Our new gov’s budget-balancing act
In her first address in office, Gov. Hochul correctly prioritized getting New York State to operate both well and transparently. Accomplishing this requires rectifying twin management failures — the operational management failure we see in rental assistance funds not getting disbursed quickly, and the fiscal management failure whose root cause is lack of transparency that keeps New Yorkers in the dark as to how and how much of their money is being spent.
Fortunately, these problems can be fixed with leadership, government-wide performance management and accountability, and specific fiscal management changes.
The state does not now have a cash-availability problem. It’s flush. With strong tax receipts, unprecedented federal aid and tax increases (which were unnecessary), this year’s $212 billion budget included renter and homeowner relief programs ($3.3 billion), the Excluded Workers Fund ($2.1 billion), small business recovery grants ($800 million), and an unprecedented increase in school aid ($13 billion for the school year).
Despite coffers virtually overflowing, the question remains: Will this money get to those who need it and will it actually help? “Fiscal ribbon cutting” — budgeting money and declaring victory — does not alone deliver results and relief. That relies also on designing and managing the programs well.
Management matters — a lot. The state should implement a government-wide management and accountability system like some other states have. Interestingly, both former Govs. Cuomo took steps forward, Mario with the short-lived “Key Item Reporting System” and Andrew with his, never-implemented Spending and Government Efficiency (SAGE) Commission’s blueprint.
Hochul should get the job done by instituting a data-driven management and accountability process. Officials from the governor cascading down to front-line managers and workers should leverage the best measures to track and manage precisely what is being spent, what outputs are being delivered, the quality and efficiency of activities, and ultimately their impacts. The state should publicize specific goals for every major activity and transparently provide the core performance data. This would enhance New Yorkers’ confidence in their government and allow them to hold it accountable.
In addition to getting rent, homeowner and excluded worker relief out the door, as she has promised, Hochul should use this robust performance management system to deliver small business relief, education improvements, and other recovery programs. More than just disbursing funds, this is about delivering and being accountable for results. How many people do not get evicted? How many small property owners can pay their mortgage? What is the impact on the rental market and employment?
Young people have suffered tremendously during the pandemic. Disrupted schooling has slowed or halted progress for many and likely exacerbated educational disparities. With $10 billion in one-time federal education funds on top of a $3 billion increase in state-funded school aid, New Yorkers should know both what to expect and what actually is accomplished in terms of remediating learning loss, improving educational outcomes and reducing disparities. The public should have the data used by the state to track and manage these funds, hold districts accountable and measure results. Otherwise, we risk throwing away and not solving the problem.
Transparency also is key to reversing the state’s fiscal management problems. To obfuscate the budget’s size and spending growth, the state has regularly used fiscal maneuvers, including moving dedicated transit revenue and portions of the School Tax Relief (STAR) program effectively off-budget, and infamously delaying a $1.7 billion state Medicaid payment by three days to make spending appear lower. Amazingly, the state also fails to publish a financial plan when the budget is adopted, this year waiting seven weeks, and regularly publishes financial reports late, such as this year’s now four-week late first-quarter update.
Five specific transparency measures would improve the state’s fiscal management: Move funds back on budget, stop manipulating the timing of spending, budget and report using Generally Accepted Accounting Principles, and publish the financial plan when the budget is adopted and other financial reports on time.
Two other fiscal improvements also would help protect New Yorkers’ future. The state should put more funds aside for a rainy day — the next recession or severe emergency — and reduce the future federal fiscal cliff. While strong revenue and federal aid fortunately mitigated the possible pain from inadequate fiscal reserves, the state may not be so lucky next time. With more than $5 billion in excess receipts than budgeted this year, the time to build sufficient reserves starts now. Also, federal aid will run out in four years, at which time the $3.5 billion in recurring programs it will be supporting will be in trouble. The state should shift priority recurring programs from federal to recurring state revenues over time.
Tackling these crises requires swift action. It is encouraging to hear Hochul emphasize performance and transparency. Her next step should be to convert those pledges into action.