According to the Executive Summary of the Division of the Budget (DOB), "Governor Paterson is recommending reducing new legislative programs by 50 percent of remaining spending, commensurate with the reduction enacted for new executive programs. " Ostensibly, the cut would apply to funds not yet disbursed as of December 1, 2008 for the fiscal year April 1, 2008 - March 31, 2009.
This characterization, which suggests curtailment of "new" activities, is inaccurate. Many of the service programs slated for cuts have been funded by state appropriations for many years. For example, PULP has received appropriations every year since 1981. Apparently these are "new" appropriations in "DOB-speak" because former Governor Spitzer did not include them in his Executive Budget and so they had to be added by the Legislature in budget negotiations.
The cut of 50% of funds undisbursed as of December 1 masks their draconian nature. If the state agencies processed the contracts in a timely fashion, grantees would have gotten a 25% advance early on and would have billed the state for current expenditures up until now. If they claimed reimbursement of contract expenses through October, the disbursements as of December 1 would amount to seven months' expenses plus three months' advance (25%), leaving unpaid only two months' worth of pro rated grant expenses. So a 50% cut in that would amount to roughly one month's contract expenses, or 8% of the annual grant. That too is is a sizable cut, but that is not what happened. The Governor's proposed cut is far more draconian than that.
The list of cuts shows that DOB anticipates $4.2 million -- the total amount of the original civil legal services appropriation -- still to be on hand on December 1, available for the proposed 50% cut. Obviously, DOB expects not to pay even one cent of the $4.2 million appropriated for civil legal services on April 23, 2008. This is due to deliberate stalling by state agencies in processing funds for programs added by the Legislature. See NYS Continues to Disadvantage Not for Profit Grantees, discussing the slow payment of state funds to non profit organizations. The problem apparently exists in harsher measure for programs added by the Legislature.
Many small nonprofit organizations like PULP lack significant fund reserves. They cannot stop their services, close offices, lay off staff, and stop paying rent and other expenses while waiting for the tardy state contract reimbursement to begin, because, apart from the impracticality of stop and go disruption, in order to receive their funding, they must make expenditures in accordance with their contract budgets. As a result, many must borrow from banks in reliance on receiving state contracts to perform the work supported by the enacted state appropriations.
The contract stalling and the Governor's proposed cutbacks essentially raid and deplete the financially weak nonprofit agency reserves driving them to expensive borrowing or service cutbacks.
As stated by a school superintendent in reaction to the Governor's proposed education cuts, "The governor didn't talk about dipping into his own reserves, but he wants us to dip into ours." Local Reaction to Paterson's Plan.
PULP and other groups advocating on behalf of low income people have now run legislatively funded programs for this year with borrowed money for seven and one half months, (62.5% of the year) without receiving any reimbursement, only to learn that the Governor wants to cut 50% of the annual funding -- with less than 37.5% of the year left.
Do the math. The Governor's "solution" is a recipe for bankruptcy of some organizations and certainly an immediate halt to program operations undertaken in anticipation of reimbursement.
We trust that the Legislature will not accede to the Governor's extreme proposals.
See Reaction to State Cuts: 'Catastrophic,' 'Devastating'; Local Reaction to Paterson's Plan; Paterson's Cuts Run into Resistance; Legislators: Hands off School Funding; Pols Poised to Bust Gov's Budget Chops; Governor Paterson's Proposed Budget Cuts 'Could Blow Up in his Face'; NY Senate Won't Act on Governor's Budget Plan.
Mr. Paterson met with the Senate majority leader, Dean G. Skelos, and the Assembly speaker, Sheldon Silver, in his Midtown Manhattan office on Sunday afternoon. But by the time the meeting ended, after about an hour, it was not clear that the Legislature would even vote on Mr. Paterson's plan to close the state's budget deficit.Paterson and Top 2 Legislators Fail to Agree on Cuts.
Alternatives to the Governor's proposals are suggested by the statewide Better Choice Budget Campaign and the One New York: Fighting for Fairness Coalition of more than 150 social services providers, at Budget Backfire: Cuts on the Needy Won't Help: a Raft of Painful Funding Reductions Is Not the Best Way out of the State's Budget Crisis.