DiNapoli: State budget expands back-door borrowing, fails to build up rainy-day fund

Rachel Silberstein

Albany Times Union

Apr 27, 2018

New York's state's $168.3 billion budget reduces transparency and oversight measures, expands "back-door borrowing" and includes new lump-sum appropriations, according to a report released Friday by state Comptroller Tom DiNapoli.

The spending plan addresses federal tax changes and increases the state's investment in education and healthcare, DiNapoli said, but the lack of oversight and irresponsible borrowing puts the state at risk.

"I am concerned that the budget expands public authority back-door borrowing and fails to build up rainy day reserves." DiNapoli said. "While revenues are currently strong, it's important to monitor trends moving forward including the ongoing impact of federal tax and budget actions."

One of the largest of lump-sum appropriations in the spending plan is a $475 million allocation for the State and Municipal Facilities Program, or SAM – a 23 percent increase from last year –even though the majority of previous appropriations for the program remain unspent, according to the report.

"The need for additional discretionary spending authority was not made clear in the enacted budget," DiNapoli said.

SAM, which has been appropriated a total of $2.4 billion over the last five years, is used by the state Dormitory Authority to fund capital projects. Critics note that its statutory criteria grows broader with each passing budget and that the governor and Legislature use the funds for pet projects. The 2018-19 budget expands an extensive list of entities that may benefit from the funds to include nonprofit organizations, sanitation districts, special districts, regional transportation authorities and the New York City Health and Hospitals Corporation.

The enacted budget also authorizes public authorities to borrow an additional $6.5 billion on behalf of the state, a 21.5 percent increase from what was authorized in Gov. Andrew Cuomo's initial budget proposal. Of the borrowed funds, SAM benefits from an additional $398.5 million, according to DiNapoli's analysis.

Fiscal watchdogs have long criticized the state for using SAM as "a credit card" and for the program's lack of transparency.

"Number one, this money is not being used to fund public priorities. Number two, it's using borrowed money and forcing future taxpayers to pick up the tab for politicians to win political points today," said Ken Girardin, policy analyst at the right-leaning Empire Center for Public Policy.

When asked about the comptroller's findings, a budget spokesperson for Cuomo's office argued that padding the SAM program provides additional flexibility to react to needs that emerge during the fiscal year.

"Every dollar of spending must meet the statutory and program requirements established within appropriation language and be subject to a rigorous agency review process," Cuomo spokesman Morris Peters said. "The idea that we'd know exactly what the year will bring with no contingencies is simply unrealistic and a recipe for gridlock."

DiNapoli's report questions why the state has not put away more rainy day funds. While in December, the state appeared to be facing a significant budget shortfall, the state ended the fiscal year with $1.7 billion additional revenue compared to a year earlier, due to stronger tax revenues late in the year, unexpected settlements and lower-than-projected spending. DiNapoli called it "a missed opportunity to better prepare for the next economic downturn."

The comptroller acknowledged that the budget was enacted on time — or prior to the April 1 deadline — but noted that as usual, most budget bills were rushed to passage with "messages of necessity," leaving little time for review.