Ever Upwards:
Real Spending Growth Under Pataki and Cuomo
FISCALWATCH MEMO January 22, 2002
“Restraining overall spending” is among the accomplishments highlighted several times in the voluminous documents that make up Governor George Pataki’s 2002-03 Executive Budget.
Of course, “restraint” is a relative concept—especially in a state with New York’s taxing and spending traditions. If you want to assess how Pataki really compares to his predecessor in this regard, the answer will depend on how you count.
On the surface, it’s no contest: the state funds [1] budget rose by a whopping 123 percent in Mario Cuomo’s three terms as Governor, compared to 36 percent in Pataki’s first seven years.
But these nominal numbers include no adjustment for the annual inflation rate, which averaged 4.3 percent under Cuomo and just 2.4 percent under Pataki. When spending is converted into constant dollars and distributed into four-year gubernatorial terms over the past two decades, a somewhat different picture emerges.
State Spending Increase by Gubernatorial Term*
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As shown above, nearly three quarters of the real spending increase under Cuomo was packed into his profligate first term (i.e., from state fiscal year 1982-83 through 1986-87). Otherwise, measuring the state funds budget in constant dollars:
- the rate of spending growth in Pataki’s first term was roughly equal to the rate of growth in Cuomo’s third term; and
- spending in Cuomo’s second term increased at only half the projected rate of increase for the first three years of Pataki’s second term;
or, to look at it yet another way,
- spending during Pataki’s first seven fiscal years in office has risen almost twice as fast as it did in Cuomo’s last eight years—and this will remain true even if the Legislature adds no spending to Pataki’s no-growth proposal for 2002-03.[2]
The trends are further detailed in the chart of real spending on an annual basis, which shows that the state funds budget peaked at the end of Cuomo’s second term and resumed its steady rise in Pataki’s second term.
New York State Spending, Fiscal Years 1983-2003*
Source note for chart: Spending for fiscal 2002-03 is from proposed Executive Budget. The assumed inflation rate for 2002 is based on the Division of the Budget’s forecast “composite CPI of New York.” All other years is as reported by the U.S. Labor Department for consumers in the NY-NJ-CT-PA region.
Of course, these spending totals tell only part of the story.
For example, the increase in Cuomo’s last term would have been slightly higher if his last budget had not been cut by Pataki, who took office in the final quarter of the 1994-95 fiscal year. [3]
Moreover, state budgets enacted under Cuomo were rife with fiscal abuses, including a heavy reliance on non-recurring “one-shot” revenues and the sale of state assets to public authorities. Pataki, by contrast, eliminated or minimized such practices (prior to this year, at any rate).
Cuomo’s budgets also featured a massive expansion of state debt, which has continued to increase (but at a slower rate) under Pataki. Most significantly, Cuomo responded to New York’s last recession by raising taxes, making a bad situation much worse. Pataki—so far—has pledged to hold the line on taxes and to move forward with scheduled tax cuts in the face of the state’s current economic downturn.
Austerity was forced on Cuomo by economic circumstances during his last two terms, while Pataki reduced real spending in order to finance tax cuts during his first few years in office. During economic boom times, Cuomo spent nearly every nickel of new revenue generated by economic growth, while Pataki used a portion of the money to continue paying for tax cuts and to build up reserves (which, in Cuomo’s time, were non-existent).
The bottom line of the inflation-adjusted analysis is this: Real state spending in New York has risen 54 percent over the past two decades. About one-third of the total dollar increase occurred under Pataki.
As for “restraint,” there are some red flags on the horizon. Although the proposed 2002-03 budget represents a slight decrease in real terms, it also projects that state funds spending will rise in fiscal 2003-04 and 2004-05 by a total of 10 percent—more than twice the projected inflation rate for that period.
- The New York State budget reports spending in three ways. The “all funds” total includes federal aid. The “general fund” consists solely of state taxes and fees whose use is not restricted to any purposes or category of spending. But over the past 20 years, the general fund has shrunk from nearly two-thirds to less than half the total budget. For comparative purposes, the best current available measure of spending is the “state funds” total, which includes all appropriations supported by state taxes and fees.
- In 2001 constant dollars, state funds spending increased by about $3.6 billion, or 8 percent, in Cuomo’s last two terms, and by $7.3 billion, or 15 percent, in Pataki’s first seven years. The 2002-03 Executive Budget would increase state funds spending by 1.6 percent, which would be below the projected 2.4 percent “composite CPI of New York” for 2002.
- Spending in 1994-95 ended up $300 million to $500 million lower than Cuomo had projected in his final mid-year forecast—equivalent, at most, to just over 1 percent of the total state funds budget.
POSTED: JANUARY 22, 2002