Cuomo calls New York budget process a “sham”

February 1, 2011

By Joan Gralla

(Reuters) – New York Governor Andrew Cuomo called the state’s budget process a “sham” that leads to runaway spending, saying it resembles some of the deceptive practices he uncovered on Wall Street.

The governor criticized rules that automatically increase spending for expensive items such as education and the healthcare entitlement Medicaid, saying reasonable limits could eliminate most of the state’s $10 billion deficit on a $136 billion budget.

His comments came in an op-ed column to be published in some newspapers on Tuesday, the same day he was due to issue his first budget plan. This is expected to lay off thousands of state workers and slash Medicaid — the state-federal health plan for the poor, disabled and elderly — and education aid.

His press office made the text available to reporters.

“I was shocked to learn that the state’s budget process is a sham that mirrors the deceptive practices I fought to change in the private sector,” said Cuomo, referring to Wall Street abuses he challenged in his previous job as attorney general.

The Democrat called for replacing the education and Medicaid formulas that automatically trigger spending increases, which work out to 13 percent this coming year.

“Who is responsible for setting the growth in the state’s budget? The answer is shockingly, no one,” said Cuomo, who nonetheless blamed “special interests” and lobbyists.

If education and Medicaid rose only at the rate of inflation, there would be only a $1 billion deficit, he wrote.

But James Parrott of the Fiscal Policy Institute think tank faulted Cuomo for sounding surprised at the automatic spending increases because his predecessor David Paterson revealed them on November 1.

“This is bordering on the bizarre,” Parrott said.

Cuomo, a Democrat, has promised to balance the budget with spending cuts alone and ruled out tax increases, and will allow a temporary income tax surcharge for millionaires to expire.

New York City Mayor Michael Bloomberg has said cuts to New York City’s education could force him to lay off 15,000 teachers and damage the city’s public hospitals.

Cuomo’s budget-balancing promises face considerable skepticism in the $2.8 trillion municipal market, which faces risk from alarming budget shortfalls in states and cities across the country.

“I’d like to see it,” said Gary Pollack, managing director with Deutsche Bank Private Wealth Management.

Cuomo proposed “objective, fair criteria such as the rate of inflation, enrollment, the Consumer Price Index, or personal income growth” to determine more modest spending increases, saying only programs that prove their effectiveness should be funded.

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