NY state budget would hike debt, reduce transparency -CFO
* Comptroller concerned with "backdoor borrowing"
* Cuomo official says comptroller "totally gets wrong" some items
* New point of contention between two Democrats often at odds
By Hilary Russ
Feb 13 (Reuters) - New York Governor Andrew Cuomo's proposed budget will increase debt through "backdoor borrowing" and give the governor new powers that could reduce accountability, the state's top fiscal official said on Wednesday.
"We need more effective debt reform that gives taxpayers a voice in balancing the costs and benefits of any new borrowing," New York State Comptroller Thomas DiNapoli said in a statement.
Cuomo's proposed fiscal 2014 budget includes a plan use $750 million from the state's workers compensation insurance fund for capital and other needs, expand public-private partnerships and increase by $3.3 billion the borrowing ability of the state's public authorities, DiNapoli said.
DiNapoli had some praise Cuomo's proposal, saying it restrains spending, cuts one-year projected budget gaps, and funds needed infrastructure projects, including Superstorm Sandy recovery efforts.
The governor presented a $136.5 billion budget in January that would boost education spending and close a $1.3 billion gap without raising taxes.
The state legislature has to approve a budget before the state fiscal year begins on April 1.
DiNapoli's report elicited a strong reaction from Cuomo's budget director, Robert Megna.
"The comptroller's staff did him a disservice on some of the comments that were made in this report, which we think misrepresents or just totally gets wrong some of the things that are in the budget," Megna said in a telephone call with reporters.
Cuomo and DiNapoli, both Democrats elected to their offices, have butted heads several times.
DiNapoli criticized Cuomo's last budget on similar transparency grounds, as Cuomo narrowed DiNapoli's oversight of certain contracts. Cuomo said he did it to streamline government, and DiNapoli said it would hamstring his ability to kill bad contracts.
It is also the comptroller's job to be a watchdog about fiscal issues, said long-time New York Democratic strategist Hank Sheinkopf.
"The comptroller and the governor have had at best a contentious relationship," Sheinkopf said.
Deputy Comptroller Robert Ward said that for the current year, annual issuance of state-supported debt was $4.4 billion.
Now, the governor's office says that figure will be closer to $5.1 billion on average annually.
"We don't know how to read that other than to say that's an increase," Ward told Reuters, who called Megna's reaction "puzzling."
"We were frankly surprised at the intensity of the response to a pretty straightforward issue," Ward said.
BUDGET DETAILS CRITICIZED
Under Cuomo's plan, the state would create a new $1 billion annual revenue bond financing program backed by sales tax revenues. The new bond program - along with existing New York bonds backed by the state's personal income tax revenues - would fund infrastructure and other capital projects, DiNapoli said.
Such bonds, unlike general obligation debt, are issued by public authorities and don't have to be approved by voters.
Cuomo also proposed eliminating financial reporting requirements for New York cities, counties and school districts, which have long complained that such state mandates are burdensome.
But that proposal could eviscerate one of DiNapoli's most cherished initiatives, which monitors fiscal distress among local governments, just as it is getting off the ground.
Megna disputed DiNapoli's claim that debt levels would rise. Megna said the proposed budget would actually shrink the state's debt load to 4.6 percent of personal income from 5.5 percent.
Megna also said that Cuomo's proposed reforms to the state workers compensation insurance program would eliminate some liabilities.
That would allow transfers from the workers compensation fund to be safely be used for other measures, including debt reduction, without acting as one-time budget fixes that would create future revenue holes, Megna said.
Such a use of funds would be acceptable, Ward said, except that the language in the budget also allows the governor to use the insurance fund money for other purposes.
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