NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10117
SPONSOR: Weinstein TITLE OF BILL: An act in relation to enacting the New York state
fiscal reform and accountability act; to amend the state finance law and
the public authorities law, in relation to contents of the state budget
and the capital financing and program plan; to amend the state finance
law, in relation to the rainy day reserve fund; and to repeal section 49
of the state finance law, relating to the segregation of lump sum appro-
priations (Part A); to amend the state finance law, in relation to
establishing the New York state capital asset and infrastructure council
(Part B); to amend the state finance law, in relation to limitations on
state-funded debt; to repeal sections 67-a and 67-b of the state finance
law, relating to limitations on state-supported debt; and providing for
the repeal of certain provisions upon expiration thereof (Part C)
PURPOSE:
The proposed "New York state fiscal reform and accountability act" will
improve the transparency, accountability, and affordability of New York
State's spending, reserves, capital planning, and borrowing practices.
PART A
SUMMARY OF PROVISIONS:
Section 1 amends subdivision 5 of section 4 of the state finance law to
-require transfer authorizations for each state fund, account, or public
authority resource to include amounts to be transferred and to identify
the specific fund, account, or public authority from which money or
other. financial resources are to be transferred and to which the
specific fund, account, or public authority money or other financial
resources are to be transferred.
Section 2 amends subdivision 3 of section 22 of the state finance law to
require new detail in the financial projections presented with the exec-
utive budget, including more detailed cash flow projections for major
funds, taxes, and programs, as well as requiring identification of each
appropriation, by agency, fund, and program, that is subject to allo-
cation by means of (i) a memorandum of understanding, (ii) an inter-
change with another item of appropriation, (iii) transfer or suballo-
cation to another agency, or (iv) any other method of allocating an
appropriation into smaller sums, identifying purpose, amount, and
projected disbursements.
Section 3 amends subdivision 4 of section 23 of the state finance law to
require new detail in the financial projections presented with the
enacted budget financial plan and subsequent updates as provided for in
section 2 of this Part, and to require every appropriation or reappro-
priation to be accompanied by a cash disbursement estimate, by program,
in the enacted budget financial plan and subsequent financial plan
updates.
Section 4 adds two new subdivisions 5-a and 5-b to section 22 of the
state finance law to provide for greater detail in projected spending
for agencies and public authorities, including identifying amounts
provided to maintain current services as well as to support new program
initiatives or policy changes, including summaries that identify
disbursements, carry-over spending and new spending by each agency or
public authority, by program and fund, separately identified for state
purposes, local assistance, capital projects, and general state charges.
Section 5 amends subdivision 3 of section 23 of the state finance law to
require that, prior to the date the Legislature finally acts upon the
budget bills proposed by the Executive, the Governor must provide a
preliminary overview of the estimated Financial Plan impact of revisions
to the Budget that occurred between the submission of the budget bills
by the governor and the bills, as amended by the Legislature, that are
anticipated to be passed.by both houses of the_ legislature and consti-
tute final passage. This report must include a description of receipts
and disbursements in the General Fund and All Governmental Funds, as
well as a general description, by agency and program where applicable,
of changes in revenue and spending projections that occurred between the
Governor's submission and action by the Legislature.
Section 6 adds a new section 40-b to the state finance law to require
that all state agency and public authority spending for State projects
and purposes supported in any way by State funds, including State Funded
public authority bond proceeds, shall be subject to appropriation and
payable only upon audit and warrant of the state comptroller, and there-
fore subject to OSC pre-audit of payment.
Sections 7 amends section 24 of the state finance law related to the
allocation of any State funds for which an appropriation is provided
which either does not identify a specific recipient or is not subject to
allocation by statutory formula for the purpose of extending to all
Executive appropriations the existing prohibition against the use of
lump sum appropriations by the legislature, and removes provisions that
allow lump sums appropriations to be allocated pursuant to resolutions
passed by both houses of the legislature.
This section adds the following requirements: for any appropriation
which either does not identify a specific recipient or is not subject to
allocation by statutory formula, the administering agency or public
authority shall develop and execute a competitive process for disburse-
ment of funds based on measurable and objective criteria, and prepare a
project-level detailed plan, including an allocation plan for the appro-
priation, the selection process and criteria used, and project scores,
prior to the execution of any contract, the entering into of any commit-
ment, or the disbursement of any funds. This section also requires
every appropriation or reappropriation submitted in the budget bills
proposed by the Executive, by program, be accompanied by an estimate of
a cash disbursement for each such appropriation in the financial plan.
Section 8 repeals section 49 of the state finance law related to lump
sum appropriations.
Section 9 amends the state finance law by adding a new section 24-a to
require the division of the budget to submit a spending transparency
report annually to the legislature, the office of the state comptroller
and the public on the allocation of any appropriation which either does
not identify a specific recipient or is not subject to allocation by
statutory formula, identifying, by appropriation, the amount allocated
by project, the selection process and criteria used, and each funded
project score, as well as the overall scoring and ranking of projects
evaluated for each appropriation, as well as the specific allocation of
any appropriation, by agency, fund, and program, that is subject to
allocation by means of (i) a memorandum of understanding, (ii) an inter-
change with another item of appropriation, (iii) transfer or suballo-
cation to another agency, or (iv) any other method of allocating an
appropriation, identifying purpose, amount, and projected disbursements
from the prior year, including but not limited to disbursement informa-
tion by agency, fund and program with project-level detail. The report
must also include the fiscal and programmatic impact of any executed
transfers between funds and / or public authorities on programs and
activities associated with such funds and/or public authorities from
which money or other financial resources are transferred and to which
money or financial resources are transferred.
Section 10 amends the public authorities law by adding a new section
2801-a to require each state and local public authority in receipt of a
State appropriation to report quarterly on the expenditure of such
funds, including identifying, by appropriation, the amount allocated by
project, the selection process and criteria used, and each funded
project score, as well as the overall scoring and ranking of projects
evaluated.
Section 11 amends the Public Authorities Control Board (PACB) Act,
specifically section 51 of the public authorities law, to require that
the PACB Board make available to the public all resolutions, project
descriptions, board materials and project lists for at least ten years.
Section 12 amends subdivisions 1 and 2 of section 92-cc of the state
finance law to require that at the close of each fiscal year, a portion
of any General Fund cash surplus, as measured by the positive balance in
the General Fund relative to initial projections, be deposited into the
Rainy Day Reserve Fund, removing the discretion of the director of the
budget, until the fund reaches the maximum balance, which is increased
from five percent of prior year General Fund disbursements to eight
percent. Any remaining surplus shall be deposited in the Debt Reduction
Reserve Fund. In years when All Funds tax receipts and General Fund
miscellaneous receipts are flat or decline, deposits to the Rainy Day
Reserve Fund would be at the discretion of the director of the budget.
Section 13 provides for an immediate effective date.
PART B
SUMMARY OF PROVISIONS:
Section 1 adds a new Article 17 ("New York State Capital Asset and
Infrastructure Council") to the state finance law, including three
sections:
Section 250 defines the terms "Capital Assets," "Council,"
"Construction," "Local Authority," "State Authority," "Maintenance,"
"Municipal Corporation" and "Rehabilitation."
Section 251 sets forth the creation and structure of the New York State
Capital Asset and Infrastructure Council including:
*that the council is created within the Executive Department;
*the purpose of the council, which is to develop and implement a process
to identify, monitor, plan, recommend and publicly report on all capital
assets of state agencies and state public authorities, as well as, in
its judgment, capital assets of municipal entities that are/were signif-
icantly funded with State monies, to ensure that the capital assets meet
current and future demand, facilitate economic growth, are maintained in
a good operating condition that ensures public safety, and are developed
or modified in a sustainable manner;
*that the council will consist of five members serving four year terms
and appointed by the governor, including one who shall be appointed upon
the recommendation of the temporary president of the senate, one who
shall be appointed upon the recommendation of the speaker of the assem-
bly, and one who shall be appointed upon the recommendation of the comp-
troller.
Section 252 sets forth the duties and powers of the council including:
*the ability to enter into cooperative agreements with other government
offices, State agencies, State and local authorities and municipal
corporations to support the work of the council and to carry out its
responsibilities.
*developing recommendations on proposed improvements in prioritizing the
planning and funding of capital asset investments, and improved proce-
dures for ensuring that state agencies and state authorities and in its
discretion local authorities and municipal corporations, appropriately
account for, assess the condition of, repair and replace assets; period-
ically identifying capital assets located within the State and annually
issuing a comprehensive statewide capital needs assessment report;
*using the comprehensive statewide capital needs assessment report,
biennially issue a comprehensive 20 year long-term strategic plan for
capital needs encompassing necessary maintenance activities, scheduled
asset replacement, financing and the status of current capital activ-
ities.
Section 2 amends section 22-c of the state finance law to require the
governor to base the capital program and.financing plan submitted with
the executive budget on the long-term strategic plan established in
section 252(5) of article 17 of the state finance law.
Section 3 provides for an immediate effective date.
PART C
SUMMARY OF PROVISIONS:
Section 1 repeals sections 67-a and 67-b of the State Finance Law and
adds new sections 67-a, 67-b, 67-b-1, 67-b-2 and 67-d to the State
Finance Law:
Section 67-a defines the terms "State debt," "State-backed debt",
State-"Supported debt" and "State-funded debt" to clarify the full scope
of the State's debt obligations. Section 67-a also defines the terms
"Revenue debt," "Total personal income of the state," "capital purpose"
and "conduit debt obligation."
Section 67-b sets forth the duties with respect to State-funded debt,
which include:
*requiring the division of the budget to annually determine the debt
limit of the state by calculating the amount equal to five percent of
the defined total personal income of the state;
*beginning in 2027, requiring the division of the budget, by October 31,
to determine the total debt limit of the state for the next fiscal year
and report the limit to the legislature and the comptroller; and
*beginning in fiscal year 2019-20, the inclusion of a plan in the execu-
tive budget proposal outlining the methodology for implementing the debt
limit determined by DOB;
Section 67-b-1 continues the current limitations on the issuance of
State-supported debt. This section shall expire and be deemed repealed
on March 31, 2028 when section 67-b-2 is in effect.
Section 67-b-2 sets forth general limitations on State-funded debt
including:
*implementation of an overall debt cap, effective on and after April 1,
2028, on all State-funded debt to limit debt to no more than 5 percent
of the total personal income in the State;
*prohibiting the use of State-funded debt for any purpose other than a
capital purpose;
*requiring all State-funded debt to be in the form of obligations issued
by the Comptroller beginning with the fiscal year that is at least one
year after the effective date of an amendment to the Constitution; and,
*prohibiting the issuance of any State-funded debt obligation with a
final maturity exceeding the probable life of the capital project
financed by such debt, as well as prohibiting any maturity longer than
30 years.
Section 67-d prohibits the issuance of new debt supported by a state
agreement to make payments only if expected debt service sources fall
short.
Sections 2 through 6 make conforming changes to statute to reflect the
newly created definition of "State-funded debt", as added by this bill.
Section 7 provides for an immediate effective date. Provided, however,
that section 67-b-1 of the state finance law shall expire and be deemed
repealed on March 31, 2028 and section 67-b-2 shall take effect March
31, 2028.
PRIOR LEGISLATIVE HISTORY:
A. 7287 (Farrell) 2017
A. 10340 (Farrell) 2015-2016
JUSTIFICATION:
New York State has taken important steps to improve its budgetary prac-
tices and financial condition over the past decade, but much work
remains. This is evidenced by issues that persist with respect to State
spending, debt, and capital planning. Key challenges include:
*Lack of adequate transparency and accountability for State spending,
including an increasing dependence on public authorities for "backdoor
spending" on purposes that may be vaguely defined in law, if at all.
Spending decisions for discretionary pools of funding, totaling well
into the billions of dollars, are made through processes that can be
opaque, out of the public's eye, and often with unclear justification
and unsubstantiated merit.
*Relatively low levels of statutory "rainy day" reserve funds, which may
leave the State with insufficient flexibility to respond to economic
downturns or catastrophic events. More robust reserves are particularly
desirable because New York relies heavily on revenue that can be vola-
tile depending on economic conditions, including its Personal Income
Tax.
*A debt burden that is among the highest in the nation, and statutory
debt capacity that is shrinking, potentially limiting the State's abili-
ty to make critical future capital investments as needed. The State has
responded to this challenge, in part, by making less responsible debt
choices. In addition, the State's reliance on "backdoor borrowing" by
public authorities for nearly all its borrowing reduces transparency and
evades voter control over decisions about whether to borrow for various
purposes.
*Persistent questions as to whether the State invests appropriately in
the upkeep and replacement of essential capital assets. Such questions
are especially difficult to answer because the State does not have an
effective, transparent and comprehensive capital planning process. In
recent years, some efforts have been made to focus attention on the need
for improved capital planning and some progress has been made to
increase support for New York's infrastructure. However, further
reforms are needed to assure that public resources devoted to capital
investment are used as cost-effectively as possible.
The Office of the State Comptroller proposes a comprehensive fiscal
reform package, including proposed constitutional and statutory amend-
ments, to address these four key issue areas and commit New York State
to the highest standards of accountable, transparent and effective budg-
eting, as well as fiscal sustainability. Key components of the plan
include:
*State spending reforms, to require greater accountability, transparency
and oversight for broadly allocated State funds and for public authority
spending on behalf of the State, and to enhance transparency with
respect to the State's spending plan. These would include banning back-
door spending, requiring greater disclosure of public authority activ-
ities, expanding restrictions and requirements related to lump sum
appropriations and unallocated, discretionary funds, and improving clar-
ity and disclosures with respect to the State Budget and the Financial
Plan. These changes would protect the public interest, ensure that
taxpayers can clearly see how their dollars are being used, and promote
integrity in State funding decisions.
*New rules for budget reserves to require deposits to the State's statu-
tory rainy day reserve funds and mandate further steps to bring such
reserves to maximum statutory levels. More robust reserves would miti-
gate the potential budgetary impact of an economic downturn or
catastrophic event by reducing the need for painful spending cuts,
significant tax increases, or the use of fiscal manipulation, temporary
"one-shot" fixes or other budgetary ploys.
*Reforms to promote more responsible debt practices, including a consti-
tutional and statutory debt cap using a comprehensive definition of
State debt, to strengthen the current limits on outstanding debt and
broaden the scope of borrowing subject to the cap. This would provide a
more meaningful constraint, as the current statutory debt caps are
narrowly defined and susceptible to evasion. The proposal would provide
voters a greater voice in borrowing decisions made on their behalf by
prohibiting backdoor borrowing by public authorities and requiring voter
approval of State debt with limited exceptions and tight controls.
*A comprehensive capital prioritization and planning process to ensure
the cost-effective use of billions of dollars in annual infrastructure
spending. This proposal would create a comprehensive inventory and
condition assessment of all State capital assets, and would be the basis
for the State's five-year Capital Plan as well as a 20-year planning
window. It would provide a much-needed, long-term capital planning mech-
anism to allow policy makers to prioritize capital investments, identify
critical infrastructure needs and ensure that the State's limited
resources, including its debt capacity, are used effectively.
FISCAL IMPLICATIONS:
These measures to improve and enhance State financial practices, capital
planning and borrowing can help ensure that public resources are used
wisely, that critical needs can be met both today and in the future, and
that the State conducts its business in the most transparent and
accountable manner possible.
The State Comptroller urges passage of this legislation.
