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BUDGET TIMEBOMB PDF Print E-mail
Thursday, 01 April 2010 12:00

According to the Big Bang Theory of Government, New York State’s Budget was scheduled to explode on April 1st with the start of a new 2010-2011 Fiscal Year.   Like an out-of-control tour bus packed with screaming teachers, taxpayers, legislators and Medicaid recipients, New York’s $137 billion annual budget was hurtling towards an open and unbridgeable $9 billion hole in the highway.

    By the time you read this, April 1st will have come and gone.  And, it seems unlikely that the budget time bomb will have actually gone off – at least yet.  As we went to press, the chances of any budget agreement by the Governor, Senate and Assembly still seemed remote.  Most observers were confident that New York State would once again manage to turn back the clock on its fiscal obligations.  That clock, however, was still ticking.   

When the ticking stops, it could signal very, very bad things for many nonprofit human service providers and the people they serve.  Since our first look in February (“Death by a Thousand Cuts”), the Governor’s Executive Budget proposal – which featured $4.5 billion in spending cuts -- has grown only more frightening.  

In part, this is because providers, advocates and local government officials have recognized the actual impact of many previously less-than-obvious budget cuts.  Several of these are particularly devastating for New York City, including:

•    A $65 million cut to state support for the City’s adult homeless shelters;

•    A $25 million reallocation of Title XX funds that could close as many as 100 senior centers;  

•    A $50 million reduction in available child care funding; and,

•    The complete elimination of New York City’s $328 million in State revenue sharing as part of a $1.3 billion total reduction in State aid, which Mayor Bloomberg has indicated will trigger an extensive series of “contingency budget” service cuts.

“Everywhere you look there are holes,” says Susan Stamler, Director of Policy and Advocacy at United Neighborhood Houses.

At the same time, the big budget gap has appeared to grow even deeper over the past two months, due to the apparent evaporation of several key funding sources on which the Governor’s plan rests.   These included the “soda tax”, which accounted for $465 million in revenues for FY2010-2011 and an ongoing $1 billion annually thereafter, a $1 per pack cigarette tax ($210 million), fees associated with the sale of wine in grocery stores ($253 million) and a new gross receipts tax on health care providers ($216 million).   On March 22nd, the State Senate underscored the shakiness of these assumptions when it rejected this entire package of revenues in its “one house” budget resolution.

“If the legislature doesn’t approve these, that is another $1 billion or more in cuts they will have to do,” says Allison Sesso, Deputy Executive Director of the Human Services Council of New York City.

“At the end of the day, there are going to be very significant budget reductions,” says Ronald Soloway, Managing Director of Government and External Relations for UJA-Federation of New York.  “This is not going to be like last year when money was found to restore all the service cuts.  In fact, every day the legislature waits the budget deficit gets larger.  We are looking now at $9-$10 billion.”

What would be the impact of the Governor’s Budget as currently proposed?  Here is a look at some of the larger cutbacks most recently identified by providers and advocates.

Cuts to Homeless Shelters

The budget proposes to effectively end direct State funding for New York City’s homeless shelters which serve approximately 7,500 single adults every night.  Traditionally, say advocates, the State shared the cost of single adult homeless shelters with the City – although it had capped its share and is now paying less than half.   As outlined in the Executive Budget, the State proposes that the City enroll single adult shelter residents on Public Assistance and take reimbursement for shelter costs through the individual’s PA shelter grant.

Advocates, providers and the City itself view the plan as completely unworkable and estimate that it would result in a $65 million loss of funding.  Only 24 percent of Department of Homeless Services single adult shelter clients currently qualify for public assistance.   The rest, they say, are hindered by mental or physical health problems and life on the streets.  “People come in one night and are out the rest; or they are in one month and out the next,” says Shelly Nortz, Deputy Executive Director for Policy with Coalition for the Homeless.  

“The Governor’s proposal for homeless adult shelter funding is irresponsible and puts the City in an untenable position as we continue to provide shelter to our most vulnerable New Yorkers, said NYC DHS Commissioner Robert V. Hess. “The state proposal is particularly damaging and insensitive in this economic climate where the cuts would have a severe impact on our ability to deliver critical services to those who need it most.”  

“This is poorly thought out and doesn’t make any sense,” says Christy Parque, Executive Director of Homeless Services United.  “It creates an ironic disincentive for shelter residents to work.  And, undocumented people, who account for about 12% of the shelter population, will not be eligible.”  

The City anticipates the loss in state funding would result in at least a 10% across the board cut in funding for adult shelters – a cut which will have an even greater impact on services.  “You can’t tell your landlord you are only going to pay 90% of your rent or debt service,” says Parque.  “The only place you can take the cut is in staffing or program services.  We are estimating we could lose 600 to 700 positions in the shelters.”

In addition to directly impacting shelter operations, the cuts would eliminate vital discretionary services such as street outreach teams, Safe Havens and stabilization beds.  “We could see 1,000 more new people on the street,” says Parque. “We will lose the progress we have made in reducing street homelessness prior to the downturn.”

Ironically, the proposal comes just as the City reports that there has already been a setback in the effort to get homeless individuals and families off the streets and into shelter.  This year’s annual Homeless Outreach Population Estimate (HOPE) street homeless survey found that 3,111 homeless individuals were living on city streets in January – up by 783 or 34% over the number in 2009.  “These are challenging times that have had an impact on our street homeless population,” said DHS Commissioner Hess, who stressed that this year’s number was still 29% below where it had been in 2005.

“With record homelessness in New York City, this is exactly the wrong time for Governor Paterson to propose staggering cuts to our shelter system,” said Mary Brosnahan, Executive Director of Coalition for the Homeless.

It is also worth noting that advocates believe the state proposal could actually increase total costs for both State and City taxpayers, since far more single adults pass through the shelter system each year (23,000) than are housed on any given night (7,500).   “If, as DOB assumes, all shelter occupants become public assistance recipients, my calculation shows that not only would the combined income loss and added expenses cost New York City at least $74 million, but the added welfare costs would also wipe out the assumed $36 million in state savings and actually cost us a few million dollars,” said Shelly Nortz in legislative budget testimony on February 10th.

“Save Our Centers”

Another surprise hole in the State’s budget is a seemingly arcane proposal to redirect federal Title XX funds.  In New York City, the budget shift would cost the Department for the Aging (DFTA) approximately $25 million or roughly one-quarter of its entire budget for senior centers.  The cut, if it is not reversed, is expected to result in the closing of between 80 and 110 senior centers – and services for 5,500 seniors -- across the five boroughs.

Advocates, providers and elected officials turned out at City Hall on March 9th to protest the Governor’s budget proposal with the launch of a “Save Our Centers” campaign.

“These cuts would literally starve thousands of poor seniors,” New York City Council Aging Committee Chair Jessica Lappin said. “In addition to providing hot meals, these centers provide care, companionship, and case management to some of our neediest New Yorkers. Our state legislators simply cannot approve this cut.”

“The City Council has a proven record of success when it comes to defending our city’s senior centers,” said Speaker Christine C. Quinn. “Older New Yorkers depend on senior centers as a lifeline, especially during this recession. We’re urging everyone to call their state legislators and the Governor’s office to let them know these cuts are unacceptable. We won’t allow Albany to turn its back on our seniors.”

 “The tsunami of city and state cuts raining down on senior centers and other services funded through the Department for the Aging will close up to 110 senior centers and cripple the funding of the remaining senior centers,” said Bobbie Sackman, Director of Public Policy for the Council of Senior Centers and Services.

 “UNH, along with our fellow advocates and colleagues in government and the provider community, is adamantly opposed to the State’s proposal to redirect $25 million in Title XX funds away from New York City’s senior services,” said Nancy Wackstein, Executive Director of United Neighborhood Houses.  

“If the Title XX funding for senior centers is eliminated, then Selfhelp’s six senior centers, which serve many thousands of seniors in Queens, will face a funding loss of $90,000 per center – further compounding recent budget cuts,” said Leo Aspen, Vice President, Senior Communities, Selfhelp Community Services, Inc.

“FPWA urges the Governor and New York State Legislature to preserve the flexibility of Title XX funding so that needed resources can continue to flow to neighborhood-based senior centers,” said Kathy Fitzgibbons, Senior Policy Analyst from the Federation of Protestant Welfare Agencies (FPWA).

 Child Care Shortfall

While not technically an Executive Budget cut, advocates are concerned that FY2010-2011 will see up to a $50 million reduction in available funding for child care services as the State’s runs out of roll-over monies which had previously helped support current-year programming around the state.  “The impact in New York City could be as high as $30 million,” says Gregory Brender, Policy Analyst with United Neighborhood Houses.  “A loss that large could only be implemented through a significant reduction in capacity.”

It’s the State, Stupid!

In addition to these specific funding reductions, New York City is also slated to take a broader loss in revenue sharing and education aid.  “We all know that hard budget choices are necessary – but so are fair ones,” the Mayor told the legislature during budget testimony in January. “I regret to say that this budget – which would impose a total of $1.3 billion in cuts on New York City and leave us with close to 19,000 fewer City employees to perform basic services – utterly fails the test of fairness.”   For example, he pointed out that New York City would see its Aid and Incentives for Municipalities (AIM) funding cut entirely while all other counties in the state would only face reductions of up to 5%.  The loss on AIM alone comes to $328 million.

In response, the Mayor has developed an entirely separate “contingency budget” outlining extremely painful cuts to programs and services which will be necessary if the Governor’s budget is adopted as written.

What would the loss of this $1.3 billion mean? In addition to cutting 8,500 teachers, 3,150 cops, 1,050 fire fighters and 978 correction officers, there are likely to be some significant cuts to human services.  A few examples of the Mayor’s proposals include:

•    A 30% reduction in ACS preventive services capacity – 2,584 slots – for a $9.2 million budget reduction;

•    A 25% reduction in the number of day care vouchers provided to low income families for a $35.6 million savings;

•    Elimination of funding for 500 soup kitchens and food pantries for a $10.2 million cut;

•    Closing of 15 senior centers for a $3.5 million cut;

•    A 6% reduction in administrative rates to foster boarding home agencies;

•    A 14% reduction in City-Funded Beacons;

•    Elimination of 3,000 OST slots.

TANF Funded Programs

Another major area of concern for human service providers is the Executive Budget’s wholesale cuts to programs which had been funded using federal Temporary Assistance for Needy Families (TANF) funds.  These TANF-Surplus funds – savings accrued by the state as Public Assistance (PA) rolls declined following welfare reform -- had been used over the past decade to support a wide range of human service programs.   As part of the Governor’s Executive Budget, a substantial portion of these funds will be redirected back to support increasing PA costs due to rising enrollments and higher benefits.  

As a result, approximately $132 million in funding has been stripped away from over 30 separate programs which provide job training, youth services, alternatives to incarceration, supportive housing, refugee resettlement, home visiting, child care and more.

In most cases, the loss of TANF funding was total. Therefore, programs which had been fully-supported by these federal funds are completely eliminated in the Governor’s budget proposal.  Among the victims are the Summer Youth Employment Program ($35 million), OCFS Preventive Services ($18.8 million), Supportive Housing for Families and Young Adults ($5 million), and many more.

Those programs previously funded through a combination of TANF and State funds are typically losing all TANF funds and 10% of State monies.  The combined impacts are devastating.  Programs which provide Alternatives to Incarceration/Alternatives to Residential Placement for juveniles lost $10.8 million in TANF funding, close to 80% of their total funding.   Advantage Afterschool took a $11.4 million TANF cut, bringing total proposed funding down to $17.25 million -- 39% below its current FY2010 budget and a full 43% below its $30.5 million starting point at the beginning of FY2010.

Tick, Tick, Tick

As we went to press, the State’s budget negotiating machinery was beginning to budge forward.  As previously noted, the Senate had passed a “one house” budget resolution which restored substantial  funding to a range of programs and services, including many TANF-funded programs, monies for Title XX-funded senior centers, homeless shelter funding, etc.

Providers and advocates took some encouragement from the Senate action.  “We are grateful that the Senate recognized the importance of these critical human service programs,” said HSC’s Allison Sesso of HSC.

Unfortunately, this optimism was tempered by the fact that the Senate resolution simultaneously rejected more than $1 billion in revenue actions already included in the Governor’s Executive Budget proposal.  Based on a preliminary review, it appeared that the Senate resolution would leave the FY2010-2011 budget with a significant deficit.

“The State Senate Democrats’ budget resolution… fails to take common-sense measures to generate revenue that could offset a devastating school aid cut and prevent 8,500 teacher layoffs in New York City,” said Mayor Bloomberg.  “While the resolution does include laudable restorations to senior centers, homeless shelters and indigent health care, all eyes will be on the Senate, and the entire Legislature, as we enter the home stretch in this crucial process.”

Revenues Anyone?

While prospects for the Governor’s “Soda Tax” seemed increasingly doubtful, a number of advocacy groups were urging consideration of additional tax and revenue proposals to offset the need for painful cuts.

The Fiscal Policy Institute was pressing for an enhancement to last year’s temporary Personal Income Tax (PIT) rate increases for high-income households.  “It is the most logical type of revenue increase to do in bad times,” says Frank Mauro, FPI’s Executive Director.  “Last year, they temporarily created two additional tax brackets, one for individuals with income of $200,000 or married couples with income of $300,000 and another for singles with income of $500,000.   We are proposing that for the remaining two years, they add an additional one percent tax at the $1 million level.”  The proceeds, says Mauro, would be $1 billion per year.

FPI is also suggesting a “Wall Street Helps Main Street” proposal.  “At a time when so many people and businesses are doing badly, a lot of banks and Wall Street firms are making unprecedented profits,” says Mauro.  “The profits of the Security Industry Association members were reported at $58 billion in 2009.  That is almost three times the previous record of $20 billion in 2006.  We believe that at a time like this, when so few firms are profitable, the ones that are should be doing more to help out.”

Among the suggestions are:

•    Temporarily suspend the use of net operating loss carry-forwards to shelter current year profits from taxation;

•    An excess profits tax on a certain portion of profits over a very high level;

•    A tax on bonuses; and

•    A temporary reduction of the rebate on the stock transfer tax.

Mauro notes that the Governor of Colorado has just signed a three-year suspension on the use of net operating loss carry-forwards.

The Human Services Council is also supporting a number of additional revenue proposals totaling over $1.2 billion in annual revenues.  These include elimination of the Empire Zone program ($600 million), a Plastic Bag Tax ($340 million) and reforming the Brownfield Clean-Up Program ($300 million).

Another approach to partially addressing the State’s current deficit was suggested by Lieutenant Governor Richard Ravitch who proposed a temporary borrowing program as a bridge to longer term fiscal reform.  Ravitch’s plan would allow the State to borrow up to $2 billion per year for the next three years as part of a plan which would impose a variety of new fiscal controls.  These would include creation of a five-member commission to review the States financial plans, and authority for the Governor to balance the budget through across the board spending cuts in the event of a deadlock with the legislature.   Ravitch’s proposal was promptly criticized by the Governor and appears to have generated little other support in Albany.

Three Men in a Room?

Following the Senate’s resolution, Assembly Speaker Sheldon Silver was reportedly in discussions in preparation for passage of that body’s “one house” budget resolution.  Watching and waiting, advocates appeared less optimistic regarding the prospects here than in the Senate.

Exactly when New York would get its “three men in a room” remained unclear.  What appeared certain, however, was that none of the three would be bringing any money to the table.   That is the problem.

 

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