Governor Announces Budget, says He’ll Leverage $5 Billion for the TZ Bridge, and Create Thousands of Jobs Overall in Hudson Valley

Governor Andrew M. Cuomo traveled to the City of Yonkers in Westchester County on Wednesday to outline his 2012-13 Executive Budget and Reform Plan.

The governor claims his budget closes the current $2 billion budget deficit with no new taxes or new fees. He says it will provide “sweeping” mandate relief and pension reform that will save taxpayers and local governments billions of dollars as well as launch “historic education reform” to put students “ahead of the education bureaucracy.” Additionally, Cuomo says his budget has a $25 billion economic development agenda, funded largely by leveraging billions in private sector investment rather than by taxpayer dollars. The governor says the New York Works Fund and Task Force will accelerate and launch projects to rebuild infrastructure in the Hudson Valley, spurring more than $426 million in investment, and creating more than 4,100 jobs.

The NY Works Fund will further leverage $5 billion for the Tappan Zee Bridge project, leading to the creation of more than 23,000 additional jobs. A complete list of projects in the Hudson Valley can be found at: http://governor.ny.gov/assets/Yonkersprojects.pdf

“The hard work we did last year to transform the way our state spends money is paying dividends this year as we are now able to make the long-term reforms needed to reimagine our government and revitalize the state’s economy,” Governor Cuomo said. “This budget demonstrates fiscal discipline and proposes real reforms that puts students ahead of the education bureaucracy and leverages major investment to spur private sector growth. By coming together in the same bipartisan manner we did last year, we will continue our work to build a New New York.”

Cuomo says under his plan the state operating budget increases by less than 2 percent while increasing school aid and Medicaid funding at approximately 4 percent.

Highlights of the plan include:

· Closing the current budget gap with, according to Cuomo, “no new taxes, fees or gimmicks,” and including “zero growth in state agency spending;”

· Eliminating automatic spending inflators and implementing changes throughout the budget that Cuomo says will ensure spending increases for service providers reflect performance and actual cost;

· Allocating $1.3 billion in state investment designed to spur a total of $25 billion from other sources to launch and accelerate major infrastructure projects and create thousands of jobs;

· Creating a plan for the state to take over 100 percent of the costs of Medicaid growth that will be phased in over three years, saving local governments $1.2 billion over the next five years;

· Creating a pension reform plan that will save state taxpayers and local governments outside New York City $83 billion, and will save New York City $30 billion over the next 30 years; and

· Increasing school aid by $805 million, including $250 million linked to improved academic performance and management efficiency, and implementation of an enhanced teacher evaluation process.

Cuomo said due to the structural reforms enacted in last year’s budget as well as the reforms proposed in this budget, the budget gap in 2013-14 is projected at $715 million. That is the lowest “first out-year” budget gap in two decades, he said, noting that in his estimation the budget’s recommendations cut the projected four-year deficit by more than half, from $16.4 billion to $7.4 billion.

The executive budget includes:

· All funds spending of $132.5 billion in the fiscal year that begins April 1, 2012, a decrease of $225 million from 2011-12. The back-to-back decline in all funds spending would represent the first time in decades that this has occurred.

· Stateo operating funds spending of $88.7 billion, an increase of $1.7 billion, or 1.9 percent. State operating funds exclude federal funds and long-term capital spending.

The $3.5 billion budget gap identified in December is closed through $2 billion in spending reductions and $1.5 billion in revenues from the tax reforms enacted last year that maintained the millionaire tax, albeit only on multi-millionaires rather than anyone making over $250,000. Cuomo said he has budgeted for zero percent growth in state agency spending by redesigning State agency operations to reduce duplication, redundancy and waste.

Last year, the budget eliminated certain automatic inflators and pegging increases in education and Medicaid spending. Cuomo said these actions saved New York billions of dollars and helped to stabilize the state’s finances. The 2012-13 financial plan, he said, will further control automatic cost growth and tie growth to rational measures. For 2012-13, inflators like cost of living adjustments will be kept flat and reforms will be introduced to ensure that spending increases in future years reflect performance and actual cost.

Medicaid growth is a major cost driver for counties. In 2006, the state capped the amount of Medicaid cost growth that counties have to pay at 3 percent of growth; all growth over 3 percent is paid by the State. Cuomo has agreed that the State will phase in a 100 percent takeover of the costs of Medicaid growth. In the 2013 fiscal year, the county cap will fall to 2 percent of Medicaid growth; in county fiscal year 2014, the county share will be reduced to 1 percent. Starting in county fiscal year 2015, the state will pay 100 percent of the costs of Medicaid growth. The takeover by the state of a greater share of local Medicaid expenses will save counties and New York City $1.2 billion over the next five years.

County Executive C. Scott Vanderhoef’s spokesman Ron Levine responded to this, saying, “The County Executive is supporting legislation sponsored by Lower HudsonValley members of the New York State Legislature that would require state policy makers to take full responsibility for New York’s largest in the nation Medicaid program which would be implemented through an eight-year gradual state takeover of county Medicaid costs. This is most appropriate for the taxpayers of Rockland, where our county’s entire property tax levy goes to fund Medicaid. Nonetheless, the governor’s proposal, while a good first step, is not adequate.”

Next to Medicaid, pension costs are the most significant burden on local governments. The governor called for a new tier in the state pension system that he said will save the state and local governments outside of New York City $83 billion and New York City $30 billion over the next 30 years. The new pension plan would have progressive contribution rates between 4 percent and 6 percent with shared risk/reward for employees and employers to account for market volatility. It includes a voluntary option for defined contribution following the TIAA-CREF model. Employees taking this defined contribution will vest in this system after one year. This option will be portable. No current employees will be affected by the governor’s pension reform plan.