No more budget gimmicks – by George J. Marlin

The following appears in the April 29, 2010 issue of the Long Island Business News:

The City of New York in the 1960s and 1970s invented every conceivable budgetary gimmick to conceal its fiscal excesses. The most egregious was the transfer of the city’s general fund expenses to the capital fund. By 1975, more than half of the city’s construction dollars – $875 million – was used to cover day-to-day expenditures.

To avoid municipal bankruptcy Gov. Hugh Carey and the state Legislature imposed stringent internal financial reforms and oversight that eliminated such abuses, restored the city’s credibility and stifled temptation by local officials to backslide.

“New York’s Deficit Shuffle,” an explosive exposé released this month by state Comptroller Thomas DiNapoli, reveals that Albany has not employed the transparent budgetary standards it ordered New York City to follow and has, instead, utilized sleight-of-hand fiscal techniques similar to those that brought the city to its knees in 1975.

According to the DiNapoli report, Albany potentates for years have raided special revenue funds, capital project funds and debt service funds to create the illusion that the state has closed its annual general fund deficit.

Since 2000, more than $17 billion in general fund expenses have been dumped into the Health Care Reform Act fund, and more than $3.7 billion have been transferred into the General Fund from various dedicated state funds. And in 2007 these imprudent one shots were codified. The Division of Budget has “blanket” authority to sweep funds without public disclosure.

In New York’s 2008-2009 fiscal year, fund shuffling totaled $5.3 billion. The number topped $6.4 billion for the fiscal year that ended on March 31, 2010. Also in 2009-2010, $1.4 billion in temporary loans to dedicated funds remained outstanding and $200 million in new debt was issued to pay for what was supposed to be pay-as-you go capital spending.

Here are a few dedicated funds from which money was swept into the General Fund under the “blanket” authorization:

  • $134.9 million – Health Care Reform Act
  • $21.0 million – Elderly Pharmaceutical Insurance Coverage
  • $15.0 million – Hazardous Waste Oversight and Assistance
  • $12.5 million – Local Wireless Public Safety
  • $9.8 million – New York City Veterans Homes (St. Albans and Oxford)
  • $6.6 million – Indigent Legal Services
  • $1.0 million – Assisted Living Residence Quality Oversight

The fiscal manipulators in the governor’s budget office have been shameless. To cover up Albany’s reckless spending, they have even grabbed money from programs created to help the elderly and veterans.

Also misused were temporary loans from the state’s Short-Term Investment Pool, which are permitted to cover state fund cash shortfalls until cash receipts become available later in a fiscal year. Since 2000, the state has ended each budget year with an average of $1.4 billion in temporary loans that have not been repaid. These loans are becoming perpetual and are covering up recurring deficits in special revenue accounts.

The DiNapoli report points out that “the net result of this dizzying array of transactions is that the true extent of the state’s fiscal distress is masked and commitments made to New Yorkers are broken as their ‘dedicated’ tax and fee payments are used for other purposes.”

The use of “transactions” by governors George Pataki, Eliot Spitzer, David Paterson and their accomplices in the state Legislature have caused an ever- widening budget gap that is destroying New York’s fiscal integrity and its overtaxed economic base.

To restore the state’s fiscal health, the next governor must have the courage and fortitude to tell tax-and-spend legislators that budget manipulations described in the DiNapoli report will end, the actual deficit will be addressed, the government will learn to live within its means and will no longer be the major growth industry in the state.

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