CITIZENSUNION NEWYORKSTATEBUDGETREFORMREPORTCARD: 2012ANIMPROVEMENTBUTSTILLANINCOMPLETE April2012

Withnomessagesofnecessityusedtopassthestatesfinalbudgetbillsforthefirsttimeinyears,andthebudgetenactedonedayaheadof the deadline, New York States budget processsaw some welcomed improvement in the 2012 budget process compared to recent years. Though progress was made, the entire state budget process still fell short; the state did not fully meet the modest improvements of the budget reforms of 2007, and there was no action on further reforms, leaving in place a process that is still too opaque, complicated and rushed. Thisreportcardreviewsthestatebudgetprocessasconductedin2012,2011and2010,andtheirrespectiveadherencetoelementsofthe 2007reforms. Italso points outareaswhereadditionalreformisneededtoimprovetheprocess. This reportcardbuildsuponprevious CitizensUnionreportsonstatebudgetreform,includingareportcardonthe2008and2009cyclesi,andaDecember2008IssueBriefand PositionStatementonNewYorkStateBudgetReform.ii The2007reformsincluded,amongotheritems,quickstartbudgetdiscussionsandaMarch1stdeadlineforrevenueconsensus;itemization of certain lumpsum appropriations and prohibition of legislative lumpsum additions; a requirement for the legislature to pass rules regardingtheformationofjointconferencecommitteesandissuanceofascheduleofdatesforpublichearingsandmeetings;provisionof fiscalimpactstatementsonlegislativechangesbeforeanyvote;executivemultiyearfinancialplans;andauthorizationofanewRainyDay fundatuptothreepercentofGeneralFundspending.
CitizensUnionoftheCityofNewYork 299Broadway,Suite700NewYork,NY100071976 phone2122270342fax2122270345citizens@citizensunion.orgwww.citizensunion.org PeterJ.W.Sherwin,ChairDickDadey,ExecutiveDirector

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Thisreportcardfindsmixedresultsregardingimplementationofmajoraspectsofthe2007reformsandnoactiontoenactfurtherreforms, resultinginabudgetprocessthat,whileimproved,continuestobeflawed. Ourfindingsarelistedbelow,whichhighlightthemostrecentbudgetadoptioncyclethatconcludedattheendofMarchin2012. 1. Whilenomessagesofnecessitywereusedforbudgetbillsin2012,unlikein2010and2011,othermajorpiecesoflegislationwith largefiscalimpactswereunfortunatelypassedwithsuchmessagespriortotheadoptionofthebudget,includingtheTier6Pension legislationinMarch2012andtheincometaxoverhaulofDecember2011. 2. Theunfulfilledrequirementsofthe2007BudgetReformActduringthisyearsbudgetprocesswere:missingthedeadlineforthe startofthequickstartbudgetnegotiationsinNovember2011,theexemptingofcertainlumpsumappropriationsfromitemization injointresolutionsofthesenateandassembly,andthelackoffiscalimpactstatementsforcertainbudgetbillsinbothhousespriorto votes. 3. There continues to be no movement on other widelysupported measures to improve the budget process, such as incorporating performance measurement, requiring the use of Generally Accepted Accounting Principles (GAAP), and the creation of an IndependentBudgetOffice. 4. Thestatebudgetcontinuestolackadequatetransparency,withbudgetdocumentshardtodecipherforthegeneralpublic,andno releaseofbudgetdatainuserfriendlyformatssuchasspreadsheetstoallowforindependentanalysis. 5. Whilenewmemberitemshavenotbeenfundedinthebudgetforthelastfewyears,discretionaryfundscontinuetobeavailable andaredistributedthroughreappropriationsoftheCommunityProjectsFund,andotherfundshavebeentreatedlikemember itemssuchasthebulletaidforschooldistricts,andhavelargelylackedneededpublicscrutiny. Thespiritandlegalrequirementsofthe2007reformsmustbemetandadditionalbudgetreformsarestillneededifNewYorkersaretohold stategovernmentaccountableandtrustinthedecisionsitmakesespeciallyincontinuedtryingfiscaltimeswhentoughdecisionsneedto be made about taxes and spending. Citizens Union urges the Governor and State Legislature to enact Citizens Unions reform proposals containedinthisreportcardtoenhancebudgetintegrity,improvetransparency,andincreaseefficiencyofthebudgetprocess.

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KEY Thumbsupprogresswasmade Thumbsdownreformswereignoredorprocesscontinuedtobebroken(textinitalics) Mixedsomeprogressoradherencetolaw,butmoreworktodo FurtheractionneededCitizensUnionrecommendations

REFORM BUDGETREFORMS OF2007 Statelawwas amendedtorequire thatthelegislature adoptjointrulesto establishjoint budgetconference committees. TheSenateand Assemblyadopted jointrules establishing conference committees. Reformsdidnot createan IndependentBudget Office. ACTIONIN2010 Noconference committeeswere formed.There wasnopublic discussionof smallerpiecesof thebudget.The legislative leadersmeeting, therefore,was theonlyforum wherethebudget wasdiscussed publicly. Inspiteofseveral legislative proposals,no reformswere enacted. ACTIONIN2011 Conferencecommitteeswere usedtoreconcilesomeofthe differentbudgetproposalsof eachhouse,thoughmeetings werebrief,limitingtheroleof rankandfilemembers. Budgetnegotiationscontinued behindcloseddoors,largely drivenbyleadership. ACTIONIN2012 Conferencecommittees wereconvenedandused toreconcilethedifferent budgetproposals.There continuedtobea sentiment,however,that majordecisionswere madebehindclosed doors.iii CITIZENSUNION RECOMMENDATIONS Enactchangestothe lawtoexplicitly requirethecreation ofjointconference committeesand jointpublic conference committee meetings,and ensurerankandfile membershavea meaningfulrolein theprocess. Anindependent budgetofficeshould beestablishedto conducteconomic analysesandprovide nonpartisan projectionsofthe statesrevenuesand expenditures.

Useof Conference Committees

Inspiteofseverallegislative proposals,noreformswere enacted.

Inspiteofseveral legislativeproposals,no reformswereenacted.

Creationofan Independent BudgetOffice

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REFORM

BUDGETREFORMSOF 2007 Lawamendedto requireearlier QuickStartbudget discussionsamong theExecutive, Assemblyand Senatein November,aswell asaMarch1st deadlineforrevenue consensusbetween thethreeparties.

ACTIONIN2010 Governor Paterson releasedthe executivebudget onJanuary19th, the Constitutional requirementfor midterm governors. QuickStart budget discussionsheld infall2009. Amendmentsto theexecutive budgetwere madewithin21 days.

ACTIONIN2011 GovernorCuomoreleasedhis executivebudgetonFebruary 1st,theConstitutional requirementforthefirstterm ofanewgovernor. QuickStartbudget discussionsheldinfall2010.

ACTIONIN2012 GovernorCuomo releasedtheexecutive budgetonJanuary17th, theConstitutional requirementformid termgovernors. QuickStartdiscussions tookplacelaterthan requiredin2011;leaders citedvolatilemarketsfor thelackofrevenue forecasts,andsome advocatesdisagreedwith thelevelofuncertainty.iv Amendmentstothe executivebudgetwere madewithin21days,but additionalamendments weremade30daysafter introduction.

CITIZENSUNION RECOMMENDATIONS

Increased Legislative Deliberation

Lawamendedto requirethegovernor tomakeallpractical effortstosubmitall budgetamendments within21daysafter thesubmissionof theExecutive Budget. Reformsdidnot alterthetotal amountoftime availableforpublic andlegislative evaluationduring thevariousstagesof thebudgetprocess.

Amendmentstotheexecutive budgetweremadewithin21 days,butadditional amendmentsweremade30 daysafterintroduction.

Thereshouldbefull publicavailabilityof allfinalbudgetbills beforeascheduled votethatwillallow sufficienttimefor analysis,discussion, anddebate,aswell asprovidebetter opportunitiesfor publicparticipation andreviewbyrank andfilemembers.

Inspiteof delayedpassage ofstatebudget, somemessages ofnecessitywere used,limiting legislative review.

Nearlyallvotesonfinalbudget billsoccurredwithinadayof amendmentduetomessages ofnecessity. TheSenateRulesamended, allowingbudgetbillstogo directlytothefloor,bypassing theRulesCommittee;floor debatewasreducedto2 minutespermember.

Inspiteofvarious legislativeproposalsto establishalaterfiscal yearstartdate,noaction occurred.

Establishalaterstart dateforthefiscal yearinorderto providemoretime fordeliberation,and amoreaccurate accountingoftax receipts.

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REFORM

BUDGETREFORMS OF2007 Statelawwas amendedto requirethat memberitemsbe itemizedin resolutionsifnotin budgetbills(fora discussionofother fundsrequiredto beitemized,see thesectionLump Sum Appropriations).

ACTIONIN2010 Whilenew memberitems werenotincluded inthebudget,the legislature reappropriated pastfunds,which werevetoedby Governor Paterson.v

ACTIONIN2011 Whilenew memberitems werenot includedinthe budget,the legislature reappropriated pastfunds,which werevetoedby Governor Cuomo.vi

ACTIONIN2012 Newmemberitemswerenot includedinthebudget,but fundsfrompreviousyears continuetoexistinthe CommunityProjectsFund, whichhavebeenredirectedto newprojects.viiCapitalfunds frompreviousyearsalso continuetoexist. Discretionaryfunding continuestoexistinNewYork Statethroughothermeans, suchasthebulletaidfor schooldistricts,andRegional EconomicCouncilsfunds.viii Theprocessofawardingthese fundshasreceivedlittlepublic scrutiny(formoreinformation, seetheLumpSum Appropriationssection). Inspiteoftheintroductionof reformlegislationtorequire equaldistributionoffundsto membersandincreased accountabilityand transparency,noreformshave beenenacted.

CITIZENSUNION RECOMMENDATIONS

Discretionary Funding/Member Items

Sponsoringlegislators namesshouldbelisted alongwiththeitemized memberitemsthey sponsoredinbudget appropriationbills duringthenormal budgetprocessbefore theyarepassed, standardsshouldbe developedfortheir distribution,and reportingshouldbe requiredontheirusage.

Norequirementfor equitable distributionof memberitems. Norequirement thatlegislators namesbelisted withtheir sponsoredmember itemsin appropriationsbills.

Inspiteofthe introductionof reformlegislation torequireequal distributionof fundstomembers andincreased accountabilityand transparency,no reformshavebeen enacted.

Inspiteofthe introductionof reformlegislation torequireequal distributionof fundsto membersand increased accountability and transparency,no reformshave beenenacted.

Memberitemsshould beequitablydistributed toallmembers,along withincreased transparencyand accountability.

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REFORM

BUDGETREFORMS OF2007 Budgetreformsdid notaddress messagesof necessity.

ACTIONIN2010 Messagesof necessitywere usedinboth housesforall twelvebudget extenders,though onlyforcertain budgetbillsinthe regularbudget process:inboth houses,the deficiencybudget, andinthe Assemblythe PublicProtection& General Governmentand Transportation, andEconomic Development Environmental Protection(TED) bills. Inspiteof legislative proposals,no reformswere enacted.

ACTIONIN2011 Messagesof necessitywere usedinboth housesfornearly allbudgetbills, excludingthe debtservice appropriation bill. Inspiteof legislative proposals,no reformswere enacted.

ACTIONIN2012 Nomessagesofnecessity wereusedforbudgetbills, whichagedthefullthreedays. Majorpiecesoflegislation withlargefiscalimpacts, however,werepassedwith messagesofnecessity,suchas theenactmentofTier6and otherpensionreformsin March2012andtherevision ofthetaxcodeinDecember 2011. Inspiteoflegislative proposals,noreformswere enacted.

CITIZENSUNION RECOMMENDATIONS Theuseofmessagesof necessityshouldbe limitedtowhenitis evidentthatadelayin theLegislaturesaction wouldhavesignificant adverseconsequences andthegovernor presents documentationofsuch need.

UseofMessages ofNecessityix

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REFORM

BUDGETREFORMS OF2007 Budgetreformsdid notaddress performance budgeting.

ACTIONIN2010 Moststatefunds lackanyreal measureof performanceand accountabilityfor theirusage,except foreducation fundingthrough Contractsfor Excellence. Inspiteofseveral legislative proposals,no reformswere enacted.

ACTIONIN2011 Moststatefunds lackanyreal measureof performanceand accountabilityfor theirusage, exceptfor education fundingthrough Contractsfor Excellence. Inspiteofseveral legislative proposals,no reformswere enacted.

ACTIONIN2012 Moststatefundscontinueto lackanyrealmeasureof performanceand accountabilityfortheirusage, exceptforlimitededucation funding. Neweffortsregarding performanceforeducation fundingfocuslargelyoncost savingsandefficiencyrather thanperformance.Examples includeperformance measurementforteachersin exchangeforfederalfunds, andcompetitivegrantsfor education.x Inspiteofseverallegislative proposals,noreformswere enacted.

CITIZENSUNION RECOMMENDATIONS Performancebudgeting andoutcome measurementshouldbe usedtohelp policymakersdetermine whetherprogramsare meetingstatedgoals andpromoteamore rationalappropriation ofstatefunds.

Useof Performance BudgetingtoTie Fundingwith Results

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REFORM

BUDGETREFORMS OF2007 Lawamendedto requireitemization offundsfor Temporary Assistancefor NeedyFamilies (TANF),Medicaid, andthe Environmental ProtectionFund. Loopholeremains toallowlumpsum additionsbythe legislaturein budgetlegislation providedtheyare itemizedinjoint resolutionspassed afterthenormal budgetprocess. Thereformsdidnot establishcriteria fordistributing lumpsum appropriationsor requirereportson theirusage.

ACTIONIN2010 Legislative additionscanstill bemadeinlump sum appropriations exceptin categoriesdenied bythe2007budget reforms.

ACTIONIN2011 Legislative additionscanstill bemadeinlump sum appropriations exceptin categoriesdenied bythe2007 budgetreforms.

ACTIONIN2012 Severallumpsum appropriationswereexempted fromthe2007reformlaw, allowingtheSenateand Assemblytopassseparate resolutionsreminiscentof memberitems.Examplesof suchlumpsumsincludethe newbulletaidtoschools totalingnearly$30million, andsmallerpotsofdomestic violencepreventionandother locallawenforcementfunds.xi

CITIZENSUNION RECOMMENDATIONS

Lumpsum appropriationsshould disclosethedetailed purposesandcriteria setforthfortheir distribution.

Lumpsum Appropriations

Atimelimitforthe reappropriationof lumpsumsshouldbe institutedtodecrease slushfundsandtheuse ofsuchfundsasone shotbudgetgapfillers.

Thereshouldberegular reportingonlumpsum appropriationsthat includesdetailed informationregarding fundsdistributedand theirrecipients,and remainingfunds.

Nocriteriafor distributionofor reportingrequired forlumpsum appropriations.

Nocriteriafor distributionofor reporting requiredfor lumpsum appropriations.

Nocriteriafordistributionof orreportingrequiredforlump sumappropriations.

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REFORM

BUDGETREFORMS OF2007 Lawamendedto requirefiscal impactstatements onchangesbefore anyvote, executive multiyearfinancial plans,monthly cashflow projections,and assessmentof impactonlocal governmentsand stateworkforce levels.

ACTIONIN2010 Nofiscalimpact statementsor summarydocuments wereusedfor legislativechangesto thebudgetpriorto adoption. Twelvebudget extenderswhich enactedcutsand policychangeswere usedintheabsence ofanontimebudget throughJune2010, allpassedusing messagesof necessity.xii

ACTIONIN2011 Whilefiscalimpact statementsand summarydocuments outliningchangesto thebudgetlegislation werelargelyon membersdeskatthe timeofthebudgets passageintheSenate, oneofthebudgetbills waspassedthrough committeewithout documentsavailable andchangeswere describedonthefloor oftheSenate.

ACTIONIN2012 Membersofthe AssemblyMinority Conferencecriticized thelackoffiscal impactstatements fortheAssembly onehousebudget legislation.xiiiFiscal impactstatements werenotmade availableonthe Senatefloorfor approximatelyhalfof thebudgetbills. TheGovernor proposedlanguage regardingthe unilateraltransferof fundsinthestate operationsbudget whichwasmetwith widespreadcriticism. Thefinallanguage allowedtransfersfor onlybackoffice operations. Inspiteofseveral recommendations andproposals regardingtheuseof GAAP,noreforms wereenacted.

CITIZENSUNION RECOMMENDATIONS TheGovernorshould submitabudget presentationbookthat containsacompleteand clearfinancialpictureof stateoperationsandfiscal responsibilities,including thoseofpublicauthorities. Budgetpresentations shouldintegrate informationregardingthe expenseoftaxexpenditures projectedundercurrentlaw andoffbudgetitemswhich arefinancialobligationsof thestate,butnotcurrently presentedaspartofthe statesbudget. TheGovernorand Legislatureshouldexamine modelsfortheNYC budgetingprocessregarding consolidationsofservices andfunctions,including submissionofa reorganizationplanand requiredlegislativeapproval oftransfersoveracertain threshold.xiv GenerallyAccepted AccountingPrinciples (GAAP)shouldbeusedas thestatesbasisfor accounting.

Increase Integrityin Budgeting

Reformsdidnot requirebudget documentstolist thefullfinancial obligationsofthe statewithregard topublic authoritiesorthe impacton localities. Reformsdidnot requiretheuseof Generally Accepted Accounting Principles(GAAP).

Inspiteofseveral recommendations andproposals regardingtheuseof GAAP,noreforms wereenacted.

Inspiteofseveral recommendationsand proposalsregarding theuseofGAAP,no reformswereenacted.

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REFORM

BUDGETREFORMS OF2007 Lawamendedto requirethe legislaturetoissue abudgetschedule for:(a)public hearings,(b)joint budgetconference committeesand (c)theissuanceof finalreports.

ACTIONIN2010 Jointconference committeeswere neverformed, meaningthatthe publichadlittle knowledgeofbudget discussionsor opportunityto comment. Theuseofbudget extenderspassedvia messagesof necessitylimited publicandlegislative review. Formatand presentationof budgetbillsand otherdocumentswas largelynotuser friendly.The executivebudget summariesprovided onlybroadoverviews, anddocumentswere notprovidedin formats,suchas spreadsheets,that allowedfor independentanalysis.

ACTIONIN2011 Withthegoalof passingthebudget onedayearly,the budgetwaslargely passedviatheusage ofmessagesof necessitywhich providedlittle opportunityforpublic andlegislativereview. Thepublicwas temporarilyshutoutof theviewinggalleriesof thelegislative chambersduringthe budgetdebate. Formatand presentationofbudget billsandother documentswaslargely notuserfriendly.The executivebudget summariesprovided onlybroadoverviews, anddocumentswere notprovidedin formats,suchas spreadsheets,that allowedfor independentanalysis.

ACTIONIN2012 TheGovernor developedanonline engagementwebsite, CitizensConnect, whichincluded informationabout budgetmeetingsand hearings,heldonline chatsandsolicited generalinput,but didnotattemptto provideuserfriendly summariesofthe budgetandbudget process.xv Formatand presentationof budgetbillsand otherdocumentswas largelynotuser friendly.The executivebudget summariesprovided onlybroad overviews,and documentswerenot providedinformats, suchasspreadsheets, thatallowedfor independent analysis.

CITIZENSUNION RECOMMENDATIONS

Thereshouldbeample advancenoticepriorto schedulingorcancellation ofbudgethearingsand meetings.

Transparency andEaseof Public Understanding

Allbudgetdocuments shouldfacilitateand encouragepublicand legislativereviewbybeing presentedinuserfriendly andconsistentformats.

Reformsdidnot addressuser friendlinessof budget documents.

TheLegislatureshould presentchangestothe Governorsappropriations billsinacomparableformat withupdatedfinancialplan tablesandprojections.

Theadoptedbudgetbills shouldbereportedinthe sameformatasproposedin theexecutivebudget presentation.

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CitizensUnionsBudgetReformReportCardfor2008and2009isavailableat: http://www.citizensunion.org/www/cu/site/hosting/IssueBriefs/CU%20Budget%20Reform%20Report%20Card%20November%202009.pdf ii CitizensUnions2008IssueBriefandPositionStatementonStateBudgetReformisavailableat: http://www.citizensunion.org/www/cu/site/hosting/issuebriefs/2008ib_statebudgetreform.pdf iii DeWitt,Karen.Budgetclosedownnears.NewYorkNow.March26,2012.Availableat:http://nynow.org/post/budgetclosedownnears iv Gormley,Michael.GovernorCuomo,NewYorkStateLegislatureMissBudgetDeadline,CityEconomicTurmoil.AssociatedPress.November10,2012. http://www.huffingtonpost.com/2011/11/10/newyorkcuomomissesbudgetdeadline2011_n_1086247.html v Bridenbach,Michelle.NYGov.DavidPatersonVetoesPorkBarrelGrantstoDozensofCNYorganizations.SyracusePostStandard.July2010.Availableat: http://www.syracuse.com/news/index.ssf/2010/07/ny_gov_david_paterson_vetoes_p.html vi Benjamin,Liz.CuomoVetoesPhantomMemberItems.April2011.Availableat:http://www.capitaltonight.com/2011/04/cuomovetoesphantommemberitems/ vii Nahmias,Laura.PorkResurrection.March20,2012.CityandState.Availableat:http://www.cityandstateny.com/porkresurrection/ viii Gershman,Jacob,andFleischer,Lisa.PorkDecried,NotDead.TheWallStreetJournal.March29,2012.Availableat: http://online.wsj.com/article/SB10001424052702303404704577312161276788318.html ix Messagesofnecessityareissuedbythegovernortoallowbillstobepassedimmediatelywithoutagingforthreedays. x Formoreinformation,see:http://www.governor.ny.gov/BuildingaNew1/nystudentsfirstSeealsotheSchoolDistrictManagementEfficiencyCompetitiveGrantProgramat http://www.p12.nysed.gov/funding/gc12010/ xi Formoreinformation,seetheAidtoLocalitiesAppropriationsLegislation,S.6253of2012.Thelegislationexemptsthefundingfromthe2007reformswiththefollowing language:Notwithstandinganyprovisionoflawthisappropriationshallbeallocatedonlypursuanttoaplansettingforthanitemizedlistofgranteeswiththeamounttobe receivedbyeach,orthemethodologyforallocatingsuchappropriation...Availableat:http://assembly.state.ny.us/leg/?default_fld=&bn=S06253&term=&Summary=Y&Text=Y xii FormoreinformationontheuseofbudgetextendersbyGovernorPaterson,seePatersonAlsoRisesbyReidFillipant,NYObserver.March29,2011.Availableat: http://www.observer.com/2011/politics/patersonalsorises. xiii StatementforAssemblymemberMarkJohns,March12,2012.Availableat:http://assembly.state.ny.us/mem/MarkJohns/story/46832/ xiv FormoreinformationseeCitizensUnionsPositionStatementonBudgetTransfers,March2012,availableat: http://www.citizensunion.org/www/cu/site/hosting/Reports/CU_Position_BudgetTransferLanguage_March2012.pdf xv Seewww.governor.ny.gov/citizenconnects/