“Other” State Budget News

Thursday, February 26th, 2009 at 6:34 am by

A lot of the New York State budget news this year starts in Washington — with the federal stimulus package.  We have a separate post today updating the stimulus news.  This post covers the rest of the story.

Consensus Revenue Forecast
As required by state law, on Monday representatives of the Governor, Assembly, and Senate met with prominent regional economists to discuss their economic forecasts and attempt to reach a consensus forecast of state budget revenues.  On Tuesday, they announced agreement.

Reflecting the continuing deterioration in the economy since Governor Paterson released his budget in December, the consensus is that the state will take in $1 billion less than estimated in the Governor’s budget.

In years past, the houses have been able to pay for some of their changes to governors’ proposed budget by predicting the state would take in more revenue.

This year, in contrast, legislative budget negotiations must start with finding over a billion in additional revenue or spending cuts, before Legislators can start adding to the Governor’s budget.

“Millionaire’s Tax”
Voter support for a tax increase on higher income New Yorkers seems to be growing, although Governor Paterson expresses reservations.  One variation is estimated to generate $6 billion by raising personal income tax rates for households with incomes in excess of $250,000 per year.

It can be expected that part of an income tax increase — if approved — would be used to avoid implementing some of the over $3 billion in tax and fee increases proposed by the Governor.

Next Steps
The injection of federal stimulus funds into the state budget process presents a unique complication, and one which is not fully shared by most other states.  Most states have more time to make decisions, with fiscal years that start three months after ours (July 1, not April 1).  As a result, New York’s planned distribution of federal stabilization funds may be incorporated into the state budget and School Aid without having been formally approved by U.S. Education Secretary Arne Duncan.

Uncertainty over how the federal funds might be used and how much might be coming has left rank-and-file legislators more uncertain than usual over how the state budget might be resolved.

This week’s consensus revenue forecasting exercise is one step in the state’s formal process of reaching an enacted budget.

The next step should be introduction and passage of separate “one-house” budget plans by the Assembly and Senate.  This is expected to happen the week after next – the week of March 9.  It’s not an absolute certainty that the houses will repeat this step, however.

The amount of detail presented in the one-house plans varies, from year-to-year, and between the houses.  In years past, the Assembly Democrats released at least district total School Aid allocations, while Senate Republicans did not.  This year we have a new Democratic majority in charge in the Senate and its leaders may take a different approach.

Whatever is included in the one-house budgets — if they are made public — will not be precise or dependable enough for districts to make firm budgeting directions, but it should give an indication of what restorations are likely to be made and what cuts may remain in a final state budget.

Prospects for an On-Time Budget
With the complication of the federal stimulus funding and the “newness” of Senate Democrats to majority status one might presume there are good reasons why the state could again miss adopting a budget before the April 1 start of its fiscal year.

But there are contrary considerations that might induce timely action.

First, for the first time in 35 years one party controls all three chambers – Governor, Assembly, and Senate.  Democrats will want to demonstrate their capacity to make state government work.

Second, there is a payoff for the state to enact a budget earlier rather than later — budget cuts and revenue increases go into effect sooner, enabling the state to realize the impact of its actions earlier and over more of its fiscal year.

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