NY state masks deficit by "shuffling" money
NEW YORK (Reuters) - For over a decade, New York state has papered over budget deficits and over-spending by "shuffling" money among accounts, siphoning cash from dedicated funds and "abusing" temporary loans, according to a report released on Monday.
The general fund is the main one that credit analysts scrutinize because it excludes federal aid and some dedicated revenues from taxes or fees, such as dollars that flow into environmental or transportation funds, for example.
New York's Democratic Comptroller Thomas DiNapoli said in the report that "the general fund is increasingly providing a distorted view of the state's financial health because money is shifted in and out of this account."
This strategy obscures the state's deficit, he said.
The current budget deficit for New York state now stands at $9 billion.
The state missed the April 1 budget deadline as Democratic Governor David Paterson and the Democratic-controlled Legislature sparred over spending cuts, a soda tax and borrowing plans.
Paterson proposed a $135 billion budget. He dealt with the current deficit by delaying payments, including income tax refunds.
The budget for the fiscal year that ended on March 31 used $6.4 billion of "fund sweeps, shifts and temporary loans," and it pushed nearly $3 billion of payments into the new budget, DiNapoli said.
Since 1985, New York state had set up 515 new accounts, bringing the total to 720, he said. In the past 10 years, $2.9 billion has been taken out of these accounts to close budget holes.
Similarly, one of the state's biggest funds, the Dedicated Highway and Bridge Trust Fund, has been drained so often that only $11.6 billion -- or just under 35 percent of its cash -- has been spent on improving roads and bridges, DiNapoli said.
The state's failure to fix its "chronic" deficits is exemplified by its borrowing an average of $1.4 billion a year from its short-term investment pool in the last decade, he said.
Though credit analysts frown on borrowing for anything other than long-term capital improvements, the state now spends $1 billion a year to repay debt issued for operating costs, DiNapoli said.
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