New York Proceeds With $1.6 Billion Deficit Reduction Plan

Governor Calls on Legislature to Enact Remaining Portion of Deficit Reduction Plan and Join His Efforts to Lower Spending to More Affordable Levels.

Governor David A. Paterson today announced that his administration is moving forward to implement $1.6 billion in savings to help close the State’s current-year deficit. Most of these measures can be achieved administratively while additional measures were previously statutorily authorized by the Legislature prior to the release of his Deficit Reduction Plan (DRP).

Governor Paterson also announced that he is submitting an updated version of his Deficit Reduction Plan to the Legislature on Monday.

“I first presented my Deficit Reduction Plan on October 15, and since that time the Legislature has refused to take necessary action to maintain our State’s fiscal stability,” Governor Paterson said. “As I said directly to New Yorkers last week, if legislators won’t face up to their responsibility and join me in making the tough decisions – I’ll do it myself. I will continue to fight every single day to keep New York State afloat in the midst of this historic economic crisis – with or without the help of the Legislature.”

If legislators do not wish to enact specific spending reductions, Governor Paterson has proposed an alternative Executive Authority Option for their consideration. The Executive Authority Option would give the Executive Branch the one-time authority to administratively direct the reduction of 2009-10 fiscal year payments and close the current-year budget gap.

“I know certain legislators fear the political consequences if they vote to approve my plan to save New York State’s finances. So I am doing everything within my current authority to reduce the fiscal burden these legislators must deal with,” Governor Paterson said.

The specific $1.6 billion in savings measures Governor Paterson is moving forward to implement – nearly all of which were included in his original Deficit Reduction Plan – include the following:

Agency Reductions ($500 million) – Governor Paterson ordered an 11 percent reduction in each State agency’s non-personnel services budget. All of these cuts, except for those to the City University of New York ($53 million), can be achieved without legislative approval.

Medicaid Fraud Targets ($150 million) – Governor Paterson will set more aggressive Medicaid Fraud recovery targets for the Office of Medicaid Inspector General (OMIG), which is an Executive Branch agency.

Debt Management ($100 million) – The State will realize savings compared to its debt service estimates from refundings, the use of Build America Bonds (“BABs”), and relatively low interest rates on its variable rate bonds. The State’s overall debt management policies are overseen by the Division of the Budget, which is an Executive Branch agency.

18-A Assessment Reestimate ($45 million) – Reflects an upward reestimate of the amount of revenue that will be collected from the increased 18-A utility assessment enacted in the 2009-10 budget.

Workers Compensation Surplus Recapture ($49 million) – Certain insurers have indicated their intention to remit excess funds under legislation enacted as part the 2009-10 budget.

Other Administrative Actions ($300 million) – An additional $300 million in administrative savings will be achieved through a number of potential actions, including reflecting a reduction of Medicaid and EPIC pharmacy reimbursement rates pursuant to the terms of the First Data Bank litigation settlement; further controls on specific agency activities; delaying scheduled HEAL NY spending in the current year, using funds currently earmarked for debt management purposes; reflecting a reestimate of health care costs, and other initiatives.

VLT Franchise Payment ($200 million) – The DRP assumes that the winning Aqueduct Video Lottery Terminal bidder will make a franchise payment of at least $200 million in the 2009-10 fiscal year. Statutory authorization for the operation of video lottery terminals at Aqueduct was previously enacted by the Legislature.

Battery Park City Authority (Up to $250 million) – In April, the 2009-10 Enacted Budget authorized a transfer of up to $250 million from the Battery Park City Authority to the State’s General Fund. Reducing the size of the General Fund transfer to $200 million and providing $100 million for New York City affordable housing efforts is currently under consideration. The Enacted Budget, however, provides the Executive Branch authorization to transfer up to $250 million.

Topics: budget, deficit reduction plan, DRP, Economy, Executive Authority Option, fiscal stability, Governance, legislature, New York, recession, revenue, U.S., United States

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