Post on 27-Jul-2020
2012-13 Executive Budget Governor Andrew M. Cuomo
January 17, 2012 Robert L Megna, Director of the Budget
I. Economic Overview II. Financial Plan Summary III. Reforms
I. Economic Overview
4.1
2.5
3.7
4.5 4.4
4.8
4.1
1.1
1.8
2.5
3.5 3.1
2.7
1.9
-0.3
-3.5
3.0
1.7
2.2
2.9
3.6 3.3
2.8 2.7
-4
-3
-2
-1
0
1
2
3
4
5
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Perc
en
t ch
an
ge
GDP CPI
Outlook for Real U.S. GDP Growth and Inflation
Note: Displayed values pertain to GDP growth. Source: Moody’s Analytics; DOB staff estimates.
Estimate/Forecast
0
1
2
3
4
0
1
2
3
4
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12
BC GI MA
Economic Outlook Weakens GDP Forecast for 2012
Percent change
Source: Global Insight; Macroeconomic Advisors; Blue Chip.
• Economic forecasters have been continuously revising their outlooks for 2012
downward; on average, forecasts for real 2012 U.S. GDP growth have fallen from
over 3% to about 2%.
5
6
7
8
9
10
11
1989 1993 1997 2001 2005 2009
$ T
, S
AA
R
Real Personal Income Minus Transfers Total Employment
Industrial Production Real Manufacturing and Trade Sales
100
110
120
130
140
1989 1993 1997 2001 2005 2009
Mil
lio
ns
60
65
70
75
80
85
90
95
100
105
1989 1993 1997 2001 2005 2009
In
de
x
600
700
800
900
1,000
1,100
1989 1993 1997 2001 2005 2009
$ B
, S
AA
R
Note: Shaded areas represent U.S. recessions.
Source: Moody’s Analytics.
0
200
400
600
800
1000
1200
1400
1600
1800
2000
0
100
200
300
400
500
600
Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Th
ou
san
ds
Th
ou
san
ds
Multi-family starts
Single family starts (right axis)
Home buyers
credit expires
2008-2010 Avg.
household formation rate
Source: Moody’s Analytics.
Single Family Housing Market Still Weak
1996-2007 Avg. household formation rate
-60
-40
-20
0
20
40
60
80
0
10
20
30
40
50
60
1999 2001 2003 2005 2007 2009 2011
Pro
fits in
$ B
illion
s
State Fiscal Year Ending
Finance and Insurance Bonuses
Securities Industry Profits
Weak Wall Street Profits Lead to a Decline in Bonuses
Note: Values for profits pertain to the prior calendar year; estimates for 2011 assume that profits for
the fourth quarter will be equal to the third quarter.
Source: NYS Department of Labor; SIFMA; DOB staff estimates.
Bo
nu
ses i
n $
Billio
ns
• Securities Industry profits are expected to decline over 75 percent during 2011. The
Finance sector bonuses are expected to decline 31.8 percent during SFY2011-12.
0
5
10
15
20
25
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Perc
en
t
State Fiscal Year Ending
Employment Share
Wage Share
Finance Sector Has an Outsized Impact on State Revenue
Source: NYS Department of Labor; DOB staff estimates.
Forecast
• The finance sector has 5% of total employment but about 20% of total wages.
70
80
90
100
110
120
0
5
10
15
20
25
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Net C
reatio
n In
dex (%
) R
ate
s o
f Jo
b C
reati
on
an
d D
estr
ucti
on
(%
) NYS Private Sector Employment Dynamics
Net creation index (right scale)
Job creation index
Job destruction index
Source: NYS Department of Labor; DOB staff estimates.
0
5
10
15
20
25
1982Q1 1986Q1 1990Q1 1994Q1 1998Q1 2002Q1 2006Q1 2010Q1
Perc
en
t
Midtown Manhattan
Downtown Manhattan
Office Vacancy Rates
Source: Moody’s Analytics; CBRE.
The Indicators of New York State’s Tax Base
-15
-10
-5
0
5
10
15
20
1999 2001 2003 2005 2007 2009 2011 2013
Perc
ent
change
Personal Income NYSAGI PIT Liability
Forecast
Note: Personal income tax (PIT) liability is computed based on 2002 NY State tax law; 2010
liability and NYSAGI data are preliminary.
Source: NYS Department of Taxation and Finance; Moody's Economy.com; DOB staff estimates.
Forecast Risks
• The global economy is slowing
• Financial markets becoming increasingly volatile
• Labor market yet to provide momentum to the U.S. economy
• Households still deleveraging
• Housing market still weak with risk from foreclosures
• Energy prices on the rise again
• Fiscal policy uncertainty a negative for the economic outlook
II. Financial Plan Summary
State Operating Funds 2012-13 Executive Budget - $88.7 Billion
Taxes 73%
Misc Receipts/
Other 27%
Where it Comes From
Medicaid (All
Agencies)* 25%
School Aid 22%
Other Local
Assistance 24%
Agency Operations
22%
Debt Service
7%
Where it Goes
* Includes local assistance, state operations and fringe benefits.
All Funds 2012-13 Executive Budget - $132.5 Billion
Medicaid (All
Agencies)* 36%
School Aid 18%
Other Local
Assistance 24%
Agency Operations
12%
Capital 5%
Debt Service
5%
Where it Goes
* Includes local assistance, state operations and fringe benefits.
Taxes 49%
Misc Receipts/
Other 20%
Federal Grants
31%
Where it Comes From
2012-13 Executive Budget Overview
• Budget gap for 2012-13 was $3.5 billion – upper end of range in Mid-Year Update
• Tax reform reduced the budget gap by $1.5 billion, leaving $2.0 billion that must be closed by the Executive Budget
• Gap-closing plan of $2 billion consists entirely of proposals to control spending
• Total State Operating Funds (“SOF”) spending growth is held to 1.9%
– Local aid grows at 2.6%
– Agency operations decline by 0.4%
• School Aid and Medicaid grow at 4%, consistent with 2011-12 caps
• Budget leaves a 2013-14 gap of $715 million, equal to about 1.2% of projected General Fund receipts -- by comparison, the 2011-12 gap equaled about 18% of receipts
Budget Gaps: Before Gap-Closing Plan
$90.8
$94.3
$97.5
$100.7
$86.9 $87.3
$90.7
$92.5
$96.5
$85
$90
$95
$100
2012 2013 2014 2015 2016
State Operating Funds Spending
Available Resources
$3.6 Gap
4.5%
3.9%
3.4%
3.3%
$4.2 Gap
$5.0 Gap
$3.5 Gap
Dollars in billions.
Annual Growth Local Assistance Programs (SOF)
Before and After Executive Budget
BEFORE AFTER
LOCAL ASSISTANCE 3.9% 2.6%
SCHOOL AID (School Year Basis) 4% 4%
MEDICAID 4% 4%
SOCIAL SERVICES 7.3% 2.1%
MENTAL HYGIENE 7.7% -0.1%
HIGHER EDUCATION 3.3% 2.2%
Annual Growth (SOF) Executive Agencies
2012-13
Annual Change
STATE OPERATIONS (PS/NPS ONLY) -1.0%
CORRECTIONS -3.3%
ENVIRONMENTAL CONSERVATION -1.0%
HEALTH 1.3%
MENTAL HEALTH -0.2%
OPWDD -0.6%
Budget Gaps: After Gap-Closing Plan
$88.7
$92.6
$95.8
$99.4
$87.0
$91.9
$92.8
$95.7
$85
$90
$95
$100
2012 2013 2014 2015 2016
State Operating Funds Spending
Available Resources
$0.7 Gap
1.9%
4.4%
3.5%
3.8%
$3.7 Gap
$3.0 Gap
Dollars in billions.
Gap-Closing Plan for 2012-13 Dollars in Billions
Spending Control
57%
Tax Reform/
Job Growth
43%
TAX REFORM/JOB GROWTH: $1.5
Rate/Bracket Reform: +$1.9
MTA Payroll Tax: -$0.25
Tax Credits: -$0.045
Programs: -$0.1
SPENDING CONTROL: $2.0
Agency Operations: $1.1
Local Assistance: $0.8
Debt Management: $0.1
Agency Spending Controls 1.14
Agency/Independents 0.84
Enterprise/Consolidations 0.10
Health Insurance Rate Renewal 0.13
Fringe Benefits (New Proposals) 0.07
Local Assistance Spending Controls 0.76
Human Services COLA/Trends 0.15
Mental Hygiene 0.17
Social Services/Housing 0.14
Public Health 0.11
All Other Local Programs 0.19
Debt Management 0.14
Investments/New Initiatives (0.07)
Total Spending Controls 1.97
SPENDING CONTROL ($BIL)
SPENDING CONTROL -- $2B
Annual Spending Growth
1.9%
-0.2%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
State Operating Funds All Funds
State Operating Funds Growth = 1.9%
$ %
TOTAL STATE OPERATING FUNDS 87,048 88,734 1,686 1.9%
Local Assistance Grants 57,548 59,061 1,513 2.6%
School Aid (Fiscal Year) 19,677 20,002 325 1.7%
Medicaid (DOH) 15,280 15,859 579 3.8%
Transportation 4,257 4,398 141 3.3%
All Other 18,334 18,802 468 2.6%
State Operations/Fringe Benefits 23,623 23,519 (104) -0.4%
Personal Service 11,876 11,964 88 0.7%
Non-Personal Service/Other 5,211 5,167 (44) -0.8%
Pension Contribution 1,680 1,574 (106) -6.3%
Employee/Retiree Health 3,291 3,240 (51) -1.5%
Other Fringe Benefits 1,565 1,574 9 0.6%
Debt Service 5,872 6,149 277 4.7%
Capital Projects 5 5 0 0.0%
FY 2013
Proposed
Ann. Change
STATE OPERATING FUNDS TOTAL
(millions of dollars)F
Y
2
FY 2012
Current
1. School Aid increase if $805M (4%) on School Year Basis. 2. Medicaid excludes NPS costs (shown in State Operations) and includes administrative takeover savings.
Excluding these factors, Medicaid spending grows by 4% over 2011-12.
State Workforce
135,600 125,800 121,900 121,800
0
25,000
50,000
75,000
100,000
125,000
150,000 All Funds Total FTEs *
* Subject to Direct Executive Control
NY Works Fund
Source
State $1.3 billion $723 million new capital $600 million existing capital accelerated
Federal $1.7 billion Combination new and accelerated Federal aid (e.g. dam & municipal water systems)
Authority $5 billion $4 billion
New Tappan Zee Bridge Existing capital accelerated (e.g. NYSERDA & PA)
Private $3 billion Leveraging new private investment
TOTAL $15 billion
A Fundamental Change in New York’s Spending Habits
$95.0
$102.4
$108.1
$113.0
$118.1
$85.1 $87.0
$88.7
$92.6
$95.8
$99.4
$85
$95
$105
$115
2011 2012 2013 2014 2015 2016
One Year Ago
Today
$10.0
$0.0
$14.9
$3.5
Before After
2011-12 Budget
FY 2012 FY 2013
Declines in Two-Year Budget Gaps 2011-12 and 2012-13
$21.4 B 86%
Reduction
$3.5
$0.0
$3.6
$0.7
Before After
2012-13 Budget
FY 2013 FY 2014
$6.4 B 90%
Reduction
III. Reforms
Enterprise Shared Services 8 to 1 Return on Investment
$110 million in cost reductions in 2012-13
$ in Thousands Five Year Total
Required Investments: (134,757)
Savings:
Procurement 755,000
Real Estate 69,000
Business Services 115,000
Information Technology 160,000
Savings Subtotal
1,099,000
NET ANNUAL SAVINGS 964,243
Mergers and Consolidations
• Division of Lottery and Racing and Wagering Board
• Civil Service and the Governor’s Office of Employee Relations
• Department of Tax and Finance will assume the debt collection functions of HESC
• Department of Transportation will consolidate regional offices
• Management of Belleayre Ski Center will move from DEC to the Olympic Regional Development Authority
• Eliminate more than 25 boards and commissions that are no longer active
• Use flexible State Operations appropriation language to enable further consolidations
Single Contract Reform
Currently:
• 20 agencies use over 50 independent systems or databases to manage the grant contracting process
• 71 percent of new and renewal grant contracts with not-for-profits were approved after the start or renewal date
Executive Budget Recommendations:
• Develop standard Master Contract for Grants
• Develop single application to apply for grants
• Implement a Statewide Grants Management Portal to standardize grant application, contract, payment and reporting activities
• Implement rigorous vendor performance management process that holds vendors accountable against the Service Level Objectives
The existing grant application and contract process is overly complex, the payment system is cumbersome and causes delays and there is no
relation to outcome-based performance standards
Controlling Executive Compensation and Administrative Costs in Service Providers
• At least 85 percent of every public dollar will be spent on direct services, not administration
• Reimbursement for any executive’s compensation will be capped at $199,000
• Excess compensation will be a basis for rejection of a provider
One-third of the State budget goes to non-profit and for-profit agencies to provide services on behalf of the State
Local Medicaid Relief Saves Counties and NYC $1.2 billion over 5 years
($ in millions) 2012-13 2013-14 2014-15 2015-16
Local Cap
Growth 3% 2% 1% 0%
Local Benefit/
State Cost $0 $61.1 $187.0 $369.6
Executive Budget Recommendations:
• The State will take over growth in the local share or Medicaid expenses
• Phased takeover of the local government Medicaid administration expense
Pension Reform Save Public Employers $83 billion over 30 years
Plus $30 billion in savings over 30 years for NYC
• Increase salary contributions from 3 percent to 4, 5, or 6 percent based on salary
• Implement a risk/reward system which would tie contributions to economic conditions
• Raise the retirement age from 62 to 65
• Decrease the pension multiplier and exclude overtime for the formula to calculate final average salary
• Create a voluntary new defined contribution option
Pre-School Special Education Reforms State costs have doubled over the past ten-years
School districts make most programmatic decisions but do not share in costs
Pre-School Special Education reforms will save counties $20 million in the 2013 local fiscal year Executive Budget recommendations:
• Assign any county growth (excluding NYC) above the 2011-12 school year equally to the State, county and school district
• Current split is 59.5 percent State, 40.5 percent county
• Eliminate potential conflicts of interest in the current evaluation system
Pre-School Special Ed Growth
Early Intervention Reforms Significant fiscal and administrative relief
without impacting services
Early Intervention Reforms will save local governments $99 million over five years
Executive Budget recommendations:
• Expand insurance coverage to include EI service providers
• Centralize fiscal oversight through a fiscal intermediary
• Reduce local costs and improve timeliness of State reimbursement Insurance
3%
Medicaid (Federal)
27%
Medicaid (State)
22%
Local Share 22% Non-
Medicaid State Share 26%
Total Cost of Current System is $643 million
$805 Million School Aid Increase
$250 million for
Performance Grants
Additional aid for results in academic
gains and management
efficiency $265 million For
Reimbursable Costs
Reimburse expenses like
school construction and transportation
$290 million for
General Support
Targeted to high need school
districts
56%
69% 76%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Enrollment 2012-13 TotalSchool Aid
2012-13 AllocatedYear-to-Year
Increase
Allocated School Aid Increase is Targeted to High Need School Districts
2012-13 Executive Budget Governor Andrew M. Cuomo
January 17, 2012 Robert L Megna, Director of the Budget