Gov. Andrew Cuomo’s 2012-13 executive budget closes the $2 billion budget gap faced by the state without assessing new taxes or fees, and it even leaves room for more local aid to school districts.

Cuomo presented his budget proposal in an hour-long address Tuesday, Jan. 17. He said putting together this year’s budget was easy because much of the hard work was done in formulating the 2011-12 budget.

“The good work we did last year is paying dividends in many ways,” Cuomo said. “Last April, we reduced the deficit and we made real cuts. Late last year, we reformed the tax code so that we could avoid major problems when we sat down to do this year’s budget.”

In the 2011-12 budget, the state legislature agreed to certain “givens” that would remain steady in this year’s budget: SUNY and CUNY tuition would increase 2.2 percent; state spending would increase 2 percent; and spending on education and Medicare would increase 4 percent. Given those assumptions, the state was left this year with a $2 billion deficit.

In order to address the deficit, Cuomo and the state budget office turned to other state offices and asked them to keep their costs flat from last year to this year, though they were initially expecting a 4.5 percent increase. The state agencies – the Office of the Attorney General, Office of Court Administration and Office of the State Comptroller – agreed, saving the state about $1.3 billion. Next year, Cuomo said he will also look to tie in performance indices to the budgetary process, which will further limit money going to state agencies. In addition, when it came to the deficit, the governor’s budget reduced public assistance aid to localities from the projected 3.9 percent to 2.6 percent, saving an additional $756 million.

Cuomo’s proposal increases the state’s operating budget by 1.9 percent, bringing the total to $88.7 billion, an increase of $1.7 billion. State operating funds exclude federal funds and long-term capital spending. With those funds included, the state budget, according to Cuomo’s plan, is $132.5 billion for the fiscal year that begins April 1, 2012. The number actually represents a decrease of $225 million since 2011-12.

Economic development

One of the initiatives to come out of the budget proposal is the New York Works Fund and Task Force, an economic development team that aims to spur growth in the state. Public funds will be used to start development, but they’ll be used to encourage private investment. The initiative calls for $1.3 billion in taxpayer money to invite up to $25 billion in investment from other sources, including private companies, the federal government and authorities, to allow major projects to move forward that will create jobs and improve the state’s infrastructure.

Cuomo used the controversial Aqueduct Convention Center proposal in Queens as an example.

“The company owns it,” he said. “This is a reputable company that has all of their licenses and everything in order. This project is at their cost. They operate it. You’re talking about a potential for $4 billion in activity to the state with virtually zero in investment from the state, and we don’t put a shovel in the ground. I think that’s a prime example of entrepreneurial government.”

In particular, Cuomo’s proposal called for $1 million in state money to address chronic poverty in Buffalo, noting that it could spur as much as $5 million in private investment in the downtrodden city.

In addition, this portion of the budget would offer capital funding to communities through the New York Works program.

Mandate reform

Next, Cuomo addressed mandate reform.

“Mandate reform is something everybody wants to do in concept,” Cuomo said, “except nobody really wants to do it when they learn what it is.”

The two biggest issues in New York state in terms of mandate reform are Medicaid and pensions, because those are the costliest at both the local and the state level.

In terms of Medicaid, the state enacted a phased-in 3 percent cap in 2005 that went into effect in 2008; however, many counties complained that, since the tax cap is 2 percent, Medicaid still put a huge burden on their budgets. Therefore, starting with this budget, the state will phase in a program over the next three years to hold the counties harmless from any Medicaid increases. This year, the counties will still abide by the 3 percent cap, but by 2015-16, they will pay 0 percent, and the state will be responsible for that amount.

“We’re serious about mandate reform, and we’re going to do it,” Cuomo said.

To address pension reform, Cuomo’s budget creates a Tier 6, which allows employees to vest in it after one year instead of 10, is portable, features progressive contribution rates, shared risks/rewards to account for market volatility and seeks to end abuses to the system. Cuomo said it’s 50 percent cheaper to taxpayers than Tiers 3 and 4, and it won’t affect existing union employees, just those that haven’t yet been hired.

“We never said pensions were a lifetime legacy for future employees that haven’t been hired yet,” he said.

Education

The final piece of Cuomo’s executive budget dealt with what he called the “education crisis.”

“We’ve become more interested in the bureaucracy than the student,” he said. “We have to change our thought processes… It’s not about the adults; it’s supposed to be about the student.”

Cuomo’s budget proposed an additional $250 million for competitive grants to school districts, a program he created last year, bringing the total to $800 million. The program targets low-wealth, high-needs districts.

Cuomo was also highly critical of the fact that the state has not yet enacted a teacher evaluation system, noting that it was the promise of that system that netted New York $700 million in federal Race to the Top funds.

“We can’t lose that money,” he said. “We need that.”

He urged the New York State United Teachers and the State Education Department to find a common ground and enact an evaluation system. If they failed to do so within 30 days, Cuomo said the state legislature would set up a system for them. If the local school districts accepted the system by September of 2012, they would be eligible for incentive grants; if they failed to accept it by January of 2013, they would risk forfeiting an increase in education aid in 2013-14.

Cuomo said he was pleased with the budget he presented and the message it sent to all New Yorkers.

“This will lead us to a new New York,” he said.

The final budget must be approved by the state legislature by April 1.