In 1975, at the height of the fiscal crisis, the state set up an independent Financial Control Board to oversee New York City’s finances and ensure that its yearly budgets met Generally Accepted Accounting Principles. If that was good enough to save the city then, it’s good enough for the state now. Indeed, it’s critical to Gov. Cuomo’s plans to redesign our state’s government.
GAAP accounting is nearly universal in the private sector, but most governments are held to looser standards. Its rules prohibit “cash budgeting” tricks — like rolling this year’s expenses into next year’s budget and using next year’s cash to pay this year’s bills — and so forced the city to adopt a fiscally responsible approach and put it on solid financial ground.
Last week, the governor made headlines by exposing that what special interests decry as “cuts” are really just attempts to slow down the automatic increases that fuel runaway growth in our state’s budget. As he pointed out, spending has gone up more than 5.7 percent a year over the last decade — far faster than the growth in tax receipts, personal income or inflation. These automatic increases and accounting gimmicks have put New York deep in the red.
Meanwhile, as Cuomo noted, even as our state government spends too much, it produces too little for the people. You’d laugh at a business that constantly demanded you pay more for its product while giving you less of it. Our state spending is just as absurd: We spend the most on education but we rank 34th in results; we’re No. 1 in health-care spending but 21st in health outcomes.
The governor has proposed important reforms to slow down spending, including a new Medicaid formula based on the Medical Consumer Price Index, incentive-based funding to improve school performance and a plan to work with unions to bring down state workforce costs. I support these ideas, and I hope my colleagues in the Assembly will support them as well.
But unless we fundamentally change the way our state’s budget is prepared, there will be no strong incentive to ensure that these and other innovative ideas survive past this budget cycle. GAAP must be the spine we build our future budgets around.
By creating a Financial Review Board to ensure that the state budget meets GAAP standards, we can force the state to embrace the kind of transformative ideas that will prevent deficits and make government work better for all New Yorkers. We need to build a budget that functions not only in times of prosperity, but also ensures that services aren’t devastated in future recessions.
This current budget cycle is the time to start the conversation about this badly needed reform, and I hope the governor will lead the way. We in the Assembly should work with him.
Republicans like to say that government is the problem, not the solution. As Democrats, we have a responsibility to show that government really can work for the people. Ensuring that we adhere to GAAP principles will make our budget better, stronger and more efficient — and renew New Yorkers’ faith in their government.
Micah Z. Kellner represents the Upper East Side, Yorkville and Roosevelt Island in the state Assembly.