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November 2, 2005

Spitzer, business leaders, former state budget director outline the case against Proposal One

A proposed constitutional amendment to radically overhaul the state’s budget-making process would unwisely diminish the powers that any governor would need to fundamentally rethink policies that set New York’s course, state Attorney General Eliot Spitzer said Wednesday.

“Giving the Legislature more power in the process . . . would lead to more spending and weaken the power of the executive branch to respond to crisis,” the attorney general said in a media briefing Nov. 2 in Albany. “If we take away tools from any governor, we’ll be at the mercy of a legislative branch that always feels pressure to spend more.”

Spitzer was joined at the briefing by R. Wayne Diesel, a former state budget director, and two Business Council leaders, Ed Reinfurt, the Council's vice president, and Roger Hannay, a member of the Council’s Board of Directors.

Spitzer emphatically urged New Yorkers to vote “no” on Proposal One.

“You don’t turn a mule into a thoroughbred by calling it a thoroughbred, and this isn’t even a mule,” Spitzer told journalists in dismissing the idea that the proposal is budget reform. ”Prop One is a bad idea. Don’t vote for it. This amendment goes absolutely in the wrong direction.”

Spitzer also said the core idea of Proposal One, which The Business Council and others have dubbed the Runaway Spending Amendment (RSA), is a shift of budget-making power from the executive branch to the Legislature. Other more attractive reform ideas, including an “independent” budget office and a two-year funding cycle for schools, are outlined in “enabling legislation” that the legislature has also passed.

These promising ideas are “logically and factually unrelated to this amendment,” and the suggestion from Proposal One proponents that these reforms are part of the amendment “is almost false advertising.”

The contingency budget that the amendment would automatically create if legislators don’t agree with the Governor on time would be a powerful disincentive to fundamental change in how New York spends dollars, invests in growth, and seeks fundamental changes in its direction, the attorney general said.

R. Wayne Diesel, who served as director of the state Division of the Budget under former Governor Mario M. Cuomo, said he has spoken to former state budget directors Michael Finnerty, Dall Forsythe, Peter Goldmark, Rudy Runko, and Carole Stone.

“There is virtually unanimous agreement that it can’t work and it won’t work,” Diesel said. A common concern, he said, is that true fiscal accountability must remain centered on a single individual in an executive role. "You can’t transfer that accountability to 212 focal points,” he said.

Diesel noted that, in each of the 20 years when the budget was late, the governor in power at the time complied with his constitutional obligation to produce an on-time and balanced budget proposal.

Reinfurt said pressure on legislators to spend is already intense from the regular visits to Albany of busloads of individuals representing unions and other pro-spending groups. That pressure will intensify if the amendment passes.

He also said this is not about the current governor or legislative leaders, it’s about three different branches of government. He noted that Al Smith could not have foreseen New York City’s fiscal problems in 1977, but he nonetheless put in place the system that Gov. Carey used to cope with the unforeseen crisis.

“You should vote for this only if you want the status quo for New York and its fiscal position,” Reinfurt said. “If you think New York needs to change, you should vote no.”

Hannay, president and CEO of a fourth-generation family manufacturer in rural Albany County, said he loves New York and hopes to keep his company, Hannay Reels, growing and prospering here. But he warned that Proposal One would worsen competitive challenges that New York already has and that already hurt New York State businesses.

Hannay pointed to discussions already underway in the Legislature about spending an estimated $1 billion surplus the state may accumulate by the end of this fiscal year. Despite that projected surplus, the state Budget Division projects a budget gap of more than $2 billion in the year starting next April 1.

Legislators tend to see a “temporary euphoric cash-flow surplus” as an opportunity to add more spending, even when the state faces ongoing, structural fiscal problems, Hannay said. Giving the Legislature more power over the state’s fiscal policies would inevitably worsen those problems, he said.

Spitzer cited former Governor Hugh Carey, a staunch opponent of Proposal One, who said he would have been unable to resolve the New York City fiscal crisis of the mid-1970s under the budgeting system legislators now seek through this amendment.

New York suffered fiscal problems in the early part of the 20th Century caused by legislator-driven budgeting, which the current Legislature seeks to restore with this proposal, the attorney general said.

It took the “wise leadership” of three different governors—Charles Evans Hughes, Al Smith, and Franklin Delano Roosevelt—to complete “a historic reform initiative that took New York away from legislator-driven budgeting that was not working,” Spitzer said. “The budget process had spun out of control.”

The process they enacted produced on-time budgets for 60 straight years before Albany began a 20 year period of late budgets. This pattern proves, Spitzer noted, that the recent late-budget run was not caused by the process or “a failure of the legislature to take part in the process.”