State government shutdown avoided, budget work continues UPDATED

Tuesday, June 15th, 2010 at 9:14 am by

Late yesterday, both houses of the State Legislature passed another set of emergency appropriations, avoiding a threatened shutdown of state government today.

There are mixed views on the likelihood of a a complete budget being enacted soon, with School Aid and property tax relief being major hold-ups.

One note on the averted shutdown — the State Education Department did have a contingency plan to proceed with the administration of Regents Exams starting today; I inquired last Friday.

The Governor continued with his practice of inserting cuts for the whole 2010-11 fiscal year in his emergency appropriation bills.  Following a 2004 State Court of Appeals decision, the Legislature holds that it is powerless to amend any language attached to appropriations submitted by the Governor.

This week’s recommended cuts were relatively uncontroversial, designed to reduce the possibility of a shutdown.

Upcoming budget bills will raise the prospect of more controversial cuts.  School Aid reductions may come the week after next.  The Governor says he is trying to give Legislators a chance to work out an agreement on School Aid or a complete budget.  Those negotiations continue, with legislative leaders professing some optimism that a full budget could be agreed upon soon.

Governor Paterson is more pessimistic, saying the parties are very far apart.

The Albany Times Union notes,

Included in the rest of that budget is one of the biggest and most contentious portions of state funding: education aid. Assembly Democrats want to restore some $600 million that Paterson took out of school funding, while Senate Democrats are holding out for property tax relief.

Last week, the Buffalo News reported that, “Attempts to control rising local property taxes are stalled in a philosophical and financial tug of war between Democrats who control the Assembly and Senate.”

The paper went on to summarize the positions staked out by the two houses:

…the Senate Democrats are left pushing a $250 million rebate program just for senior citizen homeowners. And even that, given the $9.2 billion deficit, appears unaffordable unless a budget deal includes a massive borrowing to help pay for such a politically popular idea, lawmakers say.

and,

Assembly Democrats are pushing a plan to restore a large portion of the $1.4 billion in state aid Paterson proposed to cut from the state’s 700 school districts, which get more than $20 billion a year from Albany. Such restorations, the Assembly leader [Speaker Sheldon Silver] insists, benefit homeowners facing rising property taxes.

Noting provisions in law limiting how districts may use additional state aid since voters in over 90 percent of districts approved budgets last month, the News explains,

Assembly Democrats are pushing a provision to permit the additional, unexpected money to be used for district operating purposes, letting them spend more than what voters approved during statewide school budget voting in May. Some Senate Democrats, meanwhile, want an alternative: Any additional state aid a district gets beyond what it budgeted must go to property tax relief this year…

But even that idea has met resistance from fellow Democrats, who say many districts have exhausted their reserve accounts and need any extra money to help restore funding for teachers facing layoff in September.

Meanwhile, fears persist than $1 billion in extra federal Medicaid funding the state is counting on is at risk.  See “Uncertainty builds over federal aid to New York.”  At least 18 other states are also depending on the same extra federal help.

The threat has led Governor Paterson to soften his resistance to borrowing to close part of the state’s budget deficit, suggesting it could become unavoidable.

State Comptroller Thomas DiNapoli has taken some criticism — unfair, I think — for a plan to allow state government, municipalities and school districts to finance some of the surge in their costs for State and Local Employees Retirement System (ERS).

A weekend article in the New York Times summed up the proposal with the title, “State Plan Makes Fund Both Borrower and Lender.”

Variations of the plan were included in the Governor’s budget, as well as the one-house budgets proposed by the Assembly and Senate, and was expected to be included in a final state budget.

The Comptroller now stresses that his proposal would require public employers to set aside money in reserve funds when rates eventually decline in order be in a stronger position to accommodate future rate increases.

My sense is that this proposal has been not a significant consideration in most districts local budgeting, perhaps because only about 20 percent of school employees are in ERS.

Most school employees are in the Teachers Retirement System.  A proposal has been circulating to enable school districts to borrow on their own, perhaps through a state authority, to finance part of their increase in TRS costs.

Under this model, the retirement system would not experience a delay in the payments it receives and then invests to fund future pension payments.  Districts would use the proceeds from their borrowing to make their full regular payments to TRS.

This proposal has not been formally introduced in the Legislature.

UPDATE (4:20 pm, Tuesday,June 15):  According to the New York Observer’s Politicker Blog, Governor Paterson said he is holding off putting education cuts in weekly budget extenders to avoid a major standoff with the Legislature. He said,

“Because of the value of school aid to the legislative leaders, I am trying to get them to make an agreement. I wasn’t going to dump billions of dollars of cuts into one extender, which I think would be trying to gouge the legislature, or be abusive.”

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