For nine consecutive years, Gov. Andrew Cuomo has passed timely, balanced budgets that have kept state spending growth below 2 percent, a record of restraint unmatched in modern state history that has made it possible for the governor to lower income tax rates for every New Yorker.
Last month, we published the state’s mid-year budget update and the details of the $6.1 billion budget gap we face in the fiscal year that starts April 1. While the exact steps to close this gap will be revealed in a few weeks when Gov. Cuomo introduces his Executive Budget proposal, you can be sure that we will build on his record of fiscal restraint. Controlled spending—not new taxes—will be the solution.
As we’ve disclosed throughout the fiscal year, this year’s budget shortfall is really two parts. About $4 billion is what we call a baseline or routine gap. In other words, if we did nothing to control costs, the gap would be $4 billion. These are the gaps that we face and close every year when developing the budget—and in some years converted into a surplus—when we control spending growth. Last year, the baseline gap we closed was $5.3 billion; in recent years, it has ranged from $3 billion to $4 billion.
The second part is spending that is above the Medicaid Global Spending Cap, a restraint the governor created in 2012 as part of reforms to control Medicaid spending growth. When the governor came into office, the state’s share of Medicaid spending was set to grow by an unsustainable rate of 13 percent. The global cap was the centerpiece to reforms that slowed Medicaid spending growth first to no more than 4 percent and now to no more than 3 percent.
From 2013 to 2018, New York’s average state share of Medicaid spending grew at 2.2 percent compared with 5.3 percent nationally. By keeping Medicaid spending growth to less than half the national average, the governor saved taxpayers $19.3 billion.
We achieved this while adding 1.5 million New Yorkers to Medicaid to reach a record low uninsured rate of 4.7 percent, raising the minimum wage amid record low unemployment rates, and taking over 100 percent of Medicaid spending growth from localities, saving them over $4 billion as the governor made the property tax cap permanent.
While the initial Medicaid reforms clearly held spending growth in check, we must now re-calibrate to ensure they’re working as intended and to meet new circumstances. Medicaid is now projected to grow by over 6 percent as the costs for caring for the elderly are impacted by state and national demographic trends, support for hospitals serving low-income communities is growing, and federal funding is declining.
We must bring down the rate of growth as we have done before even as we contend with a 50 percent federal Medicaid matching rate that’s the lowest in the country, lower than 36 other states, and far below the nearly 80 percent received by Mississippi at the highest end.
Controlling spending growth is critical as the federal government takes up to $15 billion more from New York taxpayers as a result of the elimination of the deduction for state and local taxes and redirects it to states like Mississippi, Florida, and North Carolina.
There is no doubt it will be a challenge, but it is a challenge that is manageable. The governor has closed gaps much larger than this. We know it will take discipline, and in New York we are fortunate to have a governor who has repeatedly proven that he has the leadership required to make the difficult decisions necessary to control spending and protect taxpayers.
Robert F. Mujica Jr. is budget director for New York State.