State leaders have adopted a timely budget for fiscal year 2017, but may have sacrificed fiscal discipline for expediency. Given the lack of transparency in the process, it is unclear how the State is limiting State operating fund growth to 2 percent. In addition, a mushrooming capital budget outside this cap is used to fund a variety of ad-hoc initiatives that have been developed outside a meaningful planning process.

School aid, which is approximately one-quarter of the budget, will grow 6.5 percent; however, this growth will not be targeted to the highest need districts through foundation aid. Instead the gap elimination adjustment (GEA) will be restored completely. Medicaid, the second largest item in the budget, will grow 3.4 percent. And, tax cuts planned to begin 2018 will further increase out-year budget gaps.

The Adopted budget rightly rejects imprudent proposals to shift Medicaid and CUNY costs to New York City; provide tax credits for private school donations and tolls on the Thruway; and alter the process for allocating private activity bonds.  However, important and necessary reforms were also left out, including reauthorization of a rational tuition policy for SUNY and CUNY, freezing the poorly targeted School Tax Relief (STAR) program, and reforming retiree health benefits in a responsible and sustainable manner. 

Capital spending will grow to include questionable initiatives such as $1.3 billion in subsidies for nanotechnology and high-tech manufacturing, $1 billion for the Jacob Javits Center expansion, $300 million for a research corridor on Long Island, and accelerated support for the Second Avenue Subway. The long-term debt implications of these initiatives are not addressed in the budget legislation.

Further analysis of the budget legislation will reveal some of the answers, but the broader impact on the State’s financial outlook will not be known until the Division of the Budget releases the Enacted Budget Report.