Comptroller: Paterson budget makes 'risky' assumptions

ALBANY — The state's money man says the governor's proposed budget is "risky."

In a report released Tuesday, Comptroller Thomas P. DiNapoli said Gov. David A. Paterson's executive budget relies on pay-as-you-go project financing, which increases the state's debt by 40 percent over five years. And though he called the governor's proposal a "step in the right direction," Mr. DiNapoli questioned some new revenue streams that might not materialize.

"The governor has struggled to present a balanced budget in the face of an unprecedented financial crisis," Mr. DiNapoli said in a press release accompanying the report. "No one said this would be easy. When you're dealing with a $15 billion budget gap, there's obviously going to be a lot of pain. But we can't spend more than we have. If there are proposals to put something back into the budget, then something else has to come out."

In the report's introduction, the comptroller's office notes that under Gov. Paterson's proposal, general fund revenue is projected to increase by 16 percent (3.8 percent annually) while general fund spending is expected to grow by 23 percent (5.4 percent annually) over the next four years.

Among the report's findings:

■ After fiscal year 2009-10, the general fund might not have unrestricted reserve funds from which to draw. The Tax Stabilization Reserve Fund and the Rainy Day Fund contain $1.2 billion, which the report said is "an insufficient amount to compensate for large budget gaps."

■ A $61 million increase in Aid and Incentives for Municipalities funding for municipalities outside New York City would be canceled. Reductions in funding for the Consolidated Highway Improvement Program and transit aid are proposed, as is the elimination of the STAR rebate program. Incentive grants for local governments would drop by $12.7 million.

■ Proposed Medicaid/health care savings and revenues total $3.5 billion, but state-funded Medicaid spending would jump by $587 million or 3.8 percent.

■ "On a state fiscal year basis, school funding will remain essentially flat," the report said. The Campaign for Fiscal Equity settlement's phase-in would be extended by an additional four years to eight years.

■ Graduate tuition at the State University of New York would rise 7 percent, along with previously approved undergraduate tuition hits at SUNY ($620) and City University of New York ($600). SUNY and CUNY would keep one-fifth of the tuition increase. Base aid to community colleges would be lowered by $65 million.

The report notes that out-year budgetary gaps persist, but are significantly reduced under the Paterson proposal. If enacted as proposed, the governor's plan would lower the projected deficit for fiscal 2012-13 to $5.5 billion from $19.6 billion, while the total deficit for 2010-11 through 2012-13 would drop to an estimated $11.4 billion from $55.3 billion.

Most important, the governor and the Legislature need to work together to bring the budget back into structural balance, the report said.

"As the Legislature proceeds with its review of the FY 2009-10 executive budget and specific proposals to address the state's budget deficit are either enacted or substituted for alternative proposals, attention must be given to creating a final budget that improves underlying budget balance on a structural level," the report said. "The use of one-time revenues to balance next year's budget will only add to out-year budget shortfalls."