State budget outlook for 2013-14 and beyond…

Friday, April 20th, 2012 at 10:29 am by

By law, the Governor’s Budget Division is required to publish quarterly reports on the state’s financial plan – the implementation of the current year’s budget and the outlook for the next few years following.

This is one area where the performance of state government has improved over the past decade or so – the volume of information now disclosed in these reports is impressive.

The first report on the recently enacted 2012-13 state budget was released yesterday.  As one would expect (or hope), it concludes that budget is balanced.

Looking to the future, it projects a small structural deficit for 2013-14, and a $712 (3.5 percent) increase in School Aid.

A structural deficit of $950 million is projected for next year (2013-14).  This is equivalent to 1.5 percent of expected expenditures – lower than anything we have seen in years.

The financial outlook for schools in many communities remains grim, but the outlook for the state government has improved dramatically over its last two budget cycles.

When Governor Cuomo took office, projected deficits for 2012-13 through 2014-15 totaled over $53 billion; the new report pegs them at $4.4 billion.

The projections require making assumptions about every component of the state budget, including School Aid.  The report notes,

The FY 2013 Enacted Budget includes a two-year appropriation and continues the change to tie future increases in School Aid to the rate of growth in New York State personal income. School Aid funding will increase by $805 million (4.1 percent) in the 2012-13 school year, and by an estimated $712 million (3.5 percent) in the 2013-14 school year (p. 59).

It also explains,

Over the multi-year financial plan, School Aid funding is expected to be a function of both a personal income growth index used to determine allowable growth and future legislation to allocate the allowable increases.

The report goes on to explain that “allowable growth” in School Aid may include increases in competitive grants, as well as increases for expense-based aids, and that

Any remaining amount of allowable growth can be allocated pursuant to a chapter of law for purposes including, but not limited to, additional spending for competitive grants, phase-in increases in Foundation Aid or restoration of the GEA.

Accordingly, while this year’s state budget provides for an overall School Aid increase for next year of 3.5 percent, no individual district can count on a specific percentage increase next year.

Also, the state constitution requires the Governor to propose a balanced budget.  So the Governor will be required to recommend actions to eliminate any projected deficit for the next fiscal year.  That duty could lead to changes in School Aid funding from the projections in the new budget report.

Finally, the report cites risks to the financial plan, most notably possible federal government efforts at deficit reduction.

If Congress and the President fail to enact a plan to reduce the federal deficit by $1.2 trillion over 10 years by January 2013, some automatic cuts are to take effect.  The Governor’s Budget Division estimates that these could cost New York state and local governments over $5 billion over nine years.

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