Reform in New York: the budget, the legislature, and the governance process.

• Author: Benjamin, Gerald

1. INTRODUCTION

   New York once prided itself as being a leader in governance among the states. Now mediocrity is the norm. One fifty-state study is particularly revealing. In 2001, Governing magazine, in collaboration with the Maxwell School of Syracuse University, graded the states in five key areas of government performance: Financial Management, Capital Management, Human Resources, Managing for Results, and Information Technology. New York received a "C+" average, and no grade higher than a "B." (1)

   Those who prefer to think of the glass as half full might be encouraged by the improvement over the state's "C-" average reported two years earlier. (2) But New York's improved Governing Grade Point Average, "GPA", was helped by a higher grade in Financial Management. (3) Knowing this, it would be understandable if those attentive to New York's fiscal practices and condition concluded that the state's movement from C- to C+ was evidence not of progress, but of grade inflation.

   New York's fiscal practices have been regularly criticized by the Citizens Budget Commission and others. Recurring state revenues do not cover recurring expenses. State budgets are "balanced" by extensive use of one shots, borrowing, movement of programs and activities off budget, and displacement of costs onto localities. This latter practice, along with a failure to address the state's complex overlapping arrangements for local governance, has resulted in one of the highest average per capita local property tax burdens in the nation. (4) In reaction to both the process and results of budgeting in New York, national rating agencies again downgraded state bonds in the summer of 2003. (5) New York's are now among the lowest rated in the nation. (6)

   More than any other single factor, the consistent lateness of the state budget has become a metaphor for the dysfunction in New York State government. The regularity of late adoption of the state budget in Albany--twenty years in a row--is annually grist for editorialists' mills and has become a leading symbol of state governmental nonperformance.

   The 2001-02 and 2002-03 fiscal years were, some said, the worst for the American states since World War II ("WWII"). Virtually all states experienced serious revenue shortfalls. The resultant fiscal stress engendered a number of late state budgets. But in almost all the states--unlike in New York--budget deadlock has not been the norm. In a recent paper, Dall Forsythe and Donald Boyd indicated that only California has, in recent years, had late budgets with a frequency similar to that of New York. (7) But California is constrained in budgeting by the results of statewide initiatives that significantly limit legislative discretion by mandating spending and limiting taxation. (8) There is no initiative process in New York that has produced tax limits and spending requirements. Moreover, while New York limits state government discretion in borrowing--through a constitutional referendum requirement authorizing general obligation borrowing--the legislature and governor have found numerous ways around it.

   New York budgets were regularly adopted far in advance of the beginning of the state fiscal year until the mid-1960s--though more time was required during the Harriman administration (1955-58), when partisan control of the government was divided, than in years of Republican control of the governorship and both legislative houses. (9) The first late budget in the post-WWII era came in 1965, during the Nelson Rockefeller governorship, after reapportionment and the Johnson landslide in the presidential election gave control of the legislature to the Democrats. (10) Budgets became consistently late following the mid-1970's fiscal crisis. (11) The average time between the opening of the fiscal year and adoption of the budget has lengthened, and indeed has come to exceed that in California, (12) as techniques have been developed in New York to allow the State to operate for months without a budget in place. (13)

   At about the same time that budget lateness was becoming the norm, successful legislative overrides of gubernatorial item vetoes emerged as another sign of stress in New York's budget process. The governor was given the item veto in New York in 1874 as a check against legislative depredations on the public purse. (14) The gubernatorial veto was regularly used and rarely overridden--in 104 years, from 1872 to 1976, neither the veto nor the item veto were overridden. (15) This record ended when the legislature overrode Governor Hugh Carey's veto of the Stavisky-Goodman bill, an effort to protect school funding from cuts during the mid-1970's fiscal crisis, later found unconstitutional. (16) In 1980, and extraordinarily frequently in 1982, Governor Hugh Carey had item vetoes overridden. (17) Governor Mario Cuomo took a more accommodating posture with the state legislature, and thereby avoided veto overrides. (18) Of course, the overrides of Governor George Pataki's item vetoes were a major story in the 2003 legislative session. (19)

   Frustrations with the performance of the peak political institutions of state government in New York are not limited to the fiscal arena. For example, observers again remarked upon the dearth of legislative productivity in the 2003 legislative session. The failure to bring to closure the multi-year effort to reform or repeal the draconian Rockefeller-era drug laws offers a particularly visible example. Governor Pataki, Speaker Silver, and Majority Leader Bruno all said they were committed to this goal, but agreement was again not reached, the comic-opera intervention of hip-hop impresario Russell Simmons notwithstanding. (20)

   States commonly experience the use of litigation to compel action when their legislatures fail to deal with particularly thorny--often redistributive--issues. This has been the case across the country for elementary and secondary education finance reform, an area in which New York too must now act because of a decision of its high court. (21) But in New York, the persistence of inaction across a range of issues has been a long-time critical theme. In its final report issued almost a decade ago, the New York State Constitutional Revision Commission wrote:

   We are on the edge of a dangerous cycle, in New York and in the nation as a whole. Problems worsen and pressure for their resolution intensifies. The machinery of government responds ineffectively. The public reacts with anger. Some politicians respond to this mood by attacking and dismantling government. As a consequence, government's effectiveness diminishes further. Unaddressed problems fester and grow more acute. The fabric of trust, accountability, and cooperation unravels. (22) The findings of a recent Cornell University survey, which found that 68% of New Yorkers had little or no trust and confidence in state government, indicate that this fear may not be misplaced. (23) Of the seven groups or institutions mentioned in the survey, respondents' trust in state government was at about the same level as that in the media, and exceeded only that for large corporations. (24) Turnout rates for New York state elections, which are among the lowest in the nation, provide additional evidence that New Yorkers are detached from state government. (25)

   New York's persistent fiscal difficulties have led to calls for reform. One set of proposals focuses directly upon the state's budgetary processes. One idea is to shift the beginning of the fiscal year to July 1--the practice in forty-six states--in order to allow the legislature more time to consider the executive budget proposal. This would also provide the legislature with better information about actual income tax collections, due April 15. (26) A second idea is to establish an authoritative--and perhaps politically disinterested--consensus process for revenue estimating. (27) A third idea calls for a staged, more inclusive process for legislator participation in budgetary decision-making, including the use of conference committees to resolve inter-house differences. (28)

   Another approach to reform, which is the one taken here, treats the budget process--the authoritative acquisition and allocation of scarce resources--as the state's core political activity. It begins from an understanding that, major executive/legislative conflict notwithstanding, the state budget process worked reasonably well from its inception in 1929 until about a quarter of a century ago. It assumes that manifestations of stress in the budget process are indications of underlying institutional change. It thus seeks explanations for persistent deadlock in budgeting in the differences between the political and structural assumptions that underlay the budget process as enshrined in the state constitution in 1929 and the contemporary workings of the state's political and governmental systems. It concludes that reform of the budget process is needed, but insufficient to achieve fiscally responsible, responsive governance in New York State.

   In order to understand this approach, it is necessary to assess how and why the operation of New York's peak political institutions changed just before and during the time that delays in budgeting became the norm. I begin by establishing that the triadic constitutional structure of New York State government, like the government of the nation and most other states, has inherent tensions that must be overcome. I argue that the professionalizaton of the legislature, accompanied by uniquely persistent divided partisan control of the two legislative houses, makes it harder to overcome these fundamental structural tensions. I look at the techniques and processes that have been used to overcome these tensions: strong legislative leadership; partisan organization; external power, pressure and/or deadlines; and sanctions for nonperformance. I argue that the political conditions that have evolved in New...