BUDGET ISSUES IN NEW YORK STATE - Speech or Presentation Example

?Running head: budget issues in new york 27th December Introduction The budget process for the state of New York emulates the executive budget model. This is a system whereby the executive is responsible for developing a budget proposal which is then modified by the legislature. Being the one responsible for preparation of appropriation bills among other legislations, the governor must provide an effective coordination of the teams involved in the budgeting process. Over the years, the New York budget making process has been faced with challenges and reforms that are geared towards improving the use of funds for appropriate provision of public goods to the New York residents. This paper seeks to discuss four key issues that had an implication of the New York budgeting process. 2010 sales tax reforms One of the major issues that had an impact on the New York Budget was the reforms done on the sales tax in 2010. According to the New York State Senate Committee on Budget and Tax Reforms, the sales tax was not effective in keeping pace with the technological changes as well as economic development (John, 1999). One of the notable aspects of the sales tax was that there was large amount of uncollected revenue thus affecting the state budget in terms of increased deficit. For example, according to Scott Peterson a member of the streamlined sales tax governing board, in 2011 New York budget experienced a deficit of $1,518 million based on the uncollected sales tax amounting to $1,415.3million. This resulted to the establishment of public roundtable that was aimed at discussing the sales tax. Thus the sales budget collection process was streamlined leading to reduction in the budget deficit. According to the Senate Select Committee that was formed by the Senate, the sales tax legislation that was passed in 1965, was being affected by the technological, political and economical trends. For example, the committee indicated that the economy was changing to service from industrial based economy. Additionally, there has been an increase in the tax credits as well as sales tax exemption over the years. Thus, there has been no significant growth on the revenue thus affecting the government expenditure. Another notable issue on the sales tax bill that was passed by then governor Nelson Rockefeller was that internet services as well as mail order were major areas where sales tax remained uncollected. This had a negative impact on the state budget in the sense that despite the increased government expenditure, there were no effective mechanisms of tax collection. Based on the impact of the trends in the technology, economy and politics in the form of undermining the fiscal position of the state of New York, Krueger, the leader of the Select Committee, arranged for a meeting with other stakeholders to discuss on how the fiscal stability of the state would be enhanced by establishing a proper sales tax policy which was more rational and economical. This included modernizing the sales tax system. After the meeting to improve the collection and use of the sales tax for improvement of public activities, the committee recommended the use of Streamlined Sales and Use Tax Agreement (SSUTA). This entailed rules that the government authorities would adopt during the collection of sales tax from the urban and local sellers. One of the key aspects that led to the success of the roundtable meeting to solve the sales tax crises that was held in Albany, was the involvement of various stakeholders. For example, the committee took into consideration the ideas from eleven tax experts from various industries. Thus, the experts provided resourceful technical contributions to the select committee thus making the whole process a success. Fixation of New York broken budget process The second issues that affected the budgeting process were the reforms that were initiated by Senator Krueger to fix the New York broken budget process in 2010. Krueger aim was to make comprehensive reforms within the budget process in order to produce a budget that was responsible to the residence of New York (Toy, 2009). This led to the establishment of Krueger legislation bill that was aimed at initiating key changes in the budget process. These includes first, requiring the executive to submit a two years financial plans to ensure effective long-term planning. Secondly, the bill advocated for use of Generally Accepted Accounting Principles to create a balance between enacted budget and budget proposal. Thirdly, the bill supported creation of Empire State Performance Commission that consisted of 15 members. The commission responsibility includes avoiding frauds and waste of funds during the provision of services (Fehr and Schmidt, 2005). Fourthly, the bill was supposed to create a legislative Budget Office that was not partisan. In this way politics would be removed from the budgeting process. Lastly, the bill by Krueger was intended to push fiscal year to June 1. This would ensure an effective fiscal planning. Senator Krueger’s legislation also required that the executive should undertake a cost-benefit analysis that be indicated in the tax expenditure report. The aim of the analysis is to ensure that the NY tax break programs that work are strengthened while those which results to the wastage of funds are done away with. Based on the need to make improvement on the New York State budget while at the same time making the process transparent, Senator Krueger introduced various budget reforms legislations. The first one was the two year budgeting (S7160). The aim of this legislation was to establish a two year financial plans that the executive will submit to the budget office thus ensuring that the long-term financial plan is responsible. GAAP Budgeting (S7284) was another notable legislation that Krueger introduced. According to this legislation, the enacted budget and the executive budget should be balanced using the Generally Accepted Accounting Principles. According to this principle, the two budget should be balanced on cash basis by recording revenues when they are earned and when a liability is incurred it should be recognized as an expenditure (Liz, 2010). Another notable legislation was the performance budgeting (S7259). The aim of the legislation was to establish a commission of 15 members whose duties were to initiate a budget blue prints and designing of performance management. In this way, the government was made to undertake its roles in a better manner as well as eliminate fraud with the government departments. Additionally, the commission was given role of drafting legislation that would ensure that it implement its plan in a more comprehensive way thus improving performance of the program funding. The legislative budget office (S4526) aimed at creation of a budget office that was not favoring any side. The roles of Legislative Budget Office included providing the revenue estimates to the members of the assembly and senate and make an analysis of the executive budget. Another objective of the S4526 was to eliminate politics from revenue forecasting process. This was to ensure that funds would not be diverted to activities that were not benefiting the majority of the residents in the state. The cost benefit analysis (S7347) was another key legislation that played three major roles. First, it analyzed the tax breaks to ensure that the state returns on investment were enough to ensure that government programs were effectively run. Secondly, it analyzed the tax expenditure. In this way, the government would know the extent to which the tax expenditure has been used to serve the public good as it was planned. Thirdly, S7347 was focused at ending programs that resulted to the wastage of the financial resources and making effective programs stronger. Senator Krueger also established the tax expenditure sunsets. The sunsets aimed at scheduling the taxes. In this way, the tax law would be made simpler thus making it possible to collect adequate tax to improve provision of public goods. According to Krueger, June 1 fiscal year (S5221) legislation would allow effective fiscal planning. The legislation was initiated in order to allow the income tax data that is due on April 15 is included in the budget process. The executive were required by S5221 legislation to revise the revenue consensus by May 1. Public Authorities Reform Act of 2009 The third issue that was undertaken in 2009 was the improved public hearing that was aimed at improving transparency and brining about flexibility and improved budget forecasting. This was through the enactment of Public Authorities Reform Act in 2009. Despite the 2007 legislature that was focused at initiating budget reforms, the rules were yet to be implemented. Additionally, the budget office was still not independent in 2009 thus making the process not reliable. Thus, the public hearing was used at the bases of addressing four major questions. First, it evaluated the 2007 budget reforms that worked in improving the budgeting process. Secondly, it questioned the budget reforms that were initiated in 2007 but the executive and the legislature were not effectively implementing them. Thirdly, it questioned the types of reforms that were necessary to address the economic recession. Fourthly, it evaluated how the state of New York long-term planning can be enhanced to ensure sustainable fiscal stability. The Public Authorities and Reform Act of 2009 that streamlined the Public Authorities Accountability Act of 2005 had also a significant impact on the New York budgeting process. The act provided the budget office with the powers to undertake investigations on the use of funds by the authorities within the state. Additionally, it gave public warning to the authorities that were non compliant. Other duties on the budget office as indicated by the act included defining public authorities, establishing an extensive inventory of local as well as state authorities, collection of mission statements of each public authority and the power to do an analyses of the public authorities in order to determine the effective ones and those to be eliminated. Public authorities within the state of New York have for a long time been subjected to limited public oversight. Thus the needs of the public have not been effectively met by the state budget despite the large amount of tax that is collected from the public. The establishment of the public authorities and reform act of 2009, which initiated the authority budget office that was independent and non-partisan, was a great achievement not only for the government but also for the public. Based on the large number of contracts that the state government was been involved in, the act gave the State Comptroller power to review contracts that were using more than 1 million US dollars. Thus the level of frauds was greatly reduced leading to improved economy. Through the efforts of the Senate Majority, who oversaw the establishment and implementation of the Public Authorities Reform Act, mismanagement of the taxpayer money a vice that has been experienced in the state for a long time was effectively addressed. The key parties that were involved in the formulation and implementation of the vital act included Ira Millstein, David Kidera, a task force established by the State government and the Authorities Budget Office. Property tax cap legislation of 2011 The fourth event that took place in 2011 and had an impact on the budgeting process was the passage of the property tax cap legislation. The property tax relief (S5856) legislation was aiming at increasing the property tax. According to Dean Skelos, the Senate Majority leader who sponsored the bill, the legislation was paramount in capping the local and school taxes to less that 2%. The bill also created a mandate relief while savings to local government were increased to 127 million US dollars. One of the major benefits of the property tax cap legislation is that it helped the homeowners who were being affected by the increasing property taxes. Key provision of the bill included first, limiting the tax levy growth to 2% of the increase in the consumer price index whoever is lower. Secondly, based on the quantitative or physical changes, the bill supports growth in the levy. Thirdly, schools districts were supposed to submit tax levy propositions to the commission during the district annual meetings. This would be followed by voting to approve the tax levy proposition. The voting is done only if the tax levy is within the district tax levy bracket. Fourthly, the bill advocated for carry over levy capacity. This implied that the district that did not tax an amount up to the cap in a particular year as indicated by the legislation would be free to carry over the unused tax levy to consecutive years (Bill, 2010). Apart from these provision, the bill support same cap to be applied to taxes on municipal authorities. Additionally, after a voting of not less that 60%, by the governing body, the bill allows the local boards to increase the cap. As indicated earlier, the bill established a mandate relief component that would result to local budgets saving a minimum of $127 million. This amount would be divided as follows: $70 million that will be received from contacts and piggy-backing from district schools will be allocated for local governments. $34 million would be saved for use by the school districts; $13.6 million would be diverted to the housing, administration, transportation services among other public goods in all the local governments. $7.9 million would be directed towards savings for provision of social services in the countries while a total of $1.5 million would be allocated as savings for the purpose of criminal justices. The mandate relief council, a team that was established by the property tax relief legislation, had six major roles. These include first, to determine if a regulation is costly or ineffective in the operations of the government. Secondly, it repealed mandates in regulations as well as statutes that were not funded. Thirdly, the council addressed the petitions that were arising due to the implementation of the State Administrative Procedures Act. Fourthly, it gave authority to the Comptroller of the State to make comprehensive report on mandates that were not funded as well as the costs associated. Fifthly, it ensures that a fiscal note is provided for all bills that school or local authorities can take action on. Sixthly, it allows for the nomination of 11 members by the legislature as well the governor. Conclusion Based on the above discussion, it is clear that the process of making the New York budget has being successful due to the contributions of various stakeholders. Notably, Krueger spearheaded the 2010 sales tax reforms that resulted to the increased revenue for the government thus making the budget achieve its objectives. Additionally, Senator Krueger initiated the fixation process of the New York State budget in 2010 by establishing the Krueger legislation bill that was focused at making sustainable changes on the budgeting process. As indicated, additional two issues that had a significant impact on the New York Budget process includes the Public Authorities Reform Act of 2009 that was formulated and implemented by Ira Millstein, and David Kidera among others and Property tax cap legislation of 2011. References Bill, P. (2010). Public Authorities Reform Act of 2009 Takes Effect. Available from http://www.nysenate.gov/press-release/public-authorities-reform-act-2009-takes-effect Fehr, E and Schmidt, M. (2005). The Economics of Fairness, Reciprocity and Altruism - experimental Evidence and new Theories. Discussion PAPER 2005-20, Munich John, P. (1999). Taxation and Finance. New York: Macmillan Publishers. Liz, K.(2010). Senator Krueger Announces Reforms To Fix NY's Broken Budget Process. Available from http://www.nysenate.gov/press-release/senator-krueger-announces-reforms-fix-nys-broken-budget-process Toy, S. (2009). The Financial District Attracts Families. The New York Times. Read More