Enacts a balanced budget requirement and creates the New York state governmental accounting review board

17 Co-sponsors

• David Weprin
• William Colton
• RoAnn Destito
• Frank Skartados
• Amy Paulin
• Kevin Cahill
• Mark J.F. Schroeder
• Marcos Crespo
• Joan Millman
• Joan Christensen
• Sandy Galef
• Michael Gianaris
• Albert A. Stirpe
• David Koon
• Robert Reilly
• Dennis H. Gabryszak
• Michelle Schimel

5 Multi-sponsors

• Jonathan Bing
• Hakeem Jeffries
• Margaret Markey
• John McEneny
• Michael G. Miller

BILL NUMBER:A10637

Title of bill

An act to amend the state finance law and the legisla- tive law, in relation to enacting a balanced budget requirement and creating the New York state governmental accounting review board

Purpose or general idea of bill

To require the state to prepare its budget in accordance with generally accepted accounting principles.

Summary of specific provisions

Section 1 amends the state finance law by adding a new article 3-A.

Section 35 provides the definitions for the terms used in the article.

Section 36 requires that the executive budget submission and the enacted legislative budget must be balanced in accordance with generally accepted accounting principles. It also provides for an appeal process when the executive and/or the legislature request relief from accounting standards.

Section 37 establishes a new governmental accounting review board.

Section 37 subdivision 1 establishes the administration of the board.

Subdivision 2 established the functions of the board.

Subdivision 3 & 4 established the compositions of the board and quali- fications of the members.

Subdivision 5 establishes the compensation of the board members

Subdivision 6 states that other state agencies must cooperate with the board and provide assistance as needed.

Subdivision 7 states that the chair of the board may hire an executive director.

Section 2 amends state finance law by adding a section that requires that all expenditures and revenues submitted by executive in his/her budget submission must be estimated and balanced in accordance with generally accepted accounting principles.

Section 3 amends the legislative law requiring the legislature to pass a balanced budget.

Section 4 amends the legislative law by adding a section that that all expenditures and revenues submitted by the legislature in the enacted budget must be estimated and balanced in accordance with generally accepted accounting principles.

Section 5 provides for a separability clause.

Section 6 states that the bill takes effect on April 1, 2011.

Justification

New York State has long maintained the impression of.having a very flexible budget process by operating on a cash basis. Under this system, bills are recorded as paid when funds are spent, not when a liability is incurred. This non-accrual basis is what allows lawmakers to roll expenses from the current year to the next and claim the current budget is balanced. It also allows lawmakers to use the next fiscal year's revenues to pay the current year's expenses. The result is less a matter of financial planning than of timing related gimmickry.

The State's cash accounting practices have allowed lawmakers to repeat- edly defer payments to creditors so long as cash can be found somewhere. However, as New York's recent string of fiscal crises is making evident, the threat of the State running out of cash is very real. The same holds true for the threat of default. But under the Constitution, default is not an option for New York.

To address the reality of New York's fiscal position, more comprehensive and accrual-based accounting standards axe needed. While the standards outlined by the Generally Accepted Accounting Principles (GAA2) would restrict the flexibility afforded by cash budgeting, the tradeoff is a different kind of flexibility. It would be a flexibility that affords lawmakers a clearer picture of the State's financial situation and the time to make adjustments to it.

Prior legislative history

None.

Fiscal implications

None.

Effective date

April 1, 2010