The New York State Constitution (Article VII) sets the basic guidelines for submission of the Executive Budget (Section 2) and action by the Legislature on the Governor’s spending plan (Section 4). However, the Constitution is silent on other procedural matters for adopting a budget. Constitutional budget reform amendments would ensure “on-time” and fiscally responsible budgets every year and promote transparency in the budget making process.
The annual budget is the backbone of New York State government operations. However, this important spending plan affecting more than 19 million New Yorkers had historically been adopted late and negotiated in secret with little input from rank and file legislators or the public.
But in recent years, the New York State Legislature passed the budget before the April 1st deadline.
The credit for this progress belongs to Governor David Patterson, who, in 2010, issued an unconventional ultimatum to the State Legislature that laid the groundwork for future budget negotiations between the Executive and the Legislative branches of government.
But further reforms are necessary to ensure budgets are enacted in a transparent, timely and fiscally responsible manner.
New York’s budget process needs reforms to force the process to be more open, give all legislators an equal say, keep the focus on the budget until it is passed, and promote better, “on-time” budgets.
The Senate and Assembly should convene joint conference committees by March 15, at the very latest. Joint conference committees will allow members of the Senate and Assembly to publicly negotiate budget details and resolve differences between each house. The Budget Reform Act of 2007 requires that within ten days after submission of the Executive Budget, the Senate and the Assembly must adopt a joint rule that requires the Legislature to establish a schedule for joint conference committees and to establish other processes to assist in timely passage of the budget. Unfortunately, this law to promote transparency has not always been followed.
All legislators should be provided a plain language summary of the budget 48 hours prior to vote. On many occasions over the years, Legislators were only given a few hours to review thousands of pages of bill text, sometimes in the late evening to early morning hours. A plain language summary would help to ensure legislators are making informed decisions.
A “default” mechanism should be put in place, requiring that the previous year’s budget be put in place no later than 72 hours after the start of a new fiscal year to ensure an “on-time” budget. By failing to adopt an "on-time" budget, the state places schools, municipalities, and not-for-profit organizations at risk of not knowing when and how much state aid will be available to them. It may also delay the commencement (or continuation) of capital projects and other programs which are important to the residents of the state. By having such a "default" mechanism in place, all parties will have a greater incentive to negotiate in good faith and to make compromise necessary to achieve a fair and balanced budget.
The Legislature should be prohibited from consideration of non-budget bills after the expiration of the fiscal year until the budget is adopted. Legislators focus must remain on passing a fiscally responsible spending plan through a fair and open process, until such time a budget is enacted.
The start of the fiscal year should be changed from April 1 to a May 1 so that Personal Income Tax (PIT) data can be included in the financial plan. New York’s fiscal year begins earlier than any other state with the next closest beginning on July 1. A corresponding change moving school budget fiscal years one month forward should accompany this reform.
Annual budgets should be balanced according to Generally Accepted Accounting Principles (GAAP), which recognize revenues when they are actually earned and expenditures when the liability is incurred. New York State currently operates on a cash basis where bills are considered paid when funds are disbursed. This allows for the manipulation of timing by rolling current year expenses to the next fiscal year and using next year revenues to pay current year expenses. Cash basis budgeting permits the heavy use of "one-shots" which are non-recurring revenue sources. There is also no requirement in law that the state maintain a balanced budget or end its fiscal year in balance. These practices can cause deficits.
§2. Annually ... the governor shall submit to the legislature a budget containing a complete plan of expenditures proposed to be made before the close of the ensuing fiscal year and all moneys and revenues estimated to be available therefor, together with an explanation of the basis of such estimates ...
§4. The legislature may not alter an appropriation bill submitted by the governor except to strike out or reduce items therein, but it may add thereto items of appropriation ... Such an appropriation bill shall when passed by both houses be a law immediately without further action by the governor ...
According to the National Conference of State Legislators (NCSL), as of 2005, New York State has the earliest fiscal year start date (April 1) in the nation.
In fact, 46 states’ fiscal years start on July 1. The three remaining states’ fiscal year starting dates are:
- Alabama, October 1;
- Michigan, October 1; and
- Texas, September 1
46 states' fiscal years start on July 1: AK, AR, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, OH, OK, OR, PA, RI, SC, SD, TN, UT, VA, VT, WA, WI, WV, WY