By Robert Ward, Deputy Director, Nelson A. Rockefeller Institute of Government
Change often takes time. For funders interested in public policy, an object lesson is unfolding right now in New York State.
Let’s go back to July 2009. New York Governor David Paterson was struggling—like leaders in almost all the states—to deal with deep budget shortfalls brought on by the Great Recession. But fiscal crisis was nothing new to New York, where volatile revenues and a longstanding commitment to high levels of spending on education, healthcare, and other services have produced recurring budget gaps in recent decades. Governor Paterson asked Richard Ravitch—a veteran public servant whose accomplishments included rebuilding the MTA a generation earlier—to serve as Lieutenant Governor and to develop solutions that would not only solve the immediate crisis, but prevent new fiscal emergencies in years to come. The Rockefeller Institute of Government provided research and analytical support in partnership with several New York-based sponsors, including the Bodman Foundation, the IBM International Foundation, The New York Community Trust, the Charles H. Revson Foundation, and the Rockefeller Foundation.
Lieutenant Governor Ravitch delivered a series of reports to Governor Paterson throughout 2010. These detailed the budgetary problem not only in dollars, but in terms of an increasing threat to public services. While rapid growth in revenues during economic expansion allowed the state to spend more, such additional resources often became the equivalent of a sugar high—dissipating when normal conditions resumed, so that damaging cuts in services were the almost inevitable result. As in New York City during the 1970s fiscal crisis, Ravitch wrote, “The status quo means erosion of the vital services upon which New Yorkers depend.” He expressed particular concern about higher education and transportation infrastructure, both essential to the future of the state’s economy as well as quality of life. His proposed solutions to the problem of structural budget gaps included requiring that current costs be reflected in current budgets, expanding the governor’s authority to enforce fiscal discipline when the Legislature refused to do so, and reforming spending in high-cost areas, including Medicaid and employee health benefits.
Both the state Senate and Assembly quickly introduced budget reform legislation that included key elements of the Ravitch plan. Legislators, independent fiscal monitors, and editorial writers unanimously agreed that the Lieutenant Governor had assessed the problem accurately. But Governor Paterson—perhaps preoccupied with other issues and nearing the end of his term—did not push for approval. The state budget enacted in 2010 closed a projected $9 billion deficit but left a gap nearly as large for the following year and used nearly $1 billion from reserve funds, indicating a structural problem left unsolved.
Did the Ravitch plan have an impact? Not immediately, at least not on official policy. But his clearheaded analysis did drive a major change in Albany’s conventional wisdom. Before, it was generally understood and accepted that the state’s elected leaders sometimes let things drift—and that periodically the resulting budget crises would require painful spending cuts, undesired tax increases, and shifting of costs to future generations. Lieutenant Governor Ravitch forced policymakers and attentive voters to conclude that we shouldn’t just shrug our shoulders about this; that bad budgeting has real consequences for real people; and that institutional reforms can force us to improve public policy on a sustainable basis.
A new Governor, Andrew Cuomo, took office in January 2011. His first budget proposal was entirely directed at achieving the central goal Ravitch had championed—enactment of a budget that is structurally balanced without gimmicks. The financial plan enacted in March 2011 included new provisions to assure balance through the fiscal year—thus eliminating the need for mid-year cuts such as those that had taken place during each of the two preceding years. It wiped out most of the state’s structural deficit in the years to come. That means policymakers do not have to start each budget cycle arguing over big reductions in spending or equally large revenue increases. The Health Department reports monthly on how Medicaid expenditures are tracking projections; this can be seen as a big first step toward Ravitch’s proposal for ongoing monitoring of overall budget balance. The budget enacted a year ago committed to 4 percent increases in school aid and Medicaid for 2012-13, and those increases will almost certainly go forward because the state is no longer in crisis mode.
Governor Cuomo is achieving his own budgetary goals with some specific steps Ravitch had recommended, and some that are original to the new administration. It’s impossible to know how the budgetary landscape would differ today if Lieutenant Governor Ravitch had not educated people about the need for, and possibility of, major budget reform. But clearly, he drove the ball far down the field for the team that came in after him and Governor Paterson. The bottom line: New York State has begun to budget its resources more responsibly; resources for essential services are more dependable; and policymakers actually have time to think about spending dollars more effectively in areas ranging from juvenile justice to the business operations of state agencies.
Meanwhile, another set of budget crises is unfolding in cities and counties across New York State. Syracuse Mayor Stephanie Miner has appointed Ravitch as chair of a fiscal advisory group that will help guide her city through its own very troubled waters. The connection between better budgeting and preservation of essential services is especially clear in local governments and schools. The Lieutenant Governor’s work in Albany is not only helping to drive reforms at the state level, but providing valuable lessons for elected leaders in hard-pressed municipalities as well.
Robert B. Ward has served as Deputy Director of the Rockefeller Institute since April 2007. The reports issued by Lieutenant Governor Ravitch in 2010 are available via the Institute’s website. The Institute continues to work with former Lieutenant Governor Ravitch, who has created a national Task Force on the State Budget Crisis to examine critical fiscal challenges facing all 50 states.