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John Liu Budget Testimony

John Liu Budget Testimony

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Published by Celeste Katz

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Published by: Celeste Katz on Feb 07, 2011
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02/07/2011

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PR11-02-011 February 7, 2011
 
Contact: Sharon Lee / Mike Loughran, (212) 669-3747 Page(s): 4
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COMPTROLLER LIU PRESENTS TESTIMONYON PROPOSED STATE BUDGET
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ALBANY, NY – New York City Comptroller John C. Liu today presented testimony before theState Assembly Ways and Means Committee and the State Senate Finance Committee regardingthe impact of the proposed State budget on New York City’s finances.Comptroller Liu said Governor Cuomo’s proposed budget would widen the FY 2012 budget gapby $1.4 billion due mainly to loss of education aid and the elimination of revenue sharing.Comptroller Liu’s testimony as prepared for delivery is below:Thank you Chairman Farrell and Chairman DeFrancisco for the opportunity to speak withmembers of the State Assembly Ways and Means Committee, and Members of the SenateCommittee on Finance regarding the Governor’s Executive Budget proposal and the impact itwill have on New York City’s finances. Governor Cuomo has inherited the unenviable task of eliminating a $10 billion budget gap in the coming fiscal year. This is a daunting challenge inany economic environment but even more so in this period of economic uncertainty. With out-year gaps forecasted to exceed $20 billion it is imperative that the State contend with itsstructural budget imbalance immediately.New York City has always been willing to accept our fair share of the burden for balancing theState’s budget. What I would hope though, is that the Governor’s budget is notdisproportionately balanced on the backs of hard working New York City taxpayers. I echo thesentiments of Mayor Bloomberg in affirming that any prescription for balancing the budget mustbe equitable to New York City residents.My office estimates that the Governor’s FY 2011-12 Executive Budget could create animmediate $1.4 billion gap in the City’s Fiscal 2012 budget, which already faces a $2.4 billionshortfall. The key components of this gap are revenue sharing and school aid, which togethercomprise nearly $1.25 billion. In addition, proposed cuts in welfare services could reducesupport by over $100 million, affecting many of our City’s most vulnerable.In my brief tenure as Comptroller I have made it a top priority of my office to uncover fraud,waste and abuse wherever it may exist in the expenditure of the City’s resources. One of myfirst initiatives was to institute a redesign of the office, elevating two critical bureaus - audits andcontracts - to the level of Deputy Comptroller. Due to the restructuring, we have been able to
 
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pinpoint our audit focus, which resulted in more than $129 million in actual funds beingrecouped last year alone. In addition, we are better equipped to scrutinize each contract to ensurethat we avoid instances of runaway spending.I would therefore like to commend Governor Cuomo on his proposal for redesigning andreforming State government. Embracing innovative and unique approaches to managing Stategovernment will offer many opportunities for both the State and its municipalities to conservescarce financial resources, and possibly identify additional areas of waste.I am extremely interested in what recommendations the Governor’s Mandate Relief RedesignTeam will present. New York City has long been burdened with onerous and costly unfundedState requirements -- such as the numerous costs borne by the City for funding services related tospecial education -- that often come at the expense of other vital City services. It has beenestimated that nearly 16 percent of the education budget is the direct result of unfundedmandates.As part of his redesign of New York State government, Governor Cuomo has emphasized hisfocus on a regional approach to economic development, seeking to “reenergize the State’seconomy and maximize the potential of our economic development investments.” These effortsto increase investments statewide in order to spur economic activity are to be applauded.However, these proposals to reenergize and maximize the State’s potential should not come atthe expense of New York City.Any truly comprehensive economic development program must provide assistance and supportfor those segments of the population that have typically been overlooked: specifically minoritiesand women. While unemployment rates have been leveling off and in some cases decreasing,certain groups have been disproportionately affected by the recession, specifically communitiesof color which have experienced relatively higher rates of unemployment. In the rush tomaximize economic development investment, it is important to keep in mind the unique needs of this segment of the population and provide the opportunities necessary for their economicsuccess.My office has developed a system that allows anyone with an internet connection to track theCity’s level of contract spending with Minority and Women-Owned Business Enterprises. Thewebsite updates daily and tracks potential and real spending with M/WBE’s to get a sense of how we are faring as a City. Sadly, we can do much better, but it is my hope that the public datareadily available will inspire the City to provide more opportunities to these businesses, many of whom are small and neighborhood orientated, in an effort to spur economic growth.I strongly recommend that you and your colleagues, including the Governor, keep thesetraditionally overlooked businesses in mind when discussing economic development programs.The City has tightened its budgetary belt many times over the last few years and has made thenecessary and difficult cuts to balance its budget. Further cuts to the City’s budget will requirepainful reductions in many core service areas. The most immediate and worrying of thereductions would be the elimination of thousands of pedagogical positions in New York City’spublic schools. If the Governor is truly interested in maximizing economic developmentinvestments he should look no further than the investment in our children’s education.
 
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My office estimates that the Governor’s Executive Budget will reduce support for New York City’s school children by $953 million. This includes a reduction of $891 million in formula-based aids and special education cost shifts totaling $62 million in summer school and pre-schoolspecial education programs. These cuts will have an immediate effect on the ability of the City’sDepartment of Education to provide a proper educational environment to over 1.1 millionschool-aged children.We in New York City are keenly aware of the cumulative effects of unchecked budget growthand support realistic changes to budgetary assumptions. Obviously the State cannot continue onthe course it is heading with growth in expenditures far outpacing revenues. It is appropriate thatthe Governor take a careful look at each and every budget assumption. But changes to budgetaryassumptions should be done with an eye towards equity.In Fiscal 2010 – 2011 the State returned $729.3 million of taxpayer dollars directly to over 1,500municipalities statewide through Aid and Incentives for Municipalities (AIM). The 11.1 millionNew Yorkers residing in these villages, towns and cities received over $65 per capita in AIMfunding. But nearly 8.3 million New York State residents in one city saw not a penny of thesefunds.The Governor’s Executive Budget for 2011- 2012 eliminates the entire $302 million of AIMfunding planned for New York City while reducing funding for all other municipalities by onlytwo percent. For yet another year New York City residents are being treated inequitably. I amencouraging you to right an unjustified wrong for all New York City residents by restoring theCity’s AIM funding.In addition to the aforementioned direct budget effects of the Governor’s proposal, the ExecutiveBudget may have many indirect effects on the economy of the City and the State. TheGovernor’s plan anticipates savings of close to $2.9 billion from Medicaid reform and redesign.It is hard to comment on how these cost savings will be derived because as of yet there havebeen no real proposals set forth, making it difficult to assess the impact of Medicaid cuts on theCity’s hospitals and the Health and Hospitals Corporation (HHC). Such large cuts would lead tofurther declines in services and quality of care, as well as significant job loss for health careworkers. Health care is a vital segment of New York City’s economy; we must do everythingwithin our powers to preserve funding for this industry.The Governor’s budget proposal includes $178 million in cuts to funding for social serviceswhich would impact the City’s neediest population. The wide range of actions would reducesupport for services such as youth detention and adoption subsidy, as well as shift the fundingresponsibility of special education related costs to school districts. Among these reductions, theState also unfairly targets the City by eliminating funding for two programs that would onlyaffect New York City. The reduction in funding for these two programs, for housing assistanceto public assistance households under the Work Advantage program and reimbursement for adulthomeless shelters, would remove $51 million in much needed funding for services for thehomeless and those who are at risk of being evicted from their homes.Lastly, as the steward of the City’s five pension funds I am keenly aware of the constraints whichexclude the City from taking an active role in the negotiation of pension structure. The Mayorhas put forth a pension reform proposal of which we are reviewing, but at first glance, I do agree

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