02/02/2011 12:54 pm ET Updated May 25, 2011

Cuomo's Missed Opportunity

Governor Cuomo's "state management presentation," as he called it, should make him some friends among the Republicans in the State Senate, but falls well short of addressing the real problems of Albany budgeting.

It is difficult to disagree with the premise of the proposed budget. Spending is outpacing revenues by leaps and bounds, and New York taxes are already among the highest in the country. Business is leaving upstate New York and raising taxes is a difficult sell.

However, cutting expenses or raising taxes has little to do with what is really wrong with Albany budgeting.

This blog has previously lamented New York's tradition of statutory budgets. A statutory budget doesn't have to include future expenses, and presents an easy out for desperate legislators in the red. It allows budgetary alchemists to push expenses into the future, thereby balancing the budget. If the state is short a cool $200 million, for example, to cover Medicaid expenses, the state can just push those expenses into the next fiscal year, and presto, it just got $200 million richer. Let's worry about next year, next year, the budgeters say.

It is unclear if Cuomo's budget includes this kind of borrowing from our future selves. This kind of trickery is more often the result of urgent cash flow needs than premeditation.
The Governor mocked "Albany based budgeting" as opposed to reality based budgeting, but made no reference to how Albany has actually balanced its budgets in the past.
He has, however, found some of the funds to fill the gap, 8% of the $10 billion to be exact, in so called "non-recurring resources." This is budget speak for one-shots, ie. money we won't have next year, and so will have to find elsewhere in the future. This practice is endemic in most budgets, and State Comptroller DiNapoli has tried to put an end to it. This year the money comes from nebulous sources such as "contributions by the State's public authorities" and cash found in reserve funds, the budgetary equivalent of checking for change under the cushions of your sofa. However, a sofa is an unreliable source of income. Sure sometimes you'll find a few dollars, or even a $20 if you're really lucky. But no one wants to depend on it to pay the rent.

If Cuomo is really serious about reigning in future deficits, he should make an effort to get to the roots of the real malaise of Albany budgeting and he should fight to introduce "generally accepted accounting principles." Put simply, it means: don't spend money you don't have. These principles aim to put an end to the practice of hiding expenses in the future and it means that Albany no longer can police itself. And therein lies the rub. A GAAP budget means actually having to balance a budget and not just pretending. It means actually cleaning your room and not just shoving all your crap into the closet.

The gap in New York's budget is there because there has been no real incentive for legislators to close it with anything more substantial than gum and crossed fingers. So far they have been able to balance the budget without balancing the budget. If you're a legislator, that's a pretty sweet gig, and you will be reluctant to change it. Left to their own devises, it is doubtful that Albany will want to put an end to their budgetary trickery. And who can blame them? It must be fun to be able to make up money.

In his presentation, Cuomo called for an end to borrowing. Whether or not this also includes borrowing from future budgets remains to be seen.