Beating The Clock: The Downside to On-Time Budgets

Beating The Clock: The Downside to On-Time Budgets

Beating The Clock
February 26, 2014

Gov. Andrew Cuomo’s perfect record of on-time budgets was already in jeopardy. The governor had been playing up the importance of timely budgets, praising the Legislature during his State of the State address for meeting the deadline in each of his first three years in office and—in a compliment that could double as a warning—for breaking the “gridlock that had plagued Albany.” Make it four straight, he exhorted lawmakers in his budget address, and together they would achieve a feat unmatched since the 1970s.

By the end of January, top legislative leaders had dutifully laid out a timeline that would finalize the state’s financial plan several days before April 1, the start of the new fiscal year. State Sen. Jeff Klein, the leader of the Independent Democratic Conference, said that the timeline “demonstrates the Legislature’s commitment to delivering another fiscally responsible and on-time state budget.”

Then one Monday afternoon in February, Klein went off script. One of the more volatile issues impeding the smooth passage of this year’s state budget is a dispute over universal pre-kindergarten, which pits Cuomo’s state-funded statewide plan against Mayor Bill de Blasio’s competing proposal for New York City, a far more costly option but one that would be paid for by a proposed local tax hike on the city’s wealthiest residents. Senate Republican Leader Dean Skelos plunged into the debate by telling reporters that he simply would not allow de Blasio’s plan to come to the floor for a vote. That same day Klein, who shares control of the state Senate with Skelos, fired back.

“I will not approve a budget that fails to realize the vision Mayor de Blasio and I share of providing high-quality, universal pre-K,” Klein said in a sharply worded statement. “Mayor de Blasio’s plan is the only one that provides New York City with the funding it needs to achieve that goal.”

Klein’s stance was remarkable. A legislative leader was standing up to the governor, threatening not just a key policy proposal but also the on-time adoption of the state budget—the accomplishment Cuomo generally cites first when making the case that he has put an end to Albany “dysfunction.” For a moment, state government veterans and budget experts wondered if the Legislature might dust off one of its few real tools to gain leverage in negotiations with Cuomo: late budgets.

By the next morning, however, Klein was back in line. At a press conference to promote the IDC’s paid family leave proposal, he claimed that he did not want to hold up the budget. “Everyone in New York State now wants universal pre-K,” he said. “Now we enter a crucial time frame, the budget process. Can the state come up with the money to make sure that 54,000 4-year-olds in the City of New York get full-time universal pre-K? That’s what we have to grapple with in this budget session.” In a statement later that day he added, “I want an on-time budget this year, which is something I am very proud to have accomplished for the past three years. As I have always said, I am not in favor of taxing just for the sake of taxing.”

What was telling about Klein’s apparent threat, a hardball move not used since Cuomo took office in 2011, was the senator's quick reversal. New York has for decades given a great deal of authority to its top elected official, granting the chief executive unilateral control over what to include in the budget and how to divvy up spending. However, a string of court rulings and the strong-arm tactics of two former governors have shifted the balance of power even further—too far, some say—in favor of the executive chamber. The Legislature, stripped of powers it once took for granted, is faced with the choice of acquiescing or shutting down the state government. 

When the governor submits his executive budget each January, state lawmakers can add new spending items, and the governor can veto them. The Legislature can then override a veto with a two-thirds vote in both houses. However, lawmakers can only change dollar amounts, not the language describing how the money is collected or distributed. In 1990 the Legislature amended the budget to include a fee on commercial banks to help pay for audits. The New York State Bankers Association sued, and the state Court of Appeals concluded in 1993 that lawmakers cannot alter the “terms and conditions” in an appropriation bill. Gov. George Pataki seized on the ruling to completely rewrite school aid formulas by inserting temporary changes into the budget. A 2004 ruling in the case Silver v. Pataki upheld the governor’s ability to use the budget to singlehandedly alter state law, as long as the changes were directly linked to an appropriation, which typically lasts for a single year.

“When I worked in the budget process, we used to change the terms and conditions all the time,” said Frank Mauro, a former secretary of the Assembly Ways and Means Committee and the executive director emeritus of the Fiscal Policy Institute. “The governor thought we could. He thought he could veto what we did. And we thought the Legislature could override it. But the Bankers decision changed all that. The Legislature could no longer change the terms and conditions. So how did Pataki build upon that? They would have an appropriation for aid to education, and then they’d have 20 pages changing the formula in the statute. And the Legislature couldn’t change it, unless the governor agreed to bargain.”

The state Constitution also requires the Legislature to address all of the governor’s appropriations bills before acting on any new spending bills of its own. In 2010, his last year in office, Gov. David Paterson, faced with a late budget, struck on the idea of inserting his budget language into the temporary extender bills that were passed to keep the state government operating. Lawmakers are not allowed to submit their own extender bills, and the precedent set by Pataki allowed the governor to add terms and conditions that lawmakers had no power to amend. Today lawmakers can still delay the budget in an attempt to increase spending or add a new program, but they now have to weigh the popularity of an initiative or appropriation against the public outcry that would come with a government shutdown.

“As a result, I think it’s going to be unusual to see a significantly late budget—a late budget by an hour or a day doesn’t really matter, that could happen—but I think the days of having really late budgets are over, because the Legislature’s completely ceded control,” said Blair Horner, the legislative director of the New York Public Interest Research Group. “The governor just gives them the extender—he could do a whole 11-month-and-29-day extender—and says, ‘Take it or leave it.’ All they’re left with is shutting down the government as their option.”

As Gov. Andrew Cuomo positions himself as the one competent leader in Albany who can meet deadlines and get things done, an underlying question remains: Has the governor of New York consolidated too much power?

Cuomo has had a cooperative relationship with legislative leaders without having to resort to the steps taken by his predecessors. Unlike Pataki, he has not rewritten state law in the budget, and unlike Paterson, he has not had to force his budget through with extender bills.

Some of the dearth of drama in the budget process during the Cuomo administration can be attributed to the governor’s shrewdness in providing a mix of funding and new programs each legislative session sufficient to satisfy all the key players. “When Gov. Andrew Cuomo came in, he set it up in such a manner that it was easy to do,” said Assemblyman Herman Farrell, the longtime chair of the Assembly Ways and Means Committee and a veteran of past budget standoffs. “He worked out his deals in December. He talked to the different unions, he talked to the education people, he gave them numbers. But he could say something to them because we were $10 billion short, and we were going to have a lot of problems. And he said, ‘Look, here’s what I’m going to do for education. I’m going to tell you this is what I’m going to cut, and this is what I’m going to cut next year, and this is what I’m going to do the third year.’ And people looked at it and said, ‘It can only get worse,’ so we agreed to it.”

Of course, the precedents set by Pataki and Paterson also play a critical role in getting lawmakers to cooperate.

“The governor, if he did it in a certain way, could give us a budget—and we don’t even want to talk about it—that we couldn’t touch,” Farrell said. “He could set it up so that we couldn’t hold it up. There would be extenders; there would be a whole lot of problems with it. So nobody has wanted to go into that war. No governor wanted that war, and we didn’t want the war. But you knew the guy had a shotgun in the bedroom, so we were being very careful.”

And even if Cuomo does not take full advantage of his power—or worse, abuses it—a successor could.

“It’s not a democracy,” Mauro said. “It gives the governor the power, ultimately, to govern by decree—if the governor is willing to insist on his way or no way.”

The day that Klein backed down from his demand that de Blasio’s pre-K plan be included in the state budget, Billy Easton, executive director of the Alliance for Quality Education, was interviewed by Capital Tonight host Liz Benjamin, who asked if it would be worth it for Klein to delay the budget to get what he wanted.

“You know, I think that it’s a legitimate thing to hold up a budget past April 1 to get a better budget, okay?” Easton responded. “The truth is, there’s nothing magic about March 31 that makes things better. If you get a worse budget on March 31, it’s going to hurt you more on April 1. But if you get a better budget—”

“Yeah, but schools, the longer you go on, they can’t plan for their own budgets,” Benjamin countered.

“The truth is … if out of a later budget schools got more funding, or there was more pre-K, that would end up helping students more in the long run,” Easton continued. “I’m not here saying, ‘Oh, we should have a late budget.’ … I think that we need to be talking about how with pre-K and school aid, we’re going to actually get a better budget. If we can’t get it done by March 31, we should go after that. The likelihood of going past that date has become less and less in recent years. But I think all of the leaders who are committed to pre-K, if they want to deliver it, then they have to say, ‘We are going to make this a must-have issue in the budget; we won’t do the budget without it.’ ”

Easton’s contention that a late budget can yield more favorable results for advocates, depending upon which side of an issue they support, is not without historical merit. In past years lawmakers ultimately won more funding for school districts by holding up the process. When Eliot Spitzer was governor, cuts to Medicaid were restored. And in another year, the Assembly delayed passage until it was able to get landmark rent legislation. Sometimes late budgets were even used by the governor as leverage to pass favored programs, such as a workers’ compensation reform bill Pataki pushed through his first term.

“The lateness of the budget was Exhibit A in the idiotic argument that the Legislature was dysfunctional,” said Richard Brodsky, a former assemblyman who is now a senior fellow at Demos. “Now, there’s plenty wrong with the Legislature. But we didn’t understand what dysfunction really meant until the Tea Party took over in Washington. In fact, the state was never without a budget because we did continuing resolutions. In fact, we were holding out for the things the advocates wanted. In fact, we got them. And then the same folks would say, ‘Yeah, but you didn’t do it on time.’ ”

century ago, New York was confronted with the exact opposite predicament it now faces. When Al Smith became governor in 1919, he had little real authority. The budget was left to committee chairs and rank-and-file lawmakers to submit appropriations bills. There was no centralized process to review spending requests. A governor could veto appropriations, but was hampered by the lack of line-item veto authority. Reformers had concluded that empowering the governor— including instituting an executive budget process— would make state government more accountable. Smith’s support was critical in eventually getting the reforms passed, but it wasn’t until his successor, Franklin Delano Roosevelt, took office that the new budget process was implemented.

In recent decades, the dynamic between the governor and legislative chambers in regard to the executive budget process became characterized by chronic delays. Between the late 1980s and the first decade of the 2000s, the state had only three on-time budgets. Under Gov. Mario Cuomo, budgets were late more often than they were on time. On Pataki’s watch the budget process dragged on even longer, with negotiations lasting well into the summer on several occasions.

“For the past 30 years, 23 budgets have been late an average of 50 days,” Andrew Cuomo noted in his January budget address. “Just think about that. That was the track record for state government. Thirty years, 23 late budgets—and not a little late, 50 days. And then you wonder why the people in the state of New York thought the government wasn’t working. New York State government was gridlock on steroids.”

Missing the budget deadline can cause problems. School districts and small nonprofits can be forced to scrape by with less funding. Lawmakers don’t get paid. The state’s credit rating can take a hit, which can raise borrowing costs. Voters lose confidence in their elected officials.

“I think the public expects that the governor and lawmakers adhere to the rules that they themselves have established,” said NYPIRG’s Horner. “And April 1 is the fiscal year, so the public believes that they therefore should have a budget done by April 1. … Everyone used the budget process as a cudgel against their political opponents. I think that fed public cynicism.”

Other than generating scathing headlines, however, late budgets have not had much of an impact on the lives of everyday New Yorkers. “Now the question [is]: What if they don’t pass the budget until June instead of March? It’s not good government practice, but otherwise, what in the hell is the difference?” said Richard Ravitch, who served as lieutenant governor under Paterson. “They pass continuing resolutions every month so the state is legally able to spend the money that they need to spend as if the budget were passed. So in terms of operations in the state government, there’s no change whatsoever.”

Nonetheless, Ravitch added, “I’m not advocating delay—it’s not a good practice.”

The breakdown in the state government’s system of checks and balances—which has made it far easier for the governor to insist upon an on-time budget— is also a legitimate concern, Horner acknowledged, even as good government groups attack late budgets as a sign of dysfunction.

“The ability of the Legislature to act as a check on the excesses of the executive, which was a paradigm of the founding fathers, is thrown out of whack,” Horner said. “In New York, it’s really advise and consent by the Legislature. The governor drafts the budget, and the Legislature has some limited ability to influence the governor’s proposal, and if they don’t like it, their choice is to shut down the government. From our perspective, we believe the Legislature should have more of a role in budget-making, and we think the public should definitely have more of a role in budget-making. But absent changing the state Constitution, I don’t think you can fundamentally change that.”

Mauro, an outspoken critic of the shift in power, noted that Cuomo has used the power in a way that doesn’t undercut it. “I guess you could say he’s used it effectively,” Mauro said. “It doesn’t mean he should have that much power, but he hasn’t abused it.”

So is the era of late budgets over?

“It is unless the governor tries something really extreme,” Mauro said. “In the ordinary course of events, I think the era of late budgets [is] over. Jeffrey Klein might change all that. … He could make whoever he wants to be the majority, so if he really wanted this to get a vote, he could ultimately force one by breaking his memorandum of understanding on the majority coalition. I think it’s possible.”

Jon Lentz
is City & State’s editor-in-chief.