NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7906
SPONSOR: Farrell TITLE OF BILL: An act to amend the legislative law and the state
finance law, in relation to contents of the state budget and the capital
financing and program plan; to amend the legislative law, in relation to
joint budget conference committees; to amend the state finance law, in
relation to the rainy day reserve fund; and to amend the legislative
law, in relation to report on the budget (Part A); to amend the state
finance law, in relation to establishing the New York state capital
asset/infrastructure council (Part B); to amend the state finance law,
in relation to limitations on state-funded debt; to repeal article 5-B
of the state finance law relating to limitations on state-supported
debt; and providing for the repeal of certain provisions of such law
upon expiration thereof (Part C)
PURPOSE: The proposed "comptroller's 2011 mandate for fiscal reform
act" will improve the transparency, accountability, and affordability of
New York State's budgeting, capital planning, and borrowing practices.
PART A
SUMMARY OF PROVISIONS: Section 1 amends subdivision 3 of section 53
of the legislative law to clarify, within the legislative law, that the
consensus forecast date referenced in this subdivision is determined by
section 23 of the state finance law (March 1 for the Legislature and the
Governor, and March 5 for the Comptroller if the Legislature and the
Governor fail to agree).
Section 2 amends subdivision 5 of section 4 of the state finance law to
require transfer authorizations to include specific amounts to be trans-
ferred and to identify the specific fund or accounts from which money or
other financial resources is transferred from and the specific funds or
accounts money or other financial resources are transferred from.
Section 3 amends subdivision 1 of section 22 of the state finance law to
require non-recurring receipts shall be clearly identified and used only
for non-recurring disbursements or deposited in the debt reduction
reserve fund.
Sections 4 and 5 amend subdivisions 3 and 4 of section 22 of the state
finance law to provide for new detail required in the three year finan-
cial projections presented with the executive budget
Section 6 adds a new subdivision 4-a to section 22 of the state finance
law to require that specific revenue or spending measures to eliminate
projected deficits be identified when a deficit is projected in the
financial plans submitted with the executive budget.
Section 7 adds two new subdivisions 5-a and 5-b to section 22 of the
state finance law to provide for greater detail in appropriations in the
budget when appropriated by program and fund for each state agency or
public authority, and include summaries that readily identify disburse-
ment for such entities.
Section 8 amends subdivision 3 of section 23 of the state finance law to
establish that upon the date the legislature has finally acted upon the
appropriation bill or bills submitted by the Governor the Governor shall
cause to be submitted to the legislature an overview of revisions to the
financial plan.
Section 9 adds a new subdivision 3-a to section 23 of the state finance
law to provide for each state agency or state authority receiving an
appropriation from the budget, new projects, initiative or policy chang-
es need to be identified.
Section 10 amends subdivision 4 of section 23 of the state finance law
to make a technical correction to an internal reference within the state
finance law.
Section 11 amends subdivision 6 of section 23 of the state finance law
to clarify the consensus forecast agreed to by both houses of the legis-
lature and the governor is a binding forecast. In addition this section
provides that if the legislature and the governor fail to agree on such
a binding estimate, then the determination made by the comptroller shall
be binding on both the Governor and the Legislature.
Section 12 amends the opening paragraph of subdivision 1 of section 24
of the state finance law to require every appropriation submitted in the
budget bills proposed by the executive be accompanied by an estimate of
a cash disbursement for each such appropriation.
Section 13 amends subdivision 1 of section 54-a of the legislative law
to require joint budget conference committees to meet and establish that
any meeting of the joint budget conference committees shall be held in
public.
Section 14 amends subdivisions 1 and 2 of section 92-cc of the state
finance law relating to defining "cash surplus" for the purposes of the
rainy day reserve fund. Additionally such amendment establishes that at
the close of each fiscal year, a portion of any cash surplus remaining
in the general fund after transfer shall be deposited to the rainy day
fund until the fund reaches the maximum balance. Increases the maximum
balance such fund may have to not exceeding five per centum of the
aggregate amount projected to he disbursed from the general fund during
the fiscal year immediately following the then current fiscal year.
Section 15 amends subdivision 2 of section 54 of the legislative law to
require the legislature to not only pass a budget it determines is
balanced in the general fund but also conforms with the binding consen-
sus forecast of the economy and available resources required in subdivi-
sion 6 of section 23 of the state finance law.
Section 16 provides for an immediate effective date.
PART B
SUMMARY OF PROVISIONS: Section 1 adds a new Article- 17 ("New York
State Capital Asset/Infrastructure Council") to the state finance law,
including three sections:
Section 250 defines the terms "Capital Assets," "Council,"
"Construction," "Local Authority," "State Authority," "Maintenance," and
"Rehabilitation:"
Section 251 sets forth the creation and structure of the New York State
Capital Asset/Infrastructure Council including:
* that the council is created within the Executive Department
* the purpose of the council, which is to develop and implement a proc-
ess to identify, monitor, plan, recommend and publicly report on all
capital assets of state agencies, state and local authorities and munic-
ipal corporations With significant State funding 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
procedures for ensuring that state agencies, authorities and local
governments appropriately account for, assess the condition of repair
and replace assets;
* periodically 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-e of the state finance law to require the
governor base the capital program and financing plan submitted with the
proposed executive budget on the long-term strategic plan established in
section 252(7) of article 17 of the state finance law.
Section 3 provides for an immediate effective date.
PART C
SUMMARY OF PROVISIONS: Section 1 adds a new Article 5-B (Limitations
on State Funded Debt") to the State Finance Law, including four
sections:
Section 67-a defines the terms "State debt," "State-backed debt" and
"State-funded debt" to clarify the full scope of the State's debt obli-
gations. Section 67-a also defines the terms "Revenue debt," "Total
personal income of the state," "capital purpose" and "conduit debt obli-
gation."
Section 67-b sets forth the duties with respect to state-funded debt,
which include:
* authorizing 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 2020, authorizing 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;
* beginning in fiscal year 2012-13, the inclusion of a plan in the exec-
utive 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, 2020 when section 67-c is in effect.
Section 67-c sets forth general limitations on State funded debt includ-
ing:
* implementation of an overall debt cap, effective on and after April 1,
2021, on all State funded debt to limit debt to no more than 5% 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 Constitu-
tion;
* 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 13 make conforming changes to statute to the newly
created definition of "state funded debt" set forth in new State Finance
Law Article 5-B, as added by this bill.
Section 14 provides for an immediate effective date. Provided, however,
that section 67-b-1 oft he state finance law shall expire and be deemed
repealed on March 3.1, 2021.
JUSTIFICATION:
Fiscal reform
The New York State Budget is intended to provide a plan that effectively
matches monies available to the State with the cost of services to meet
the needs of New Yorkers. For State Fiscal Year (SPY) 2010-11, the
Enacted Budget Financial Plan (updated) projected total spending of
$137.4 billion in All Governmental Funds, while total receipts are
projected at $135.2. billion.
General Fund spending is projected to reach $55.7 billion in SFY 2010-
11, while General Fund receipts are projected at $54.5 billion. The
projected gap between General Fund revenues and spending continues to
widen significantly over the next three years, exacerbated by the $16.7
billion in temporary or non-recurring resources used to support the SFY
2010-11 budget. Unfortunately, it is not unusual that wide gaps exist.
These gaps, reflect the underlying structural imbalance in the state's'
finances, which to date have generally been addressed a single year at a
time and most often through use of nonrecurring actions, including
borrowing to pay, for everyday expenses, that do not solve this urgent,
long range problem.
While there are numerous steps in the budget process, one of the most
important steps in the process is the Consensus Revenue Forecast, which
occurs in the beginning of March to determine the amount of revenue
available to cover proposed expenses. If leaders do not reach agreement
by March 1, the State Comptroller is charged with providing independent
revenue projections. While recent budget reform laws improved the proc-
ess for reaching agreement, including the fail-safe Comptroller esti-
mate, neither estimate is binding and therefore does riot provide a
comprehensive parameter for spending. Furthermore, existing law only
considers certain revenues, and not everything used to finance the budg-
et, including spending re-estimates and the use of reserves.
Once decisions on revenue and spending are finalized, the budget is
enacted and volumes of legislation and technical analysis are issued.
Yet the State budget lacks sufficient information for citizens and
others to understand and to make meaningful comparisons about spending
and revenue decisions each year. Furthermore, all of the information
provided in various Financial and Capital Plan tables and appropriation
bills does not allow a comprehensive comparison with reports on actual
spending and receipts issued by the State Comptroller:
Greater disclosure is needed to provide a better understanding of the
State's financial actions. Making information accessible to taxpayers
that clearly explains spending and revenue projections would help
address the vowing public frustration with a process perceived to be
unclear, unaccountable and unaffordable.
Debt and Capital
Although New York regularly borrows and spends money to finance long
term projects such as roads, bridges, dams, prisons and university
buildings, there is no policy to comprehensively track these capital
assets and there is no long term plan for maintaining, replacing or
adding to them, without knowing what we have or what we need, it is
difficult to determine if the State's limited resources are being put to
the best use or if the State's infrastructure will be able to support
future citizen needs.
Furthermore, the State relies heavily on borrowing by public authori-
ties, which does not require the approval of taxpayers ("backdoor
borrowing") to pay for a large portion of the State's Capital Plan. Less
than seven percent of the State's current debt burden has been approved
by those who pay for it. Reliance on this type of borrowing has become
commonplace. The enacted Five Year Capital Plan for SFY 2010-11 through
SFY 2014-15 contains no new borrowing proposals requiring voter
approval, but instead relies upon public authority debt. One reason is
the Constitution allows only one bond act for a single purpose to be put
before voters at a time, significantly limiting the State's flexibility
to address all capital needs in this process.
New York's already high debt burden is projected to significantly
increase over the next five years. Debt service is one of the fastest
growing major components of the State's budget. The debt reform measures
enacted in 2000 did little to slow the growth of the State debt or
restrict the use of debt to capital projects and, as a result, the State
is rapidly approaching the statutory cap on State-supported debt
outstanding as established in the Debt Reform Act of 2000. Although that
cap was placed on the amount of debt outstanding and debt was restricted
to capital purposes only, these provisions did not apply to all types of
State debt and are statutory, not constitutional, and thus easily
bypassed. As a result, these measures have not been effective. For exam-
ple; 16.7 percent of the State's current debt burden is for debt that
was issued for budget relief or deficit financing, which is much like
using a mortgage to pay for groceries.
The Debt Reform Act of 2000 did not adequately restrain harmful borrow-
ing practices or control growth. The State's capital planning and
borrowing practices must be made more transparent, accountable and
affordable.
Furthermore, as of March 31, 2010, approximately 94 percent of State-
Funded debt outstanding was issued without voter approval by myriad
public authorities. The Constitution establishes a procedure for
controlling debt outstanding by keeping voters involved. This bill will
not only return voters to that role, but will also remove public author-
ities from the process by having the State Comptroller issue ALL debt
for the State.
The state comptroller urges passage of this legislation.
