Empower NY governors to shut mid-year deficits: study

NEW YORK (Reuters) - New York governors are among the nation's most powerful in enacting budgets but they have much less ability to fix any deficits that open up later on than some of their peers, a new study said on Thursday.

Since December, Governor David Paterson has steered the state through three cash crunches by delaying billions of dollars of payments owed to schools, vendors, not-for-profits, and the like.

But it is not clear Paterson has the legal authority to impound these kinds of funds, the report said, and the governor has been fending off various law suits as he grapples with the state's acute financial problems.

"Clarifying and strengthening the executive authority to manage midyear fiscal imbalances may help solve looming gaps," the Albany-based Rockefeller Institute on Government said in its study.

The report added that the state political culture must switch its focus and put "fiscal integrity" ahead of clashes over increased spending and opposition to new revenue-raisers.

New York governors not only submit their budgets to the legislature, they can require it to act on their financial plan before other measures.

The state's governors can also strike out items the legislature adds with a line-item veto.

However, if New York collects less revenue than expected and a budget gap arises during a fiscal year, its governors cannot freeze or cut spending in big-dollar programs: aid for schools, colleges and universities, assistance for counties, cities, towns, and Medicaid, the federal-state health plan for the elderly, disabled and poor.

"In other words, any gubernatorial actions to address mid-year gaps must ignore three-quarters of state expenditures," the report said.

The New York executive's authority to determine midyear spending adjustments is confined to state agency operations which represent about 26 percent of non federally funded spending, the report said.

In contrast, the list of states that "expressly allow" governors to slash dollars earmarked for local governments and schools includes Massachusetts, Ohio and Oregon, the report said.

Connecticut lets its governors slice general fund spending by 3 percent.

New Jersey Republican Governor Chris Christie must shut an $11 billion deficit in fiscal 2011. The report said he has "used the impoundment power aggressively." Only last week, New Jersey's top court upheld his decision to freeze $475 million in school aid.

Maryland governors can slash any appropriation by as much as 25 percent -- if a state board approves. Massachusetts governors can cut spending by state agencies whenever there is not enough revenue, though they must inform the legislature, the study said. Ohio requires its governors to prune their budgets to keep them balanced, the report said.

New York has not approved a $135 billion budget more than two months after the April 1 deadline. The comptroller on Thursday again warned New York's cash position was "precarious."

(Reporting by Joan Gralla; Editing by Andrew Hay)