Twice as Much as Advertised
New York State Spending Growth
Governor Andrew Cuomo recently presented the New York State Fiscal Year 2019 Executive Budget, in which he claims to have held spending growth in State Operating Funds (SOF) to 1.9 percent. However, reported growth in fiscal year 2019 spending is artificially reduced by reclassifications and accounting shifts. When adjusting for these shifts, the FY2019 Executive Budget increases SOF spending by 4.1 percent.
Measuring State Operating Spending
SOF spending is a measure of cash disbursement for operations and debt service supported by State revenues; it excludes capital investments and spending supported by federal aid. This measure best reflects State policy choices about the use of its own resources for current services and programs.1 Accordingly, the Governor’s efforts to control spending have focused on limiting SOF spending growth to no more than 2 percent annually.
The Governor has claimed to have kept SOF spending growth to 2 percent or less in every year of his tenure.2 However, for the second year in a row, the budget remains within this limit because (1) items previously categorized as state operating spending have been shifted to “off budget” accounts; (2) cash disbursements have been shifted between fiscal years; and (3) other spending items have been reclassified.3
More than $2.8 billion is being shifted out of fiscal year 2019 SOF spending. The largest shift is a change in the accounting of the Metropolitan Commuter Transportation Mobility tax. Currently, the $1.5 billion tax is collected by the State and appropriated to the Metropolitan Transportation Authority (MTA). The FY2019 Executive Budget proposes these funds go directly to the MTA, thereby shifting them off budget.4 There is no change in how the tax would be collected, who is subject to the tax, or how much revenue will be transferred to the MTA. But this accounting change will decrease fiscal year 2019 SOF spending by $1.5 billion.
In fiscal year 2017 the State began the process of shifting the School Tax Relief (STAR) program from a SOF expense to a personal income tax credit. In fiscal year 2018, $827 million will be excluded from SOF spending because of this change, increasing to $938 million in fiscal year 2019. Taxpayers continue to receive the same net benefit, but SOF spending growth appears lower.
The Governor’s financial plan also depends on prepaying approximately $340 million in debt service in fiscal year 2018 that is not due until fiscal year 2019. As part of the FY2018 Budget, the State also began spending receipts from the Master Settlement Agreement off-budget, decreasing SOF spending by $103 million in fiscal year 2018 and $329 million in fiscal year 2019.5
The Governor also proposes to shift $116 million in agency costs to capital funds, while moving $390 million in other expenses from capital to SOF, for a net impact of increasing SOF spending by $274 million.6 (See Table 2.)
The spending shifts obscure the true rate of growth in state spending. If a shift in accounting methodology is warranted to more appropriately record an item of expense, an adjustment should be made when calculating spending growth to enable the Legislature and the public to accurately assess changes from the prior year. As the legislators consider the FY2019 Executive Budget they should be mindful that spending growth is twice as much as advertised.
- State Operating Funds is a preferable measure because spending from the General Fund excludes billions of dollars in special revenue accounts and All Funds spending includes federal dollars that are not within the control of the Governor or Legislature. Capital investments are also excluded because they are intended to provide longer-term benefits.
- In fiscal year 2012 SOF spending increased by approximately 3 percent due to a loss of enhanced Federal Medicaid funding offset by a deferral of fiscal year 2010 school aid into fiscal year 2011. See: New York State Division of the Budget, Stand United to Fight for New York, Executive Budget Briefing Book (January 2018), p.2, www.budget.ny.gov/pubs/archive/fy19/exec/fy19book/BriefingBook.pdf and FY 2012 Enacted Budget Financial Plan (May 2011), p.10, www.budget.ny.gov/pubs/archive/fy1112archive/enacted1112/2011-12EnactedBudget.pdf.
- David Friedfel, “When 2 Percent Isn't 2 Percent,” Citizens Budget Commission Blog (May 30, 2017), https://cbcny.org/research/when-2-percent-isnt-2-percent.
- This will also speed the process of transmitting the funds to the MTA, providing a one-time $60 million increase in revenue.
- The Master Settlement Agreement is a $10 billion settlement between various governments and the five largest tobacco companies related to the impact of tobacco use on public health.
- The $174 million shift from SOF to Capital includes $79 million for support of State University of New York Hospitals, $23 million in Department of Environmental Conservation costs, and $14 million in Office of General Service costs. The $390 million shift from Capital to SOF includes operating costs related to snow and ice removal; bus, truck and rail inspection; and DMV regulatory activities that are currently accounted for in the Dedicated Highway and Bridge Trust Fund.