New York State Assembly
     Albany, New York

    Legislative Commission on
    Government Administration

 Sheldon Silver, Speaker
 Marty Luster, Chair

Public Authorities Control Board
(Chapter 38, Laws of 1976)

In response to the fiscal crisis of the mid-1970s involving the Urban Development Corporation (a public authority with state-backed “moral obligation” debt), the legislature created the Public Authorities Control Board (PACB).

The PACB is empowered to receive applications for debt issuance from ten public authorities. Its determination that the applicant authority has sufficient funds to service and repay new debt in addition to its outstanding debt is required before new debt issuance can proceed. There are three voting members of the board--a representative of the respective majorities in each house of the legislature and, as chair, the director of the division of the budget. The minorities in each house are also represented on the board. Board decisions require unanimous approval of the voting members. The goal of the PACB Act was to ensure more responsible financial practices by providing joint executive and legislative oversight of certain authorities.

The Accounting, Financial Reporting & Budget Accountability Act
(Chapter 405, Laws of 1981)

In 1981, the legislature enacted the Accounting, Financial Reporting and Budget Accountability Act, probably the single most important fiscal reform since adoption of executive budgeting fifty years earlier. The purpose of the Act was to provide a fuller picture of state finances through improved reporting to the public and the legislature. It accomplished this goal in three ways by:

 modernizing New York’s financial reporting practices;

 requiring the presentation of the state financial plan according to generally accepted accounting principles (GAAP) as well as the traditional cash basis; and

 codifying a decision by New York’s highest court affirming the legislature’s constitutional authority to appropriate all funds, most notably federal funds, before their disbursement from the state treasury.

GAAP is a set of uniform minimum standards and guidelines for financial accounting and reporting as promulgated by, and from time to time revised by, authoritative national bodies. The modified accrual basis of accounting adopted for the state by the Act recognizes the following:

 revenues as increases in net financial resources when they become measurable, regardless of when cash is received; and

 expenditures are recognized when a liability to pay for goods or services is incurred, regardless of when it is actually paid. In contrast, the cash basis of accounting (the state's traditional method) recognizes transactions only when cash changes hands and does not report such items as accounts receivable, accounts payable or other accruals. Financial reporting according to GAAP, in conjunction with the cash basis of accounting, presents a more complete picture of the state's resources and obligations.

The Act also required an audit of the state's annual financial statements conducted by an independent certified public accountant. An audit committee composed of the chairs and ranking minority members of the legislative fiscal committees was created by the Act to implement and monitor this requirement.

Capital Planning, Budgeting & Reporting Act
(Chapter 837, Laws of 1983)

The 1983 capital budgeting law required the governor to submit one-year and five-year capital plans to the chairs of the legislative fiscal committees within 30 days after submission of the Executive Budget. The Act also required the governor to submit a detailed schedule, by state agency and for each state agency by fund, of all capital projects for the ensuing five years. The Act linked the new five-year plan to the annual capital projects budget bill by prohibiting the governor from asking for appropriations for projects not included in the plan.

The overall connection between capital planning and budgeting was strengthened by the Act and provided greater accountability on capital projects to the public and the legislature.

State Installment Purchases--Certificates of Participation
(Chapter 583, Laws of 1986)

The Financed Equipment Acquisitions Act
(Chapter 577, Laws of 1988)

Certificates of Participation (COPs) are a type of lease-purchase funding mechanism used by state agencies and departments for the acquisition of equipment. COPs were specifically authorized and regulated for the first time by Chapter 583 of the Laws of 1986. Prior to this act COPs were issued without specific statutory authorization or limitation.

In 1988, the Financed Equipment Acquisitions Act made major modifications to the COPs program. In particular, it strengthened reporting requirements imposed on the Division of the Budget and the Office of the State Comptroller. The Act further restricted the executive from unilaterally reallocating appropriation authority granted by the legislature for the outright purchase of equipment to another purpose (including, in particular, substituting COPs issuance for the acquisition of the same equipment) without prior legislative approval.

The goals of these two Acts were to establish more responsible financial practices by the state and improve legislative oversight.

The Government Accountability, Audit & Internal Control Act
(Chapter 814, Laws of 1987)

The New York State Governmental Accountability, Audit and Internal Control Act of 1987 instituted a system of internal controls over such state resources as cash, investments, facilities, inventories, supplies, equipment, and personal and contractual services. Enacting a system of internal controls was intended to further good financial practices in the state.

Tax Expenditure Reporting
(Chapter 23, Laws of 1990)

The tax expenditure reporting law requires the governor’s budget division to annually submit a report to the legislature detailing the state’s tax expenditures. Tax expenditures are credits, deductions or other statutory devices which, to achieve a public policy purpose, reduce the amount of a personal or corporate taxpayer’s liability. The report is intended to improve disclosure of state fiscal practices and assist tax policy planning. As a result of this report, and annual legislative hearings on its findings, state spending through the tax system is beginning to receive the same scrutiny as budgetary spending.

Local Government Assistance Corporation
(Chapter 220, Laws of 1990)

In 1989, the Ways and Means Committee published Fiscal Change, Financial Sense: Budgetary and Financial Reform in New York State, a comprehensive report proposing to manage New York’s growing accumulated deficit and eliminate the state’s annual multi-billion dollar cash flow spring borrowing through long-term debt issuance. The annual spring borrowing, begun under Governor Nelson Rockefeller, was necessary because the state’s disbursements in the first quarter of its fiscal year were far greater than its receipts. The principle technical reason for this cash flow imbalance was the state’s commitment to make huge school aid payments in the beginning of its fiscal year before the state treasury has received sufficient receipts to do so without temporary borrowing. A gap between the March 31 end of the state fiscal year and the June 30 end of most school district fiscal years provided state officials with the opportunity to make increased school aid promises in one state fiscal year that would not have to be paid until the next. This practice caused an annual structural cash flow imbalance, contributed to the state’s accumulated deficit, and cost millions in unnecessary additional interest payments.

Addressing the Assembly’s reform proposals, the Local Government Assistance Corporation (LGAC) was created the next year as the instrument to responsibly phase out the state’s spring borrowing dependency. LGAC was charged with systematically issuing long-term bonds over a period of years to replace the annual Tax and Revenue Anticipation Note sale. Twenty-five percent of the state’s total sales and use tax receipts are dedicated to the amortization of the LGAC bonds. As a result of this law, the state has successfully ended its 25-year annual practice of spring borrowing.

“Quick Start” Budget Reform
(Chapter 762, Laws of 1992)

The “Quick Start” Budget Reform Act of 1992 made several changes in the state’s budget adoption process to facilitate enactment of a timely budget. New York’s legislature must review the Executive Budget proposal within one of the shortest consideration periods of any major state—10 weeks. This extremely short legislative deliberation period was effectively reduced even further by the governor’s practice of waiting to submit a constitutionally-required balanced budget implementing legislation as long as thirty days after the main budget spending bills were introduced. Chapter 762 was designed to help the governor and legislature reach a budget agreement within New York’s ten-week review period by stipulating that:

 “Quick Start” review be commenced by November 15. The review would include meetings to analyze the state’s economic outlook, spending projections, the impact of state and federal statutes, and other pertinent issues;

 the governor submit all bills necessary to implement a balanced budget financial plan simultaneously with the Executive Budget.

 the budget director submit detailed information in the Executive Budget and in separate submissions supporting the estimates included in the proposed financial plan; and

 the legislature issue a schedule for its budget deliberations and a report on changes it subsequently makes to the governor’s proposed appropriations.

These actions aim to redistribute the budget process workload over more time and to overcome obstacles to adopting the budget by the beginning of the fiscal year.

Capital Maintenance
(Chapter 836, Laws of 1992)

Historically, there has been no systematic or comprehensive reporting of state capital maintenance requirements in New York. This Act specifically addresses the need to maintain the state’s capital assets by requiring additional reporting and planning, including:

 agency submission of a five-year scheduled maintenance plan for capital assets and the useful life of each capital project to the governor and the chairs of the legislative fiscal committees;

 an independent evaluation of the agency maintenance plans to be conducted every five years;

 separate and distinct appropriations for scheduled maintenance in the multiple appropriation bills submitted by the governor; and

 a report by the state comptroller describing enhancements, costs and capabilities necessary to the reporting of actual scheduled maintenance disbursements of state agencies; additional sections set out specific requirements for the Department of Transportation, a state agency with big capital maintenance needs.

The Act also requires the Division of the Budget to plan implementation of a statewide system of scheduled maintenance of capital assets.

In 1994, the legislature also enacted a landmark capital planning law designed to complement the new constitutional debt limit amendment. It will be triggered into effect if the 1995 legislature approves second passage of the constitutional debt amendment, and the amendment is approved by the voters.

The capital plan will serve to further strengthen the link between debt and capital planning by providing more information on the state's long-term capital planning and project spending needs. It will give the legislature a more accurate account of anticipated spending and thus allow for priorities to be set among capital projects. Adoption of the constitutional amendment and related capital planning legislation will further the goals of bringing the state in line with sound practices of debt management, advancing the capital planning process, and improving the legislature's capacity to oversee debt and capital projects.

Debt Reform Concurrent Resolution
(Constitutional Amendment, 1994-95) (A.11860/S.8596)

Capital Planning
(Chapter 204, Laws of 1994)

The state is now in the process of further strengthening its borrowing practices and capital planning. During the 1993 session, the Assembly approved first passage of a constitutional amendment to restructure the state’s borrowing practices, including a debt cap and restrictions on “backdoor borrowing.” Then, in 1994, the legislature passed an even stricter version of the debt cap constitutional amendment (A.11860/S.8596). If adopted, the constitutional debt limitation amendment would significantly alter the manner by which the state incurs and manages its debt by: q prohibiting the practice known as “backdoor borrowing";

 allowing the state to issue revenue-backed debt, as distinct from general obligation debt;

 limiting these new revenue bonds to a level equivalent to one percent of total personal income in the state permitting incremental increases of one-third of one percent for the next nine years and thereafter remain at 4.4 percent. Any new debt would be for capital purposes only;

 permitting voters to consider more than one state bond issue on a general election ballot;

 modernizing debt issuance guidelines for emergency purposes including certain court judgements, natural or other physical disasters, and limited economic emergencies;

 requiring the governor to hold hearings on capital needs of the state and provide the legislature with an assessment of capital assets and needs; and

 requiring the governor to submit annually to the legislature a detailed multi-year capital program and financing plan.

Open Budget Initiatives (1994)
(A.12168, A.12167, A.12166, A.12171, A.12170, A.12179, A.12180)

The Assembly also passed a series of reforms to overhaul New York’s complex budget process during the 1994 session. The Assembly fiscal reform package included several measures to promote better public understanding of the budget and to simplify the budget process. Provisions of the bills include ways to access budget documents and to avail information of the common state agencies in the Executive Budget. In addition, projections of the cost of providing services in the ensuing fiscal year as well as upgrading the three-year financial plan after the final legislative action will be presented. Other provisions of the bills include:

 requiring the governor to institute a five-year Strategic Plan for New York containing a comprehensive assessment of the current and future needs and priorities for all state functions (A.12167);

 a report from the governor on instituting a Uniform System of Classification to facilitate a link between Executive Budget documents, appropriation bills and comptroller reports to ensure that the public can track spending items through the process (A.12168);

 requiring the governor to submit an Outstanding State Debt Report, outlining all state and state public authority debt (A. 12166);

 a report from the comptroller on upgrading the central accounting system and standardizing state agency accounting systems (A. 12171); and

 the allowance of two year capital projects appropriations (A. 12170).

In 1993, the state's top court ruled in Bankers' v. Wetzler that an audit fee provision included by the legislature in the 1990-91 state operations budget bill was not an item of appropriation; thus it was null and void, having been enacted in violation of Article VII Section 4 of the NYS Constitution. That decision, for the first time imposed upon the legislature an absolute judicial prohibition against the alteration of the governor's appropriation bills, except as the court construed was very narrowly permitted by the constitution. This decision apparently contravened accepted practice in which the legislature and the governor negotiated such language changes in appropriation bills.

In order to preserve the balance between the executive and legislative branches of government in fiscal matters, the Assembly's reform package included legislation prohibiting the governor from submitting appropriation bills with programmatic language attached to items of appropriation (A. 12179 by statute, A. 12180 by constitutional amendment).