Impact of Budget Cut in State Government Public Policy Term Paper

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The current fiscal crisis facing American states has led to some drastic changes in state budgets. Throughout the country various states have been struggling to balance budgets without cutting vital services to citizens. In many states this quandary has caused a great deal of debate and has proven to be a major hurdle for governors. The purpose of this discussion is to examine the New York State budget as proposed by New York's governor, Andrew Cuomo. The research will focus on how the budget affects the public policy especially in the health care field. The discussion will also evaluate the advantages of the proposed budgetary cuts.

Proposed Budget

On February 11, 2011 the governor of New York released the 2012 budget proposal. There are several cuts that are expected to take place as a result of this budget. The governor explains that

"New York is at a crossroads, and we must seize this opportunity, make hard choices and set our state on a new path toward prosperity," Governor Cuomo said. "We simply cannot afford to keep spending at our current rate. Just like New York's families and businesses have had to do, New York State must face economic reality. This budget achieves real, year-to-year savings while restructuring the way we manage our state government. This is the first step toward building a new York (Cuomo)."

One of the main aspects of the proposal is a total transformation of the entire state budget process. Such changes, asserts Cuomo, are designed to ensure that the state will be able to eliminate its $10 billion deficit without having to raise taxes or borrow money (Cuomo). Among the areas to be effected by the budget Cuomo has proposed Reducing the Cost of State Government, Merging and Consolidating State Agencies, Reducing the Size of State Government, Education and juvenile justice reform.

As it pertains to decreasing the General Fund State Operations spending, the proposal asserts that such spending must be lowered by 10% for State agencies. Additionally both Commissioners and agency heads are expected to increase savings in the area of non-personal services. The remainder of the savings will be realized through a partnership between the governor and the state employee labor unions to develop ways to save in are of personal service spending. According to the governor such reductions will be done in a manner that will least effect state employees and the services that the state offers. However, if this partnership is unsuccessful and workforce savings cannot be realized the governor proposes a layoff of 9,800 employees.

Cuomo also proposes cuts to the state government. According to the budget, in an effort to assist in the redesign and transformation of government, the Spending and Government Efficiency (SAGE) Commission was developed. The purpose of the commission is to make suggestions to decrease by 20% the number of agencies, authorities, and commissions that exist in the state's government. Additionally the SAGE Commission has to present the Governor with a rightsizing plan to decrease the number of agencies by May 1, 2011. This rightsizing plan will then be submitted to the Legislature to take action and to ensure that the plan is properly and adequately carried out.

Another major issue with the New York State budget is the manner in which education services may be affected. School districts throughout the country are dealing with substantial cuts and New York state is no exception to this serious issue. The governor's plan explains that

"Education in New York is financed primarily through a combination of State and local funding. Under current law, school aid was slated to grow at a rate of 13% in 2011-12. The Executive Budget proposes School Aid of $19.4 billion for the 2011-12 school year, a year-to-year reduction of $1.5 billion. This represents a reduction of only 2.9% of the total operating expenditures projected to be made by school districts statewide during the 2010-11 school year, and 7.3% in State support. After these reductions, which represent $2.85 billion of gap-closing benefit for the State Fiscal Year, School Aid will continue to represent the largest State-supported program, accounting for 29% of General Fund spending (Cuomo, 2011)."

In an effort to assist the state in making the education system more efficient and realize the goals established by the governor of improving the education system in New York, the Executive Budget has set aside $250 million to be given to school districts in the state that show noteworthy improvement student performance (Cuomo, 2011). An additional $250 million will be given to school districts that establish long-term structural changes which reduce costs and increase effectiveness (Cuomo, 2011). In accordance with the budget, there is a Executive Budget school aid proposal. The proposal

"includes a $2.8 billion Gap Elimination Adjustment (GEA) for the 2011-12 school year that would help achieve a balanced budget through reductions in school aid on a progressive basis, accounting for each school district's wealth, student need, administrative efficiency and residential property tax burden. The size of the GEA in part reflects the loss of $1.3 billion in one-time Federal funding provided by the American Recovery and Reinvestment Act of 2009 and the Education Jobs Fund of 2010. The GEA is partially offset by $305 million of growth in existing expense-based aids such as Building Aid, Transportation Aid and BOCES Aid (Cuomo, 2011)."

The budget also calls for the reformation of transportation aid to support shared services and cost-effective practices. A total of $696 million will be made available to the state through the Federal Race to the Top program. The program was created for the purpose of rewarding student performance. In addition to reduce the growth of schools in the years to come, the budget calls for a new Gap Elimination Adjustment formula that will develop a law that restricts growth in the out-years dependent upon the growth in personal income.

Like other states New York is having to contemplate how to close their deficit and education like other state sponsored services may have to be cut in some ways. This is a controversial reality and in many ways New York has been saved from having to cut education expenses to the degree that other states have been forced to cut education spending. The budget also calls for the potential layoff of 7000 teachers if education expenses cannot be reduced in other ways ("Future of NY schools, teachers online in budget").

Cuts to the healthcare system

The most controversial and perhaps detrimental cut proposed by the budget is a $15 billion dollar cut to the states healthcare system. Some of the primary cuts to New York's healthcare system as proposed by the budget, involves Medicaid. According to an article entitled "Medicaid and New York's Budget" during the current fiscal year the state of New York spent $20 billion on Medicaid. This expense is equal to one quarter of the entire operating budget for the state. This type of spending cannot continue because the state is facing a $10 billion deficit for the coming fiscal year. As such Medicaid expenses must be cut. However the state has to cut Medicaid while also protecting people who are not able to afford healthcare insurance. This is a particularly sensitive issue for the state because of the number of families that rely on Medicaid to receive healthcare services.

The 2012 budget proposes a plan to reduce Medicaid spending from $21 billion to $18 billion. Such a decrease in Medicaid spending will lead to a "loss in federal matching funds of about $2.7 billion, draining a total of more than $5.5 billion (."

According to the Healthcare Association of New York State (HANYS) this would be the largest cut to the New York healthcare system in history. The HANYS has also expressed their disbelief in the manner in which the proposed budget might affect New York's healthcare system. According to HANYS

"It is also important to view this proposal in the context of past budget actions and pending federal Medicare cuts. No other sector of state spending has been more disproportionately impacted by repeated cuts than health care. In just three years, health care providers have already been cut by a cumulative $5.3 billion in Medicaid. Our state is also slated for billions more in Medicare payment cuts under the new federal reform law…If the proposed additional $15 billion in Medicaid reductions over the next two years becomes law, we will see a continuation of hospital and nursing closures, adding to the 30 hospitals and more than 50 nursing homes that have already been shuttered in the last decade (Sisto, 2011)."

Although the HANYS is vehemently opposed to the proposition of cutting certain healthcare services, such cuts may also be absolutely necessary to ensure that the state can survive without having to cut even more services. In fact there are several benefits associated with cuts to the healthcare system in New York. For instance healthcare costs are responsible for a substantial amount of the state's budget. As such cuts…[continue]

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