GOVERNOR PATERSON CALLS FOR STATE SPENDING CAP
Latest in Series of Initiatives to Reform Albany and Make Government Accountable to Taxpayers
Fiscal Discipline Will Make New York Stronger
Governor David A. Paterson today proposed major reform legislation that would cap the growth of State government spending. This initiative will help control State expenditures, improve New York’s long-term fiscal integrity, and make government more accountable to taxpayers. If the cap had been in place from 2002-03 to 2007-08, State Operating Funds spending for the 2007-08 budget would have totaled $60 billion – $17 billion lower than actual results – and annual spending growth during that period would have averaged 2.6 percent, compared to actual results of 7.9 percent.
Spending Cap legislation is the latest in a series of reform measures the Governor will be announcing during the current legislative session. Today’s announcement comes one week after the Governor signed Executive Order No. 17 – a first step in providing property tax relief to New Yorkers by reforming State mandates on local governments.
“A spending cap will reform State government and make it more accountable to taxpayers,” said Governor Paterson. “This reform legislation will change how Albany thinks, acts, and does business. A cap on spending will make every taxpayer dollar count and will force government to live within its means – just like regular New Yorkers do every day. This common sense action provides the fiscal discipline our State needs to make New York stronger well into the future.”
Under this legislation, the Governor would be required to propose, and the Legislature would have to enact, a budget that limits State Operating Funds growth to the average rate of inflation from the previous three calendar years. The State Operating Funds budget includes all State spending except long-term capital expenses and federal aid. It is the best measure of what it costs State taxpayers to operate State government in a given year.
For calendar years 2006 through 2008, the inflation rate averaged 3.3 percent. In 2009-10, the State Operating Funds budget is projected to increase by 0.7 percent, which is consistent with the proposed cap.
From 2002-03 to 2007-08, State Operating Funds spending grew from $52.8 billion to $77 billion – an average annual rate of 7.9 percent. In great part due to this dramatic expansion in spending during a boom era on Wall Street, the State needed to address a nearly $20.1 billion deficit during last year’s budget process.
This legislation also more than triples the maximum capacity of the State’s rainy day reserve from 3 percent of General Fund spending to 10 percent of General Fund spending. Consequently, surpluses that accrue as a result of this cap can be used to help address revenue declines during times of economic difficulty.
“This law will improve the long-term financial health of our government and help us avoid future fiscal crises by ending the boom and bust cycle budgeting of the past,” Governor Paterson said.
Based on projections in the Division of the Budget’s most recent financial plan, State Operating Funds spending is currently estimated to total $82.6 billion in 2010-11, an increase of $3.9 billion or 5 percent. If the cap were in effect for next year’s budget, it is expected State Operating Funds spending would be limited to no greater than $80.4 billion in 2010-11, which reflects an increase of approximately $1.7 billion or 2.1 percent from the prior year – $2.2 billion below current services estimates.
In the event of an extraordinary, unforeseen emergency, such as a natural disaster, terrorist attack, or economic calamity, the Governor, with the agreement of a two-thirds supermajority of both houses of the Legislature, may authorize spending in excess of the cap.