The $168.2 billion State Fiscal Year (SFY) 2018-19 Executive Budget proposes several measures to reduce the financial risks posed by federal funding reductions and an uncertain revenue picture but also weakens checks and balances over the use of public dollars, according to a report released today by State Comptroller Thomas P. DiNapoli.

"It is a high-pressure year for the state budget. Decisions made in Washington pose a real risk to New York's finances. Cuts from Washington, questions over state tax revenues and billions of dollars in out-year gaps pose significant threats," DiNapoli said. "At a time of difficult financial challenges, transparency, accountability and oversight in the use of public dollars are more important than ever."

Proposals included in the Executive Budget grant significant flexibility to the Executive after enactment of the budget. Under one proposal, the budget director is empowered to reduce certain spending by up to 3 percent if tax revenue projections decline by $500 million or more from those in the Executive Budget. Another proposal extends and broadens a provision enacted in 2017 allowing the budget director to impose spending cuts, absent action by the Legislature, if certain reductions in federal assistance occurred. Other proposals broadly authorize shifts of funds and spending authority among state agencies, public authorities and programs.

DiNapoli said other aspects of the spending plan also raise concerns about transparency, accountability and oversight. These include use of broadly scoped appropriations, off-budget spending for state costs, and proposals to bypass the independent oversight of public dollars.

All Funds tax receipts are projected at $77.4 billion in SFY 2018-19, a decrease of 2 percent, or nearly $1.6 billion. This projected decline, according to the Division of the Budget (DOB), reflects the acceleration of some Personal Income Tax (PIT) payments into the 2017 tax year in response to the federal tax changes, as well as a proposal to shift certain revenues off-budget. Adjusting for those factors, tax revenues would increase 4.8 percent in the coming fiscal year according to the report. The lingering uncertainty as to the overall impact of federal tax revisions requires caution in revenue projections for the coming year, DiNapoli said.

DiNapoli's report notes that All Funds spending in the coming fiscal year is projected at $168.2 billion, with more than one in every three dollars supported by federal funds. State Operating Funds spending is projected to rise by 1.9 percent, according to the Executive Budget. This figure reflects actions that would move spending off-budget, change the timing of disbursements or otherwise affect reported levels of spending. After adjusting for such actions, State Operating Funds spending would increase by more than 4 percent in the coming year, according to the report. Actions include the prepayment of some debt service and directing receipts from the state-imposed Payroll Mobility Tax to the Metropolitan Transportation Authority without an appropriation, which would eliminate a $1.4 billion disbursement.

DiNapoli's report also finds:

• Risks to the Financial Plan include an assumption of $750 million in proceeds from health plan conversions or similar transactions in each of the coming four fiscal years. Questions remain on when such transactions may occur and how much revenue would flow to the state;
• To date in SFY 2017-18, the state has received $838 million in non-recurring monetary settlements, bringing the total to more than $10.7 billion since April 2014. DOB expects to use $383 million for budget relief in SFY 2018-19, after using $461 million in SFY 2017-18. That would bring total spending of settlement resources for budget relief to more than $2 billion, nearly half of all spending of these funds through the coming fiscal year;
• Debt authorizations for state-supported borrowing by public authorities would increase by $5.3 billion, or 4.3 percent over current limits, including an increase of more than $1.4 billion for economic development initiatives;
• Revenue proposals include a 14 percent fee on health insurer profits that would generate an estimated $140 million and an excise tax on opioids expected to produce $127 million in SFY 2018-19;
• The Executive Budget Financial Plan relies on $5.1 billion in non-federal temporary resources in SFY 2018-19;
• Projected out-year General Fund gaps total $11.7 billion after proposed budget actions for the coming year but before actions to limit future annual State Operating Funds spending growth to 2 percent;
• School aid would rise by $769 million, or 3 percent, for the 2018-19 school year. Certain school districts would be required to submit detailed allocation plans showing the amount of funding provided to each school by funding source; and
• Most aid programs for local governments would be held flat for another year, including the general-assistance Aid and Incentives for Municipalities program and support for local highway and bridge projects.

DiNapoli's report analyzes the Executive Budget submitted to the Legislature on Jan. 16.

Read the Report on the State Fiscal Year 2018-19 Executive Budget, or go to: http://www.osc.state.ny.us/reports/budget/2018/executive-budget-report-2-13-18.pdf

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