gives the Legislature significant power, the report says. Legislators can delete or reduce any appropriation proposed by the governor; when both the Senate and Assembly pass a budget bill with such changes, those provisions become law with no further recourse for the governor. The Legislature can also add items of appropriation, subject to the governor’s veto.

"When the governor does reject legislative additions, the Legislature can override the veto with a two-thirds vote in each house – as it did just two years ago with billions of dollars’ worth of new spending and taxes," the report says.

Supporters of the amendment also claim it’s essential if the state is to provide adequately for vital public services, such as taking proper care of the needy.

"The reality is precisely the opposite," the report says. "Only by setting clear priorities among thousands of spending demands will state leaders be able to make sure that the most vital needs are addressed." Governors are more likely to set such priorities, it says.

The proposed amendment provides that, if the Legislature has not acted on the governor's budget bills by the start of the fiscal year, it cannot do so at all. The Legislature then is empowered to draft its own appropriation bills, becoming the “constructor” of the budget, as the Court of Appeals has described the role currently assigned to the governor. Given the Legislature's history of adding hundreds of millions of dollars to each year's Executive Budget, that proposal would lead to even higher government spending and taxes, the report says.

The Legislature added $1.3 billion to Governor Pataki’s spending proposal this year, and $1.4 billion the year before. In the past 10 years, the Legislature has added a total of more than $12 billion to the governor’s Executive Budget proposals.

"In good times and bad," the report says, "the Legislature always wants to spend more."

The "real budget problem in New York" is too much spending, the report says. To address that problem, the report suggests New York State enact a Constitutional limit on state spending and tax increases. Governor Cuomo and the Legislature enacted a spending cap in 1990, but allowed it to expire in 1992. A new spending limit, linked to population growth and inflation, would have allowed Governor Pataki and the Legislature to increase spending by roughly $2 billion this year.

"That would provide substantial increases in aid to education, Medicaid, transportation and other programs," the report says. "It would not provide increases as big as Albany ’s powerful pro-spending lobbies want – the actual increase was $4.9 billion. But it would make the state budget more responsibly balanced and ease pressure for new taxes."

If New Yorkers had Constitutional assurance that their elected representatives would not overspend, then the Legislature might reasonably argue for a revised balance of budgetary power between the executive and legislative branches.

The report also suggests a Constitutional requirement that each year's enacted budget be balanced, and "significantly tighter" limits on state debt. Albany should also require of itself the same sort of taxpayer-friendly disclosure it requires of school districts, which must send taxpayers an annual notice of the increase in spending and taxes, compared to inflation.

The report is available online at www.ppinys.org/reports/2005/runaway05.pdf.

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